Montpelier, Vt. – Governor Phil Scott signed new legislation into law strengthening Vermont’s captive regulation in a variety of areas. This year’s bill, S.88, combined changes to Vermont’s insurance and captive insurance statutes in a single bill to help minimize the number of items before the legislature. The bill made several updates to Vermont’s captive law, including clarifying the ability for a cell to convert to another type of entity, and simplifying processes around redomestication, mergers, and the filing of organizational documents prior to licensure.
This year marks 40 years since the passage of the Special Insurer Act of 1981, which created the captive industry in Vermont. “Through the years, Vermont has remained proactive in modernizing our laws to help the industry grow in the state,” said Governor Phil Scott. “Vermont is a global leader in captive insurance and continues to collaborate with the sector to ensure we remain a top destination for companies looking to create captives.”
Among the many updates included in this year’s captive bill are an addition of language that allows for the conversion of a cell into another entity in accordance with Vermont’s corporation laws. “Protected cells are a popular alternative risk transfer mechanism worldwide and are a growth area for the captive industry,” said David Provost, Deputy Commissioner of Captive Insurance. “The department has always liked the idea of cells as an incubator space for captive growth and wants to be sure it is easy for cells to convert to a standalone captive insurance company.”
Additionally, mergers and redomestications, two common occurrences, have been historically referenced in the traditional insurance statute. Since mergers and redomestications occur with much greater frequency in captives, it made sense to have captive-specific sections within the captive statute. “Vermont has seen a variety of redomestications, where a captive moves their captive from another state to Vermont, and Vermont has benefitted from this movement,” Said Richard Smith, President of the Vermont Captive Insurance Association. “We want to make this process and others as clear and simple as possible for companies.”
The remaining changes corrected minor oversights in the 40-year-old bill, to ensure the law more accurately reflects the regulatory procedures. “Every year Vermont looks not just at larger recommendations for improvement, but carefully considers all recommendations for improvement,” said Brittany Nevins, Captive Insurance Economic Development Director. “This is part of what makes Vermont a consistent, trusted and effective domicile.”
Additional changes clarified the requirements for filing organizational documents and the timing of the initial capital contribution, added Agency Captives to the list of companies required to file an annual report, and changed the designated agent for service of process of foreign risk retention groups and purchasing groups doing business in Vermont from the Secretary of State to the Commissioner, in accordance with the Liability Risk Retention Act.
A summary of the changes in the law include the following:
- Captive Formation Process – Amends statute to no longer require certified copies of organizational documents and contribution of capital prior to licensure. Instead, capital may be contributed after licensure, and the company is required to file a statement to that effect with the Department.
- Reports and Statements – Agency captives are added to the list of companies required to file an annual report.
- Protected Cell Conversions – Provides ability for protected cells to convert to a standalone captive insurance company or to different type of cell.
- Mergers, Consolidations of Captives – Simplifies the merger process, provided there is unanimous consent of the parties. Creates a new section in the captive statute instead of referencing the traditional statute.
- Redomestications – Creation of a new section in the captive statute instead of referencing the traditional insurance statute.
- Service of Process – Changed the designated agent for service of process for foreign risk retention groups and purchasing groups doing business in Vermont from the Secretary of State to the Commissioner.