Vermont Governor Phil Scott signed new legislation to add agency captives, reinsurers controlled by brokers or insurer agencies, to the types of captives allowed in Vermont – one of the world’s largest captive domiciles.
An agency captive is set up to receive a share of premiums written and pays its share of claims through a reinsurance agreement with a traditional insurer.
“In what has become an annual tradition, these improvements to our captive legislation illustrate Vermont’s ongoing commitment to the captive insurance industry, which has been an economic boon for the state,” said Gov. Scott in a statement.
“This bill will further advance Vermont’s reputation as the ‘Gold Standard’ for domiciles and will provide greater flexibility and clarity going forward for our companies.”
David Provost, deputy commissioner of Vermont’s Captive Division, commented; “As we have for many years, we worked with the VCIA to develop a bill that helps the industry grow while maintaining prudent regulatory standards.
“The legislative process is part of making sure that our captive law meets the needs of business within a regulatory framework that recognizes the special purposes for which captives are formed.”
The updates to Vermont’s captive law include provisions to allow for broader accounting systems, expand dormant captives and clarify risk retention governance standards.
A.M. Best added that according to the legislation; “agency captives would receive a share of premiums written via a reinsurance agreement with a traditional insurer and are obligated to pay its share of claims, The Vermont Agency of Commerce & Community Development said in a statement.
“Agency captive insurance companies cannot be issued a license until they control and maintain capital and surplus of at least $500,000.”
The new law will also expand the dormancy status to all captive insurers, enabling captives who have discontinued operations to retain their state licenses if they want to resume business.
The law takes effect upon passage, making the state more attractive to captive formations and opening doors for reinsurers to expand their reach in the region.