Vermont has brought in new legislation designed to strengthen its captive regulation. According to the domicile, the changes include several updates to Vermont’s captive law, including clarifying the ability for a cell to convert to another type of entity, and simplifying processes around redomestication, mergers and the filing of organisational documents prior to licensure.
The new legislation combines changes to Vermont’s insurance and captive insurance statutes in a single bill to help minimise the number of items before the legislature, and was recently signed into law by Governor Phil Scott. He noted that 2021 marks 40 years since the passage of the Special Insurer Act of 1981, which created the captive industry in Vermont.
“Through the years, Vermont has remained proactive in modernising its laws to help the industry grow in the state,” said Mr Scott. “Vermont is a global leader in captive insurance and continues to collaborate with the sector to ensure we remain a top destination for companies looking to create captives.”
One of the updates in the legislation is the addition of language that allows for the conversion of a cell into another entity, in accordance with Vermont’s corporation laws. “Protected cells are a popular alternative risk transfer mechanism worldwide and are a growth area for the captive industry,” said David Provost, deputy commissioner of captive insurance. “The department has always liked the idea of cells as an incubator space for captive growth and wants to be sure it is easy for cells to convert to a standalone captive insurance company.”
Another area covered by the new legislation is mergers and redomestications. Vermont said that because mergers and redomestications occur with much greater frequency in captives, it makes sense to have captive-specific sections within the captive statute. Richard Smith, president of the Vermont Captive Insurance Association, explained: “Vermont has seen a variety of redomestications, where a captive moves their captive from another state to Vermont, and Vermont has benefited from this movement. We want to make this process and others as clear and simple as possible for companies.”
Changes in the law include:
- Captive formation process: Amends statute to no longer require certified copies of organisational documents and contribution of capital prior to licensure. Instead, capital may be contributed after licensure and the company is required to file a statement to that effect with the department.
- Reports and statements: Agency captives are added to the list of companies required to file an annual report.
- Protected cell conversions: Provides ability for protected cells to convert to a standalone captive insurance company or to a different type of cell.
- Mergers, consolidations of captives: Simplifies the merger process, provided there is unanimous consent of the parties. Creates a new section in the captive statute instead of referencing the traditional statute.
- Redomestications: Creation of a new section in the captive statute instead of referencing the traditional insurance statute.
- Service of process: Changes the designated agent for service of process for foreign risk retention groups and purchasing groups doing business in Vermont, from the Secretary of State to the commissioner.