"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. "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."
"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," said David Provost, Deputy Commissioner of Vermont's Captive Division. "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 new captive insurance legislation added agency captives to the types of captives that can be formed in Vermont. An agency captive is a reinsurance company controlled by an insurance agency or brokerage. Through a reinsurance agreement with a traditional insurer, the agency captive receives a share of the premiums written, and is obligated to pay its share of claims. Agency captives create a long-term relationship between the agency and the insured, where interests are aligned: risk appetite, selection, pricing, loss control, claims management, etc.
"Governor Scott has supported the captive industry in Vermont since his days as a State Senator and Lt. Governor," said Richard Smith, President of VCIA which lobbied for the changes. "We're delighted to have his continued support and that of the Legislature in keeping pace with the changing needs of the industry. I have already been contacted by a number of entities interested in Vermont's new agency captive provision."
Besides the agency captive provision, changes to Vermont's captive law allows broader accounting systems, expands dormant captives and clarifies risk retention governance standards among other things.