Captive Insurance Law Changes Proposed in Vermont

A group of 11 members of the Vermont House of Representatives is cosponsoring H.538, "An act relating to captive insurance companies," which was introduced in the state's 2016 legislative session that opened earlier in January. The Act includes the following proposed changes to the current captive law.

• Enables a sponsored captive to make written application to file the required Vermont Insurance Company Annual Report on a fiscal year-end basis.
• Expands the types of captives that can qualify as a dormant captive insurance company to include sponsored or industrial insured captives.
• Refines the definition of who can be a member of the governing board of a risk retention group. In the instance of defense counsel serving on a risk retention group (RRG) governing board, the proposed amendment would limit his or her eligibility for service on the governing board if his or her annual fees have been greater than 5 percent of annual gross premium or 2 percent of its surplus during 3 or more of the previous 5 years.
• Provides for the RRG board to have a majority of independent directors.
• Gives the authority for the insurance commissioner to disagree with the RRG's determination of whether or not a board member is independent and specifies that the board has 6 months to take actions necessary to obtain the commissioner's confirmation.

These changes appear to be housekeeping and action to bring Vermont into compliance with the National Association of Insurance Commissioners (NAIC) Model Risk Retention Act #705.