Vermont Governor Phil Scott Signs Updated Captive Insurance Legislation
In what has become an annual tradition, these improvements to our captive legislation illustrate Vermont’s ongoing commitment to the captive insurance industry, which has been an economic boon for the state.
Montpelier, VT (PRWEB) May 02, 2017
Governor Phil Scott signed new legislation passed in the 2017 session strengthening Vermont’s captive legislation in a variety of areas including accounting principles, governance standards, expanded dormancy qualifications and the addition of agency captives.
“In what has become an annual tradition, these improvements to our captive legislation illustrate Vermont’s ongoing commitment to the captive insurance industry which has been an economic boon for the state,” said Governor Scott,“This bill will help to further advance Vermont’s reputation as the ‘Gold Standard’ for domiciles and will provide greater flexibility and clarity going forward for our companies.”
“As we have for many years, we worked with the VCIA to develop a bill that helps the industry grow while maintaining prudent regulatory standards. The legislative process is part of making sure that our captive law meets the needs of business within a regulatory framework that recognizes the special purposes for which captives are formed” said David Provost, Deputy Commissioner of Vermont’s Captive Division.
The law added agency captives to the types of captives that can be formed in Vermont. An agency captive is a reinsurance company controlled by an insurance agency or brokerage. Through a reinsurance agreement with a traditional insurer, the agency captive receives a share of the premiums written, and is obligated to pay its share of claims. Agency captives creates a long-term relationship between the agency and the insured, where interests are aligned: risk appetite, selection, pricing, loss control, claims management, etc.
“Governor Scott has supported the captive insurance industry in Vermont since his days as a State Senator and Lt. Governor. We’re delighted to have his continued support and that of 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. “I have already been contacted by a number of entities interested in Vermont’s new agency captive provision.”
A summary of the other changes in the law include the following:
Accounting Principles – Allows, without special permission, the three bases of accounting commonly used by Vermont captives: US GAAP, NAIC Statutory Accounting Principles (SAP), and International Financial Reporting Standards (IFRS).
Expand Dormant Captives to All Captive Types -- Dormant status is expanded to ALL captive types in Vermont, which allows companies to stay in Vermont at a very low cost, ready to be reactivated when and if the need arises.
Incorporated Protected Cells Naming Conventions – Both the captive law and corporations law required specific terminology, and both were being enforced simultaneously. The captive law requires an incorporated cell to include “Incorporated cell” or “IC” in its name, the same way the corporation law requires “corporation”, “Incorporated”, or “Inc. The new law lets the captive statute determine the naming convention. The inclusion of “Incorporated cell” or “IC” in the name of each incorporated cell is sufficient to identify the business entity.
Risk Retention Group Governance Standards -- The new law provides for relief from auditor partner rotation requirements under the same circumstances and with the same considerations as other current captive and traditional insurance regulations require, to eliminate conflicting provisions in statute and regulation.
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.
A complete copy of the bill will be posted on the Vermont Legislature’s website, and in the interim a copy of the bill as passed with amendments can be found at: http://www.vermontcaptive.com/laws-regulations/laws.html. The law takes effect upon passage.
For more information on Vermont’s captive industry, visit http://vermontcaptive.com or call Ian Davis at 802-828-5232 or email ian.davis@vermont.com.
