Vermont Improves Statute to Better Align with the Captive
Marketplace
MONTPELIER, Vt., May 22, 2024
/PRNewswire-PRWeb/ -- On May 20, 2024
Governor Scott signed legislation into law improving several
sections of the Vermont captive
insurance statute. Yearly the Vermont Captive Insurance Association
(VCIA) works with the Vermont Department of Financial Regulation
(DFR) to propose updates to captive insurance statutes based on
industry feedback. Bill H. 659 clarifies the law in multiple
instances to improve the process and consistency of regulatory
practices, to address unnecessary redundancies, and to better align
requirements with the captive marketplace.
"Vermont
has a strong foundation of regulators and service providers who
work together to ensure our state is as supportive as possible for
Vermont's captive insurance
companies." - Vermont Governor
Phil Scott
"Vermont has a strong
foundation of regulators and service providers who work together to
ensure our state is as supportive as possible for Vermont's captive insurance companies," said
Governor Phil Scott. "The passage of
the yearly captive bill is always an important action to further
improve the quality of our regulation."
Highlights of this year's bill include adding explicit language
allowing for conversions of captive insurance companies into
protected cells, amending current language for parametric contracts
to allow for different parametric contract structures, lowering
minimum statutory requirements for agency-type captive insurance
companies to better align with the captive insurance marketplace,
and statutory redundancies were addressed pertaining to
confidentiality requirements.
Section 4 amends §6004(a)(4) minimum capital for an agency
captive from $500,000 to $250,000. Since the initial passage of the agency
captive statutes in 2017, Vermont
has gained significant experience regulating this type of captive
insurance entity. A lower minimum capital will compare more
consistently with the current captive insurance marketplace,
without lowering expectations of captive insurance companies.
Regulatory monitoring practices indicate the financial health
and solvency of a captive insurance company, and the appropriate
amount of capital needed for each capital based on individual
circumstances. In evaluating this change, DFR determined it does
not present a risk to solvency, since §6004(b) states "The
Commissioner may prescribe additional capital and surplus based
upon the type, volume, and nature of insurance business
transacted."
"Captive insurance companies are regulated based on their
individual risk profile and our robust regulatory team is skilled
at understanding appropriate capital to match the unique risk,"
said Bigglestone. "Because of this we realized it wasn't necessary
to have a high arbitrary starting point for these companies."
In the 2022 legislative session, section 6002(a) was amended to
allow captive insurance companies to enter into parametric
contracts for transferring risks. Parametric contracts have been a
useful tool for companies in the face of increased natural
disasters, for example. Since that time, examples of parametric
contracts, under state laws, have demonstrated parametric contracts
can be structured as insurance contracts; therefore, corrections
were made to not be overly prohibitive. The DFR has the necessary
regulatory processes and procedures to determine how a parametric
contract should be classified and accounted for, when presented for
approval by the Commissioner.
"The industry in Vermont knows
that the regulators and the legislature are open to discussing new
ideas and open to feedback," said Kevin
Mead, President, VCIA. "It's one of the central reasons why
companies choose Vermont to
license their captive insurance company in."
"This process is essential for Vermont to proactively address inefficiencies
in its statutes without compromising on quality regulation," said
Brittany Nevins, Captive Insurance
Economic Development Director, Vermont Department of Economic
Development. "This annual process ensures that Vermont is continuing to regulate captive
insurance companies as best as possible."
For more information on Vermont's captive insurance industry, visit
www.vermontcaptive.com, call Brittany
Nevins at 802-398-5192 or email
Brittany.nevins@vermont.gov.
About Vermont Captive Insurance
Captive insurance is a regulated form of self-insurance that has
existed since the 1960's and has been a part of the Vermont insurance industry since 1981, when
Vermont passed the Special Insurer
Act. Captive insurance companies are formed by companies or groups
of companies as a form of alternative insurance to better manage
their own risk. Captives are commonly used for corporate lines of
insurance such as property, general liability, products liability,
or professional liability.
Media Contact
Brittany Nevins, Vermont
Department of Economic Development, 1 802-398-5192,
dcrow@tenthcrowcreative.com, https://www.vermontcaptive.com/
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SOURCE Vermont Captive Insurance