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Vermont Captive Insurance Legislative Amendments Signed Into Law

Changes Strengthen Vermont’s “Gold Standard” Legislation


Montpelier, VT – June 20, 2013 –  Governor Peter Shumlin signed new legislation passed in the recently concluded session addressing sponsored captives and incorporated cells, association and pure captive account rules, branch and separate purpose financial captives, and captives and risk retention groups organized as reciprocals.

“These improvements in Vermont’s law may seem technical,” said Governor Shumlin, “but taken as a whole they continue to advance Vermont’s standing as the ‘Gold Standard’ for domiciles and will provide greater flexibility and clarity going forward.”

The changes in the law include the following:

Sponsored Captives and Incorporated CellsA couple of years ago Vermont authorized protected cells in a sponsored captive company to be separately incorporated.  Users of the program identified needed amendments to deal with current law requiring the sponsored captive to become a party to the insurance policy/reinsurance agreement putting its core capital at risk even though the incorporated cell is a legal entity in its own right.  The change now clarifies that, subject to prior written approval of the sponsored captive and the Commissioner of the Vermont Department of Financial Regulation, an incorporated cell is entitled to enter into contracts and undertake obligations in its own name and for its own account.

Separate AccountsThe change now allows an association or pure captive to establish one or more separate accounts within the captive, much like what is currently authorized for life insurance companies in Vermont allowing the use of a separate account for risks that impact some, but not all of the participants thus negating the need to reorganize as a sponsored captive.

Branch Captives The new law authorizes branch captives to insure the same risks that are permitted to be insured by other captives.  It also requires the appointment of a Vermont principal representative as the designated link between the branch captive, the parent and Vermont regulators.

Special Purpose Financial CaptivesVermont now allows special purpose financial captives to be treated similarly to other captives by authorizing them to be consolidated under common ownership and control for purposes of calculating premium taxes.  It also officially changes the name to Special Purpose Financial Insurers.

Reciprocals  Captives and risk retention groups currently organized as reciprocals are, and always have been, held to the same capitalization standards as any other form of captive insurer.  As such, the limitations on a subscriber’s contingent assessment liability – specifically the minimum contingent assessment liability – provided for was deemed unnecessary and has been eliminated.

“We’re delighted to have the continued support of the Governor and the Legislature in keeping pace with the changes of the industry,” said Dan Towle, Vermont Director of Financial Services.  “The updates to our law give strong testimony reaffirming the commitment to keep us in the leadership position the captive insurance industry expects.”

A complete copy of the bill will be posted on the Vermont Legislature’s website and in the interim a copy of the bill as passed with amendments can be found at:     

For more information on Vermont’s captive industry, visit  or call Dan Towle at 802-828-5232 or email .