“These improvements in Vermont’s law may seem technical but taken as a whole they continue to advance Vermont’s standing as the 'Gold Standard' for domiciles and will provide greater flexibility and clarity going forward for our companies.
Montpelier, VT (PRWEB) May 05, 2015
Governor Peter Shumlin will sign new legislation passed in the 2015 session strengthening Vermont’s captive legislation in a variety of areas including groundbreaking changes to the investment guideline to allow marketable securities along with cash, trusts and letters of credit to meet the minimum capital requirement. Governor Shumlin will hold a ceremonial signing of the bill alongside captive insurance industry professionals on May 7, in Burlington.
“These improvements in Vermont’s law may seem technical,” said Governor Shumlin, “but taken as a whole they continue to advance Vermont’s standing as the ‘Gold Standard’ for domiciles and will provide greater flexibility and clarity going forward for our companies.”
Expanding the investment guidelines for the minimum capital requirement is a significant change that has already attracted considerable interest. This change is consistent with current investment guidelines for Vermont’s traditional insurance companies and will increase the liquidity options for companies.
“The legislation makes Vermont’s captive law more attractive and sends a strong message to the industry that we are committed to our leadership role,” said David Provost, Deputy Commissioner of Vermont’s Captive Division.
“We’re delighted to have the continued support of the Governor and the Legislature in keeping pace with the changing needs of the industry,” said Richard Smith, President of the Vermont Captive Insurance Association, which lobbied for the changes. “We’re especially proud to implement the new investment guideline for minimum capital requirements making Vermont the first domicile to do so.”
The new law also modifies the minimum capital for cell companies to $250,000 which is consistent with the current marketplace. It also adopts the National Association of Insurance Commissioners (NAIC) governance standards for Risk Retention Groups (RRGs) and portions of NAIC Protected Cell Company Model Act.
A summary of the changes in the law include the following:
Number of Incorporators – The number of incorporators was reduced from 3 to 1 to be consistent with most other incorporations under Vermont law.
Cell Companies Capital Requirements -- The change reduces the minimum capital requirement from $500,000 to $250,000 for cell captive companies.
Structure on Capital Requirement for all Captive Companies – The new law allows captives to have greater flexibility with their required minimum capital to now include marketable securities along with allowing cash, trust and letters of credit to meet the minimum capital requirement. The Department will issue further guidance to define “marketable securities”.
Definitions and Protected Cells -- The law amends the sponsored cell law to make it easier to read by moving sections of the law to improve clarity.
Naming Conventions for Incorporated Cells -- The law adds a requirement that incorporated protected cells have their own distinct names and designations, which in the case of incorporated protected cells should include the words ‘Incorporated Cell’ or the abbreviation ‘IC’.
Delinquency of Sponsored Captives and Adoption of the NAIC Protected Cell Company Model Act – Vermont now adopts portions of the NAIC Protected Cell Company Model Act language regarding the segregation of assets and liabilities, contracting by/for individual cells, treatment of cells in case of delinquency, and the reach of creditors.
RRG Governance -- Vermont now adopts the NAIC Model Governance Standards for Risk Retention Groups.
A complete copy of the bill as passed with amendments can be found at: http://www.vermontcaptive.com/laws-regulations/laws.
The law takes effect upon passage, except the governance standards applicable to risk retention groups shall apply to risk retention groups first licensed on or after the effective date of this act, and shall apply to all other risk retention groups one year after the effective date of this act (giving existing companies 1 year to come into compliance).
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 typically used for corporate lines of insurance such as property, general liability, products liability, or professional liability.