Vermont governor signs new captive bill to reduce minimum capital threshold, increase flexibility.
- Frank Klimko
- August 2020
SEAT OF POWER: Vermont’s Statehouse in Montpelier is where the governor signs legislation such as the most recent captive law that increased the viability of the state’s captive protected cells
Gov. Phil Scott has signed legislation to streamline Vermont's captive insurance laws, reducing the minimum core capital for a sponsored cell from $250,000 to $100,000, and allowing the creation of separate accounts within a cell of a sponsored captive.
The law is intended to increase efficiencies while adding flexibility to regulatory policy and procedures, the governor said in a statement.
The law seeks to increase the viability of Vermont's captive protected cells, which are alternative risk-transfer mechanisms that often operate like a stand-alone captive.
“One of the key changes recognizes the importance of cells in the captive industry, and makes it clear that a cell can operate—and should be regulated—much the same as an individual captive,” Deputy Commissioner of Captive Insurance David Provost said in a statement.
The law allows cells to form separate accounts within a given cell of a sponsored captive. So-called cell captives—or a protected cell company—wall off each insured's assets. The provisions mirror those applicable to stand-alone captives and extend the protections of statutory clarity, according to a statement from Scott's office.
In addition to reducing the minimum core capital threshold, the law gives additional investment flexibility to sponsored captive companies. Sponsored captives may be set up by an insurance industry-related entity to be used by its clients. The sponsor contributes to the captive's core capital.
The new law also will simplify captive disclosure requirements, align state law with the National Association of Insurance Commissioners' statutory accreditation standards for risk retention groups and allow dormant captives to remain intact at a minimum capital level so they may be reactivated in the future, the statement said.
Richard Smith, president of the Vermont Captive Insurance Association, said the new law will help the industry.
“Even in the midst of a pandemic where the attention of the governor and legislature is rightly focused on the health and welfare of its citizens,” Smith said, “Vermont's state leaders came through and passed a bill that updates and strengthens Vermont's captive insurance statutes.”
The state has roughly 600 licensed captives, Provost recently said. Vermont captives wrote $22.6 billion in premiums in 2019, he said.