State Governor Phil Scott has signed new legislation into law that aims to modernize Vermont’s captive insurance statutes and remove inconsistencies.
This year’s bill proposed several updates to Vermont’s captive insurance law, including the ability for captive insurance companies to enter into parametric risk transfer contracts.
It also looks to simplify reporting requirements, improve solvency procedures for sponsored cell captives, and clarify an inconsistency related to the treatment of affiliated business in sponsored cell companies.
“Vermont is always looking to improve its laws to better meet the needs of captive insurance companies, while improving the quality of our regulation,” said Governor Scott. “This year is a great example of that.”
“Although purely parametric contracts are not considered insurance due in large part to that distinction, the contract is a useful risk management tool,” said Deputy Commissioner David Provost, Department of Financial Regulation (DFR), “and there are safe harbor features that can be built into the contract to qualify it as insurance.
“Organizations often use captives as a central repository for all types of risk management tools, not just insurance, so it will be helpful for companies to have explicit authority for their captive to enter into parametric contracts.”
Kevin Mead, President of the Vermont Captive Insurance Association, also commented: “Vermont continues to take industry ideas and really consider those ideas. I’m glad that we could work together to make it easier for captive companies to utilize another risk management tool.”
