Vermont updates captive law with change to captive examination schedule

Vermont has updated its captive legislation with modifications to the captive examination schedule and improvements to the statute governing group captive investments. The new law will change the captive examination schedule from once every three years to not less than every five years. Vermont said the commissioner retains the authority to examine companies whenever deemed necessary. “This will better reflect the state’s current practice of prioritising examinations based on an assessment of the company’s risk,” said Dave Provost, deputy commissioner of captive insurance. “I believe the captive industry will welcome this move, along with other updates included in the bill.” Vermont’s new law also modernises flexibility in investments by allowing companies the ability to either adhere to current investment rules or develop their own plan for approval by the Department of Financial Regulation. “For certain captives, the old law required companies to follow prescriptive, often strict investment statutes,” said Ian Davis, director of financial services. “This move will allow Vermont statutes to keep pace with the rapid changes in the investment environment.” Richard Smith, president of the Vermont Captive Insurance Association, said: “As we have for many years, we worked collaboratively with the Department of Financial Regulation (DFR) to develop a consensus bill that will help grow our industry while maintaining our state’s prudent regulatory standards. We are grateful for the continued support from governor [Phil] Scott and that of the state legislature.” Additional changes include clarifying the definition of an independent director, requiring National Association of Insurance Commissioners (NAIC) statutory accounting for affiliated reinsurance companies, and a specific inclusion of sole proprietorships among eligible businesses to be cell participants. The bill also allows captives to now use any organisational form permitted by Vermont law, ensuring the captive statute will automatically stay current when future changes occur. According to the State of Vermont, the changes in the law include the following: Dividends and distributions: amends statute to clearly identify non-profit incorporated protected cells as eligible for dividends or distributions with commissioner approval. Captive formation: allows captives to use any organisational form permitted by Vermont law. This includes sponsored cell captives and the incorporated cells within. Attorney-in-fact bond: allows the commissioner to exempt the attorney-in-fact from the bonding requirements under specific circumstances. Examinations: modifies the examination schedule to “five years or more frequently as needed”. Investments: provides flexibility in investments by giving companies the option to develop their own investment plan for DFR approval. Sole proprietorships: specifically includes sole proprietorships as eligible business to be cell participants. Accounting standards for affiliated reinsurance companies (ARCs): requires NAIC statutory accounting for ARCs. Risk retention group (RRG) independent directors: clarifies the governance standards for RRGs, specifically the definition of independent director. Own Risk and Solvency Assessment (ORSA): applies subchapter 7A of chapter 101 (ORSA) to RRGs. “Part of what makes Vermont a leading domicile for captive insurance is our work to continuously modernise our regulations in this area,” said Vermont governor Phil Scott. “Captive insurance is a highly competitive sector and my administration is pleased to continue to work collaboratively with the legislature to consistently ensure our captive law keeps pace with the fast-changing needs of the industry.”

Vermont updates captive law with change to captive examination schedule

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