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Vermont Judged Best Insurance Regulatory Environment in United States

man writing A+.SF
January 19, 2018

For the fourth straight year and the fifth time in 6 years, Vermont was judged in the R Street Institute's 2017 Insurance Regulation Report Card to have the best insurance regulatory environment in the United States. 

The report card specifically references captive insurance in Vermont and Connecticut in its state-by-state developments section. It highlights Connecticut's state-run crumbling foundations captive insurance company as well as Vermont's passage of captive bill H. 85, adding agency captives to the types of captives that can be formed in Vermont.

According to a report summary, the report card centers around the following three questions.

  1. How free are consumers to choose the insurance products they want?

  2. How free are insurers to provide the insurance products consumers want?

  3. How effectively are states discharging their duties to monitor insurer solvency and foster competitive private insurance markets?

Driven largely by changes made in its regulatory environment through the H.B. 80 legislative package, Delaware for the first time had the worst score in the country, just narrowly edging out North Carolina, which had placed last the previous 2 years.

Study author R.J. Lehmann, R Street's director of finance, insurance, and trade policy, noted—among the positive trends the study has tracked—the continued contraction of the nation's residual property insurance plans, which fell from 3.32 percent of the market in 2011 to 1.72 percent in 2016. Most notably, Florida's state-run Citizens Property Insurance Corp. has seen its market share drop from 14.28 percent of the market to just 4.28 percent of the market over that span.

"The steps Florida lawmakers and regulators took to shrink Citizens allowed it to absorb an estimated 62,000 claims and $1.2 billion in insured losses from the strike of Hurricane Irma this past year without any notable impairment," Mr. Lehmann said. "It is in recognition of these improvements that Florida, which was the bottom-ranked state in our first report card in 2012, has clawed its way to a very respectable 'B' grade for 2017."

Vermont earned the only "A+" in this year's report card. Other states receiving either an "A" or "A-" were Arizona, Idaho, Utah, Nevada, and Wisconsin. Delaware received an "F," as did North Carolina, Louisiana, and Massachusetts. The biggest improvements in this year's report card were seen in Florida, Michigan, Pennsylvania, and Tennessee, while the biggest declines were seen in Delaware and New Hampshire.

"Last year saw a significant effort to liberalize rate controls for commercial insurance lines in Missouri and a successful effort to do so in Oregon," Mr. Lehmann said. "On the other side of the ledger is Delaware, which imposed significant new restrictions on underwriting freedom. Illinois—long among the most free-market insurance environments in the nation—was spared from the introduction of stringent controls on its workers compensation market only by the Legislature's failure to overturn Gov. Bruce Rauner's veto."

The full report is available for viewing, along with an explanation of the methodology behind the ratings.

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