Agency captive legislation will attract new business in Vermont: AM Best


Recent legislation passed in Vermont which allows agency captives to operate there will make the domicile even more attractive, according to AM Best.

Governor Phil Scott signed the legislation on May 1, 2017, which allows the state to license agency captives - reinsurance companies controlled by agencies or brokerages.

House Bill 85 adds agency captives to the list of captives already allowed to operate in the domicile, including pure captives, association captives, industrial insured captives, and risk retention groups.

The legislation states that agency captives would be required to maintain capital and surplus of at least $500,000.

The ratings agency believes in the inclusion of agency captives highlights the push by the insurance industry in recent years to get closer to the insureds.

"Many agents have deep-rooted relationships with profitable books of business," said AM Best. "The agency captive will allow them to continue to control that relationship through working with a primary carrier, while sharing in the risk by participating in the fortunes of the business written."

"House Bill 85 also expands the scope of dormant status to include all types of captives," the ratings agency continued. "Captives can be effectively used to help manage underwriting cycles. The dormancy status will allow captive owners to reactivate a captive if capacity shrinks; commercial prices harden; and, especially, if the business performs profitably, making it attractive enough to bear the risk."

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