Less than a year after Vermont passed legislation establishing a new type of captive structure, the state licensed its first affiliated reinsurance company, MAPFRE RE Vermont Corporation, formed by MAPFRE RE, a global reinsurer based in Madrid, Spain, which conducts business in more than 100 countries.
In the spring of 2018, Vermont passed a law offering a more favorable reinsurance alternative for US companies currently reinsuring with affiliates outside of the United States that may now be subject to the Base Erosion and Anti-Abuse Tax (BEAT) included in the Tax Cuts and Jobs Act of 2017.
David Provost, deputy commissioner of captive insurance, said, "[affiliated reinsurance] companies are akin to a hybrid between captives and traditional insurance. Like captives, they [are] limited to reinsurance of affiliates, but they [are] regulated in accordance with [National Association of Insurance Commissioners] NAIC accreditation standards like a commercial reinsurer."
"The experience, consistency, and responsiveness of Vermont's regulatory regime helped to make this a very straightforward process," said MAPFRE RE CEO Eduardo Pérez de Lema.
"The industry approached us with a need for a US alternative," said Mr. Provost. "It's something we've been considering for some time, but the imposition of BEAT taxes on reinsurance between US and foreign affiliates made the timing critical."