Vermont is updating captive insurance law to streamline regulatory practices

Vermont Governor Phil Scott has signed legislation to improve the state’s captive insurance status, according to a press release from the Vermont Captive Insurance Association (VCIA).

This measure, H.659, aims to streamline regulatory practices, eliminate exemptions and align requirements with the internal insurance market.

The annual legislative update, a collaboration between VCIA and the Vermont Department of Financial Regulation (DFR), introduces several key changes. In particular, it enables the transformation of captive insurance companies into protected units, changes the language of parametric contracts to adapt them to different structures, and lowers the minimum statutory requirements for agency-type captive insurance companies.

This latest change reduces the minimum capital requirement for a captive agency to $250,000 from $500,000, a change consistent with the current captive insurance market without prejudice to the expectations of captive insurance companies, the VCIA said.

Governor Scott emphasized the importance of the annual internal bill to improve regulatory quality. He said, “Vermont has a strong foundation of regulators and service providers working together to ensure that our state has the greatest support possible for captive insurance companies in Vermont.”

The legislation also includes statutory exemptions, particularly those relating to confidentiality requirements. It builds on a 2022 amendment that allowed captive insurance companies to enter into parametric risk transfer contracts, which have proven useful in managing risks associated with an increased number of natural disasters, the VCIA noted.

DFR, which monitors the financial condition and solvency of captive insurance companies, determined that the changes did not pose a risk to solvency.

“Captive insurance companies are regulated based on their individual risk profile, and our robust regulatory team is knowledgeable about appropriate capital to address unique risks,” said Sandy Bigglestone, deputy commissioner of the Vermont Division of Captive Insurance.

VCIA President Kevin Mead praised the openness of regulators and the Vermont Legislature to new ideas and opinions. Brittany Nevins, director of captive insurance economic development for the Vermont Department of Economic Development, echoed that sentiment, stating that the annual process ensures that Vermont continues to regulate captive insurance companies as effectively as possible. &