The State of Vermont has introduced a new bill to tidy up and modernise parts of its captive insurance law as it enters its 2019 legislative session.
David Provost, deputy commissioner of the captive insurance division of the Vermont Department of Financial Regulation (DFR), explained to Captive International that H. 188 would help tidy up and modernise some of Vermont’s captive laws.
“It’s a relatively simple bill this year, it is mostly technical amendments. Nothing drastic. It’s not quite a housekeeping bill - it’s a little more involved than that - it’s a series of fairly simple steps to keep our captive law modern and up-to-date,” said Provost.
One of the biggest changes in H.188 is the provision to allow flexibility in investments by giving companies the option to follow the old rules, or develop a plan for DFR approval.
“Right now a single-parent captive has no investment restrictions at all. That’s going stay that way,” said Provost.
“But groups have a lot of investment restrictions. They follow an old model law that is very prescriptive in how much they can hold and how diversified they have to be. And we’re modernising that to give them an option: they can either follow the old rules or give the DFR a plan that meets diversity and liquidity requirements, and addresses the matching of liabilities and assets with a plan of operation.”
Another significant change is the changing of the examination schedule, from “three years to maybe five” to “five years or more frequently as needed”. Provost explained there is no practical effect - the default will be five years instead of three but will still be priority based, reflecting actual practice.
“We do exams on a priority basis. So we assess companies by their risk, and if we feel they need to be examined more often, they will be examined more often,” added Provost.
Some of the other changes include the new captive structures, affiliated reinsurance companies (ARCs), requiring National Association of Insurance Commissioners (NAIC) statutory accounting.
The bill would also allow captives to use any organisational form permitted by Vermont law; the captive law will automatically stay current, and DFR still has plenty of opportunity to decline an application or reject a business form if not appropriate for an insurance company, or for a particular circumstance.
Vermont has also been considering legislation specific to run-off facilities for captive business. Legislation has been drafted, but Provost said it needs to be studied further and get more support before it is proposed.
Legislation, Captive insurance, Vermont, North America