Vermont updates captive law
Vermont has updated its captive law, covering protected cells, parametric contracts and agency-type captives.
The US state said Bill H. 659 “clarifies the law in multiple instances to improve the process and consistency of regulatory practices, to address unnecessary redundancies, and to better align requirements with the captive marketplace”.
Governor Phil Scott said: “Vermont has a strong foundation of regulators and service providers who work together to ensure our state is as supportive as possible for Vermont’s captive insurance companies. The passage of the yearly captive bill is always an important action to further improve the quality of our regulation.”
Highlights of this year’s bill include adding explicit language allowing for conversions of captive insurance companies into protected cells, amending current language for parametric contracts to allow for different parametric contract structures, lowering minimum statutory requirements for agency-type captive insurance companies to better align with the captive insurance marketplace, and statutory redundancies were addressed pertaining to confidentiality requirements.
Section 4 amends §6004(a)(4) minimum capital for an agency captive from $500,000 to $250,000. “Since the initial passage of the agency captive statutes in 2017, Vermont has gained significant experience regulating this type of captive insurance entity. A lower minimum capital will compare more consistently with the current captive insurance marketplace, without lowering expectations of captive insurance companies,” said the state.
Sandy Bigglestone, deputy commissioner, Captive Insurance Division, said: “Captive insurance companies are regulated based on their individual risk profile, and our robust regulatory team is skilled at understanding appropriate capital to match the unique risk. Because of this, we realised it wasn’t necessary to have a high arbitrary starting point for these companies.”
In the 2022 legislative session, section 6002(a) was amended to allow captive insurance companies to enter into parametric contracts for transferring risks. “Since that time, examples of parametric contracts, under state laws, have demonstrated parametric contracts can be structured as insurance contracts; therefore, corrections were made to not be overly prohibitive,” said the state.