Vermont Bill Would Adjust Captive Financial Examination Requirements
February 08, 2019
Editor's Note: This article was updated on March 5, 2019, to reflect the legislation's passage by the Vermont Senate on March 1.
Captive insurance companies in Vermont would automatically be assured of more time between mandatory financial examinations under legislation passed March 1 by the Vermont Senate.
The two identical measures are H. 188, which was introduced February 7 in the Vermont House of Representatives by Representative Michael Marcotte, R–Coventry, and S. 109, which was introduced earlier in the Vermont Senate by Senator Ann Cummings, D–Washington. Under the measures, such examinations would be every 5 years. By contrast, under the current law, those examinations are required every 3 years, though captives can seek waivers to have the examinations every 5 years.
The captive industry backs such a change. "I believe the captive industry will welcome the change because they will no longer need to get a waiver to push an exam to 5 years," said Richard Smith, president of the Vermont Captive Insurance Association in Burlington.
In addition, the legislation would give captives the option to follow current investment rules, or, alternatively, develop an investment plan, subject to approval by the Department of Financial Regulation.
"This better reflects the options captives could utilize that better suit their risk and investment needs," Mr. Smith said.
The measures, though, do not include provisions—earlier discussed by captive regulators—that would set new standards for captives running off their business.
With so many new state legislators taking office, more time was needed to educate those and other lawmakers on the runoff issue, Mr. Smith said.
The legislation, if passed, would be the latest of changes Vermont lawmakers have made to the state's captive law, which was first passed in 1981.
Last year, for example, Vermont lawmakers approved legislation giving captives more time to pay annual premium taxes. Other changes state legislators have approved in recent years include reducing captive minimum capitalization requirements, reducing the number of individuals required to sign a captive's incorporation papers, and eliminating premium taxes for dormant captives.
Vermont is, by far, the largest captive domicile in the United States, as well as the third-largest domicile worldwide. At the end of 2018, Vermont had 558 captives, including 25 captives licensed in 2018.
February 08, 2019