NO. 55.  AN ACT RELATING TO CAPTIVE INSURANCE COMPANIES.

(H.452)

It is hereby enacted by the General Assembly of the State of Vermont:

Sec. 1.  8 V.S.A. § 4836(b)(6) is amended to read:

(6)  The names and addresses of the officers and directors of the attorney, if a corporation, or its members, if a firm or a limited liability company;

Sec. 2.  8 V.S.A. § 4840(d) is added to read:

(d)  The commissioner may waive or reduce the requirements of this section for an attorney that is under common ownership or control with a reciprocal insurer.

Sec. 3.  8 V.S.A. § 4841 is amended to read:

§ 4841.  Deposit in lieu of bond

In lieu of the bond required under section 4840 of this title, the attorney may maintain on deposit $250,000.00 in the office of the commissioner, (1) subject to the same conditions as the bond, a like amount in:

(1)  cash or;

(2)  in value of securities qualified under this title as insurers' investments, as insurer investments; or

(3)  subject to the same conditions as the bond a letter of credit issued for the benefit of and acceptable to the commissioner.

 

 

Sec. 4.  8 V.S.A. § 4845(1) is amended to read:

(1)  He The commissioner shall charge as liabilities the same reserves as are required of incorporated insurers issuing nonassessable policies on a reserve basis.

Sec. 5.  8 V.S.A. § 4847(b) is amended to read:

(b)  Not less than two-thirds of the committee shall be subscribers other than the attorney, or any person employed by, representing, or having a financial interest in the attorney.

Sec. 6.  Designation.

8 V.S.A. chapter 141, §§ 6001-6020 are designated to read:

Subchapter 1.  General Provisions

Sec. 7.  8 V.S.A. §§ 6001-6020 are amended to read:

§ 6001.  DEFINITIONS

As used in this chapter, unless the context requires otherwise:

(1)  “Affiliated company” means any company in the same corporate system as a parent, an industrial insured, or a member organization by virtue of common ownership, control, operation, or management.

(2)  “Association” means any legal association of individuals, corporations, limited liability companies, partnerships, or associations, or other entities that has been in continuous existence for at least one year, the member organizations of which collectively

(A)  the member organizations of which collectively, or which does itself, whether or not in conjunction with some or all of the member organizations:

(i)(A)  own, control, or hold with power to vote all of the outstanding voting securities of an association captive insurance company incorporated as a stock insurer; or

(ii)(B)  have complete voting control over an association captive insurance company incorporated as a mutual insurer; or

(B)(C)  the member organizations of which collectively constitute all of the subscribers of an association captive insurance company formed as a reciprocal insurer.

(3)  “Association captive insurance company” means any company that insures risks of the member organizations of the association, and their affiliated companies.

(4)  “Captive insurance company” means any pure captive insurance company, association captive insurance company, sponsored captive insurance company or, industrial insured captive insurance company, or risk retention group formed or licensed under the provisions of this chapter.  For purposes of this chapter, a branch captive insurance company shall be a pure captive insurance company with respect to operations in this state, unless otherwise permitted by the commissioner.

(5)  “Commissioner” means the commissioner of the department of banking, insurance, securities, and health care administration.

(6)  “Controlled unaffiliated business” means any company:

(A)  that is not in the corporate system of a parent and affiliated companies;

(B)  that has an existing contractual relationship with a parent or affiliated company; and

(C)  whose risks are managed by a pure captive insurance company in accordance with section 6019 of this title.

(6)(7)  “Excess workers’ compensation insurance” means, in the case of an employer that has insured or self-insured its workers’ compensation risks in accordance with applicable state or federal law, insurance in excess of a specified per-incident or aggregate limit established by the commissioner.

(7)(8)  “Industrial insured” means an insured:

(A)  who procures the insurance of any risk or risks by use of the services of a full-time employee acting as an insurance manager or buyer, and;

(B)  whose aggregate annual premiums for insurance on all risks total at least $25,000.00,; and

(C)  who has at least 25 full-time employees.

(8)(9)  “Industrial insured captive insurance company” means any company that insures risks of the industrial insureds that comprise the industrial insured group, and their affiliated companies.

(9)(10)  “Industrial insured group” means any group that meets either of the following criteria:

(A)  any group of industrial insureds that collectively:

(i)(A)  own, control, or hold with power to vote all of the outstanding voting securities of an industrial insured captive insurance company incorporated as a stock insurer,;

(ii)(B)  have complete voting control over an industrial insured captive insurance company incorporated as a mutual insurer,; or

(iii)(C)  constitute all of the subscribers of an industrial insured captive insurance company formed as a reciprocal insurer.

(B)  any group which is created under the Product Liability Risk Retention Act of 1981, 15 U.S.C. § 3901 et seq., as amended, as a corporation or other limited liability association taxable as a stock insurance company or a mutual insurer under the law of the state of Vermont.

(10)(11)  “Member organization” means any individual, corporation, limited liability company, partnership, or association, or other entity that belongs to an association.

(11)(12)  “Mutual corporation” means a corporation organized without stockholders and includes a nonprofit corporation with members.

(13) “Parent” means a corporation, limited liability company, partnership, other entity, or individual, that directly or indirectly owns, controls, or holds with power to vote more than 50 per centum of the outstanding voting:

(A)  securities of a pure captive insurance company organized as a stock corporation; or

(B)  membership interests of a pure captive insurance company organized as a nonprofit corporation.

(12)(14)  “Pure captive insurance company” means any company that insures risks of its parent and affiliated companies or controlled unaffiliated business.

(13)  “Controlled unaffiliated business” means any company:

(A)  that is not in the corporate system of a parent and affiliated companies;

(B)  that has an existing contractual relationship with a parent or affiliated company; and

(C)  whose risks are managed by a pure

(15)  “Risk retention group” means a captive insurance company in accordance with section 6019 of this title.

(14)  “Alien captive insurance company” means any insurance company formed to write insurance business for its parents and affiliates and licensed organized under the laws of this state pursuant to the laws of an alien jurisdiction which imposes statutory or regulatory standards in a form acceptable to the commissioner on companies transacting the business of insurance in such jurisdiction Liability Risk Retention Act of 1986, 15 U.S.C. § 3901 et seq., as amended, as a stock or mutual corporation, a reciprocal or other limited liability entity.

(15)  “Branch business” means any insurance business transacted by a branch captive insurance company in this state.

(16)  “Branch captive insurance company” means any alien captive insurance company licensed by the commissioner to transact the business of insurance in this state through a business unit with a principal place of business in this state.

(17)  “Branch operations” means any business operations of a branch captive insurance company in this state.

(18)  “Participant” means an entity as defined in section 6023 of this title, and any affiliates thereof, that are insured by a sponsored captive insurance company, where the losses of the participant are limited through a participant contract to such participant’s pro rata share of the assets of one or more protected cells identified in such participant contract.

(19)  “Participant contract” means a contract by which a sponsored captive insurance company insures the risks of a participant and limits the losses of each such participant to its pro rata share of the assets of one or more protected cells identified in such participant contract.

(20)  “Protected cell” means a separate account established by a sponsored captive insurance company formed or licensed under the provisions of this chapter, in which assets are maintained for one or more participants in accordance with the terms of one or more participant contracts to fund the liability of the sponsored captive insurance company to such participants as set forth in such participant contracts.

(21)  “Sponsor” means any entity that meets the requirements of section 6022 of this title and is approved by the commissioner to provide all or part of the capital and surplus required by applicable law and to organize and operate a sponsored captive insurance company.

(22)  “Sponsored captive insurance company” means any captive insurance company:

(A)  in which the minimum capital and surplus required by applicable law is provided by one or more sponsors;

(B)  that is formed or licensed under the provisions of this chapter;

(C)  that insures the risks of separate participants through participant contracts; and

(D)  that funds its liability to each participant through one or more protected cells and segregates the assets of each protected cell from the assets of other protected cells and from the assets of the sponsored captive insurance company’s general account.

§ 6002.  LICENSING; AUTHORITY

(a)  Any captive insurance company, when permitted by its articles of association, charter, or other organizational document, may apply to the commissioner for a license to do any and all insurance comprised in subdivisions (1), (2), (3)(A) - (C), (3)(E) - (R) (3)(A)-(C), (E)-(R), and (4)-(9) of section subsection 3301(a) of this title and may grant annuity contracts as defined in section 3717 of this title; provided, however, that:

* * *

(4)  no risk retention group may insure any risks other than those of its members and owners;

(5)  no captive insurance company may provide personal motor vehicle or homeowner’s insurance coverage or any component thereof;

(5)(6)  no captive insurance company may accept or cede reinsurance except as provided in section 6011 of this title;

(6)(7)  any captive insurance company may provide excess workers’ compensation insurance to its parent and affiliated companies, unless prohibited by the federal law or laws of the state having jurisdiction over the transaction.  Any captive insurance company, unless prohibited by federal law, may reinsure workers’ compensation of a qualified self-insured plan of its parent and affiliated companies; and

(7)(8)  any captive insurance company which insures risks described in subdivisions (1) and (2) of section 3301(a) of this title shall comply with all applicable state and federal laws;

(8)  no branch captive insurance company may write any business in this state except insurance or reinsurance of the employee benefit business of its parent and affiliated companies which is subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended; and

(9)  no sponsored captive insurance company may insure any risks other than those of its participants.

(b)  No captive insurance company shall do any insurance business in this state unless:

(1)  it first obtains from the commissioner a license authorizing it to do insurance business in this state;

(2)  its board of directors, or in the case of a reciprocal insurer its subscribers’ advisory committee, holds at least one meeting each year in this state;

(3)  it maintains its principal place of business in this state, or in the case of a branch captive insurance company, maintains the principal place of business for its branch operations in this state; and

(4)  it appoints a registered agent to accept service of process and to otherwise act on its behalf in this state.  In case of a captive insurance company:

(A)  formed as a corporation,; provided that whenever such registered agency agent cannot with reasonable diligence be found at the registered office of the captive insurance company, the secretary of state shall be an agent of such captive insurance company upon whom any process, notice, or demand may be served;

(B)  formed as a reciprocal insurer, whenever such registered agent cannot with reasonable diligence be found at the registered office of the captive insurance company, the commissioner shall be an agent of such captive insurance company upon whom any process, notice, or demand may be served.

(c)(1)  Before receiving a license, a captive insurance company shall:

(A)  formed as a corporation shall file with the commissioner a certified copy of its charter and bylaws organizational documents, a statement under oath of its president and secretary showing its financial condition, and any other statements or documents required by the commissioner;

(B)  formed as a reciprocal insurer shall:

(i)  file with the commissioner a certified copy of the power of attorney of its attorney-in-fact, a certified copy of its subscribers’ agreement, a statement under oath of its attorney-in-fact showing its financial condition and any other statements or documents required by the commissioner; and

(ii)(B)  submit to the commissioner for approval a description of the coverages, deductibles, coverage limits, and rates, together with such additional information as the commissioner may reasonably require.  In the event of any subsequent material change in any item in such description, the reciprocal captive insurance company shall submit to the commissioner for approval an appropriate revision and shall not offer any additional kinds of insurance until a revision of such description is approved by the commissioner.  The reciprocal captive insurance company shall inform the commissioner of any material change in rates within thirty (30) days of the adoption of such change.

(2)  In addition to the information required by subdivision (1) of subsection (c) of this section, each Each applicant captive insurance company shall also file with the commissioner evidence of the following:

(A)  the amount and liquidity of its assets relative to the risks to be assumed;

(B)  the adequacy of the expertise, experience, and character of the person or persons who will manage it;

(C)  the overall soundness of its plan of operation;

(D)  the adequacy of the loss prevention programs of its parent, member organizations, or industrial insureds as applicable; and

(E)  such other factors deemed relevant by the commissioner in ascertaining whether the proposed captive insurance company will be able to meet its policy obligations.

(3)  In addition to the information required by subdivisions (1) and (2) of subsection (c) of this section, each applicant sponsored captive insurance company shall file with the commissioner the following:

(A)  a business plan demonstrating how the applicant will account for the loss and expense experience of each protected cell at a level of detail found to be sufficient by the commissioner and how it will report such experience to the commissioner;

(B)  a statement acknowledging that all financial records of the sponsored captive insurance company, including records pertaining to any protected cells, shall be made available for inspection or examination by the commissioner or the commissioner’s designated agent;

(C)  all contracts or sample contracts between the sponsored captive insurance company and any participants; and

(D)  evidence that expenses shall be allocated to each protected cell in a fair and equitable manner.

(4)(3)  Information submitted pursuant to this subsection shall be and remain confidential, and may not be made public by the commissioner or an employee or agent of the commissioner without the written consent of the company, except that:

(A)  such information may be discoverable by a party in a civil action or contested case to which the captive insurance company that submitted such information is a party, upon a showing by the party seeking to discover such information that:

(i)  the information sought is relevant to and necessary for the furtherance of such action or case,;

(ii)  the information sought is unavailable from other nonconfidential sources,; and

(iii)  a subpoena issued by a judicial or administrative officer of competent jurisdiction has been submitted to the commissioner; provided, however, that the provisions of this subdivision (4)(3) shall not apply to any industrial insured captive insurance company insuring the risks of an industrial insured group as defined in subdivision 6001(9)(B) of this title risk retention group; and

(B)  the commissioner may, in his or her the commissioner’s discretion, disclose such information to a public officer having jurisdiction over the regulation of insurance in another state, provided that:

(i)  such public official shall agree in writing to maintain the confidentiality of such information; and

(ii)  the laws of the state in which such public official serves require such information to be and to remain confidential.

(d)  Each captive insurance company shall pay to the commissioner a nonrefundable fee of $200.00 for examining, investigating, and processing its application for license, and the commissioner is authorized to retain legal, financial and examination services from outside the department, the reasonable cost of which may be charged against the applicant.  The provisions of section 3576 of this title shall apply to examinations, investigations, and processing conducted under the authority of this section.  In addition, each captive insurance company shall pay a license fee for the year of registration and a renewal fee for each year thereafter of $300.00.

(e)  If the commissioner is satisfied that the documents and statements that such captive insurance company has filed comply with the provisions of this chapter, he the commissioner may grant a license authorizing it to do insurance business in this state until April 1 thereafter, which license may be renewed.

§ 6003.  Names of companies

No captive insurance company shall adopt a name that is the same, deceptively similar, or likely to be confused with or mistaken for any other existing business name registered in the state of Vermont.

§ 6004.  Minimum capital and surplus; letter of credit

(a)  No pure captive insurance company, association captive insurance company, sponsored captive insurance company or industrial insured captive insurance company shall be issued a license unless it shall possess and thereafter maintain unimpaired paid-in capital and surplus of:

(1)  in the case of a pure captive insurance company, not less than $250,000.00,;

(2)  in the case of an association captive insurance company, not less than $750,000.00,;

(3)  in the case of an industrial insured captive insurance company, not less than $500,000.00,;

(4)  in the case of a risk retention group, not less than $1,000,000.00; and

(5)  in the case of a sponsored captive insurance company, not less than $1,000,000.00 $500,000.00.

(b)  Notwithstanding the requirements of subsection (a) of this section, no captive insurance company organized as a reciprocal insurer under this chapter shall be issued a license unless it shall possess and thereafter maintain free surplus of $1,000,000.00.

(c)  The commissioner may prescribe additional capital and surplus based upon the type, volume, and nature of insurance business transacted.

(d)(c)  Capital and surplus may be in the form of cash or an irrevocable letter of credit issued by a bank chartered by the state of Vermont or a member bank of the Federal Reserve System and approved by the commissioner.

(e)  In the case of a branch captive insurance company, as security for the payment of liabilities attributable to the branch operations, the commissioner shall require that a trust fund, funded by an irrevocable letter of credit or other acceptable asset, be established and maintained in the United States for the benefit of United States policyholders and United States ceding insurers under insurance policies issued or reinsurance contracts issued or assumed, by the branch captive insurance company through its branch operations.  The amount of such security may be no less than the capital and surplus required hereunder and the reserves on such insurance policies or such reinsurance contracts, including reserves for losses, allocated loss adjustment expenses, incurred but not reported losses and unearned premiums with regard to business written through the branch operations; provided, however, the commissioner may permit a branch captive insurance company that is required to post sec urity for loss reserves on branch business by its reinsurer to reduce the funds in the trust account required by this section by the same amount so long as the security remains posted with the reinsurer.  If the form of security selected is a letter of credit, the letter of credit must be established by, or issued or confirmed by, a bank chartered in this state or a member bank of the Federal Reserve System.

§ 6005.  Dividends

No captive insurance company may pay a dividend out of, or other distribution with respect to, capital or surplus, in excess of the limitations set forth in section 3685(d) of this title, without the prior approval of the commissioner.  Approval of an ongoing plan for the payment of dividends or other distributions shall be conditioned upon the retention, at the time of each payment, of capital or surplus in excess of amounts specified by, or determined in accordance with formulas approved by, the commissioner.  Notwithstanding the provisions of chapter 13 of Title 11B, a captive insurance company organized under the provisions of Title 11B may make such distributions as are in conformity with its purposes and approved by the commissioner.

§ 6006.  Formation of captive insurance companies in this

               state

(a)  A pure captive insurance company or a sponsored captive insurance company shall may be incorporated as a stock insurer with its capital divided into shares and held by the stockholders, or as a nonprofit corporation with one or more members.

(b)  An association captive insurance company or, an industrial insured captive insurance company, or a risk retention group may be:

(1)  incorporated as a stock insurer with its capital divided into shares and held by the stockholders, or;

(2)  incorporated as a mutual insurer without capital stock, the governing body of which is elected by the member organizations of its association, insureds; or

(3)  organized as a reciprocal insurer in accordance with chapter 132 of this title.

(c)  A captive insurance company incorporated or organized in this state shall have not less than three incorporators or two three organizers of whom not less than one shall be a resident of this state.

(d)  In the case of a captive insurance company:

(1)(A)  formed as a corporation, before the articles of incorporation are transmitted to the secretary of state, the incorporators shall petition the commissioner to issue a certificate setting forth the commissioner’s finding that the establishment and maintenance of the proposed corporation will promote the general good of the state.  In arriving at such a finding the commissioner shall consider:

(A)(i)  the character, reputation, financial standing and purposes of the incorporators;

(B)(ii)  the character, reputation, financial responsibility, insurance experience, and business qualifications of the officers and directors; and

(C)(iii)  such other aspects as the commissioner shall deem advisable.

(B)  The articles of incorporation, such certificate, and the organization fee shall be transmitted to the secretary of state, who shall thereupon record both the articles of incorporation and the certificate.

(2)  formed as a reciprocal insurer, the organizers shall petition the commissioner to issue a certificate setting forth the commissioner’s finding that the establishment and maintenance of the proposed association will promote the general good of the state.  In arriving at such a finding the commissioner shall consider: the items set forth in subdivisions (1)(A)(i)-(iii) of this subsection.

(A)  the character, reputation, financial standing and purposes of the organizers;

(B)  the character, reputation, financial responsibility, insurance experience, and business qualifications of the attorney-in-fact; and

(C)  such other aspects as the commissioner shall deem advisable.

(3)  licensed as a branch captive insurance company, the alien captive insurance company shall petition the commissioner to issue a certificate setting forth the commissioner’s finding that, after considering the character, reputation, financial responsibility, insurance experience, and business qualifications of the officers and directors of the alien captive insurance company, the licensing and maintenance of the branch operations will promote the general good of the state.  The alien captive insurance company may register to do business in this state after the commissioner’s certificate is issued.

(e)  The capital stock of a captive insurance company incorporated as a stock insurer may be authorized with no par value.

(f)  In the case of a captive insurance company:

(1)  formed as a corporation, at least one of the members of the board of directors shall be a resident of this state; and

(2)  formed as a reciprocal insurer, at least one of the members of the subscribers’ advisory committee shall be a resident of this state.

(g)  Captive Other than captive insurance companies formed as nonprofit corporations under Title 11B, captive insurance companies formed as corporations under the provisions of this chapter shall have the privileges and be subject to the provisions of the general corporation law Title 11A as well as the applicable provisions contained in this chapter.  In the event of conflict between the provisions of said general corporation law and the provisions of this chapter, the latter shall control. 

(h)  Captive insurance companies formed as nonprofit corporations under the provisions of this chapter shall have the privileges and be subject to the provisions of Title 11B as well as the applicable provisions contained in this chapter.  In the event of conflict between the provisions of Title 11B and the provisions of this chapter, the latter shall control.

(i)  The provisions of subchapter 3, and subchapter 3A of chapter 101 of this title, pertaining to mergers, consolidations, conversions, mutualizations and, redomestications, and mutual holding companies, shall apply in determining the procedures to be followed by captive insurance companies in carrying out any of the transactions described therein, except that:

(1)  the commissioner may, upon request of an insurer party to a merger authorized under subsection (a)(i) of this section, waive the requirement of subdivision (6) of section 3424 of this title; and

(2)  the commissioner may waive or modify the requirements for public notice and hearing in accordance with rules which the commissioner may adopt addressing categories of transactions.  If a notice of public hearing is required, but no one requests a hearing, then the commissioner may cancel the hearing; and

(3)  the provisions of subsections 3423(f) and (h) of this title shall not apply, and the commissioner may waive or modify the requirement of subdivision 3423(b)(4) of this title, with respect to market value of a converted company as necessary or desirable to reflect applicable restrictions on ownership of companies formed under this chapter; and

(4)  an alien insurer may be a party to a merger authorized under this subsection; provided that the requirements for a merger between a captive insurance company and a foreign insurer under section 3431 of this title shall apply to a merger between a captive insurance company and an alien insurer under this subsection.  Such alien insurer shall be treated as a foreign insurer under section 3431 and such other jurisdictions shall be the equivalent of a state for purposes of section 3431.

(h)(1)(j)  Captive insurance companies formed as reciprocal insurers under the provisions of this chapter shall have the privileges and be subject to the provisions of chapter 132 of this title in addition to the applicable provisions of this chapter.  In the event of a conflict between the provisions of chapter 132 and the provisions of this chapter, the latter shall control.  To the extent a reciprocal insurer is made subject to other provisions of this title pursuant to chapter 132, such provisions shall not be applicable to a reciprocal insurer formed under this chapter unless such provisions are expressly made applicable to captive insurance companies under this chapter.

(2)  In addition to the provisions of subdivision (1) of this subsection, captive insurance companies organized as reciprocal insurers that are industrial insured groups as defined in subdivision 6001(9)(B) of this title shall have the privileges and be subject to the provisions of chapter 142 of this title in addition to the applicable provisions of this title.

(i)(k)  The articles of incorporation or bylaws of a captive insurance company formed as a corporation may authorize a quorum of a its board of directors to consist of no fewer than one-third of the fixed or prescribed number of directors determined under section 8.24(a) of Title 11A, or under section 8.24 of Title 11B.

(j)(l)  The subscribers’ agreement or other organizing document of a captive insurance company formed as a reciprocal insurer may authorize a quorum of a its subscribers’ advisory committee to consist of no fewer than one-third of the number of its members.

§ 6007.  REPORTS AND STATEMENTS

(a)  Captive insurance companies shall not be required to make any annual report except as provided in this chapter.

(b)  Prior to March 1 of each year, each captive insurance company shall submit to the commissioner a report of its financial condition, verified by oath of two of its executive officers.  Except as provided in section 6004 of this title, each Each captive insurance company shall report using generally accepted accounting principles, unless the commissioner approves the use of statutory accounting principles, with any useful appropriate or necessary modifications or adaptations thereof required or approved or accepted by the commissioner for the type of insurance and kinds of insurers to be reported upon, and as supplemented by additional information required by the commissioner.  Except as otherwise provided, each association captive insurance company and each industrial insured captive insurance company insuring the risks of an industrial insured group defined in subdivision 6001(9)(B) of this title risk retention group shall file its report in the form required by section 3561 of this title, and each industrial insured captive insurance company insuring the risks of an industrial insured group defined in subdivision 6001(9)(B) of this title risk retention group shall comply with the requirements set forth in section 3569 of this title.  The commissioner shall by rule propose the forms in which pure captive insurance companies and industrial insured captive insurance companies insuring the risks of an industrial insured group defined in subdivision 6001(9)(A) shall report.  Subdivision 6002(c)(4) 6002(c)(3) of this title shall apply to each report filed pursuant to this section, except that such subdivision shall not apply to reports filed by industrial insured captive insurance companies insuring the risks of industrial insured groups as defined in subdivision 6001(9)(B) of this title risk retention groups.

(c)  Any pure captive insurance company or an industrial insured captive insurance company insuring the risks of industrial insured groups as defined in subdivision (9)(A) of section 6001 of this title may make written application for filing the required report on a fiscal year-end.  If an alternative reporting date is granted:

(1)  the annual report is due 60 days after the fiscal year-end; and

(2)  in order to provide sufficient detail to support the premium tax return, the pure captive insurance company or industrial insured captive insurance company insuring the risks of industrial insureds as defined in subdivision (9)(A) of section 6001 of this title shall file prior to March 1 of each year for each calendar year-end, pages 1, 2, 3, and 5 of the “Captive Annual Statement; Pure or Industrial Insured,” verified by oath of two of its executive officers.

(d)  Sixty days after the fiscal year-end, a branch captive insurance company shall file with the commissioner a copy of all reports and statements required to be filed under the laws of the jurisdiction in which the alien captive insurance company is formed, verified by oath of two of its executive officers.  If the commissioner is satisfied that the annual report filed by the alien captive insurance company in its domiciliary jurisdiction provides adequate information concerning the financial condition of the alien captive insurance company, the commissioner may waive the requirement for completion of the captive annual statement for business written in the alien jurisdiction.

§ 6008.  Examinations and investigations

(a)  At least once in three years, and whenever the commissioner determines it to be prudent, he the commissioner shall personally, or by some competent person appointed by him the commissioner, visit each captive insurance company and thoroughly inspect and examine its affairs to ascertain its financial condition, its ability to fulfill its obligations and whether it has complied with the provisions of this chapter.  The commissioner upon application, in his the commissioner’s discretion, may enlarge the aforesaid three-year period to give five years, provided said captive insurance company is subject to a comprehensive annual audit during such period of a scope satisfactory to the commissioner by independent auditors approved by him the commissioner.  The expenses and charges of the examination shall be paid to the state by the company or companies examined and the commissioner of finance and management shall issue his or her warrants for the proper charges incurred in all examinations.

(b)  The provisions of section 3576 of this title shall apply to examinations conducted under this section.

(c)  All examination reports, preliminary examination reports or results, working papers, recorded information, documents and copies thereof produced by, obtained by or disclosed to the commissioner or any other person in the course of an examination made under this section are confidential and are not subject to subpoena and may not be made public by the commissioner or an employee or agent of the commissioner without the written consent of the company, except to the extent provided in this subsection.  Nothing in this subsection shall prevent the commissioner from using such information in furtherance of the commissioner’s regulatory authority under this title.  The commissioner may, in his or her the commissioner’s discretion, grant access to such information to public officers having jurisdiction over the regulation of insurance in any other state or country, or to law enforcement officers of this state or any other state or agency of the federal government at any time, so long as such officers receiving the information agree in writing to hold it in a manner consistent with this section.

(d)(1)  The provisions of this section shall apply to all business written by a captive insurance company; provided, however, that the examination for a branch captive insurance company shall be of branch business and branch operations only, as long as the branch captive insurance company provides annually to the commissioner a certificate of compliance, or its equivalent, issued by or filed with the licensing authority of the jurisdiction in which the branch captive insurance company is formed, and demonstrates to the commissioner’s satisfaction that it is operating in sound financial condition in accordance with all applicable laws and regulations of such jurisdiction.

(2)  As a condition of licensure, the alien captive insurance company shall grant authority to the commissioner for examination of the affairs of the alien captive insurance company in the jurisdiction in which the alien captive insurance company is formed.

§ 6009.  Grounds and procedures for suspension or

               revocation of license

(a)  The license of a captive insurance company to do an insurance business in this state may be suspended or revoked by the commissioner for any of the following reasons:

(1)  Insolvency or impairment of capital or surplus;

(2)  Failure to meet the requirements of section 6004 of this title;

(3)  Refusal or failure to submit an annual report, as required by section 6007 of this title chapter, or any other report or statement required by law or by lawful order of the commissioner;

(4)  Failure to comply with the provisions of its own charter, bylaws or other organizational document;

(5)  Failure to submit to or pay the cost of examination or any legal obligation relative thereto, as required by section 6008 of this title this chapter;

(6)  Refusal or failure to pay the cost of examination as required by section 6008;

(7)  Use of methods that, although not otherwise specifically prohibited by law, nevertheless render its operation detrimental or its condition unsound with respect to the public or to its policyholders; or

(8)(7)  Failure otherwise to comply with the laws of this state.

(b)  If the commissioner finds, upon examination, hearing, or other evidence, that any captive insurance company has committed violated any provision of the acts specified in subsection (a) of this section, he the commissioner may suspend or revoke such company’s license if he the commissioner deems it in the best interest of the public and the policyholders of such captive insurance company, notwithstanding any other provision of this title.

 

 

§ 6010.  LEGAL INVESTMENTS

(a)  An association Association captive insurance company, sponsored captive insurance company and an industrial insured captive insurance company insuring the risks of an industrial insured group defined in subdivision 6001(9)(B) of this title companies and risk retention groups shall comply with the investment requirements contained in sections 3461 through 3472, exclusive of section 3463a, of this title, as applicable; provided, however, that compliance with such investment requirements shall be waived for sponsored captive insurance companies to the extent that credit for risks ceded to reinsurers is allowed pursuant to section 6011 of this title or to the extent otherwise deemed reasonable and appropriate by the commissioner.  Section 3463a of this title shall apply to association captives, sponsored captive insurance companies and industrial insured captive insurance companies insuring the risks of industrial insured groups defined in subdivision 6001(9)(B) of this title risk retention groups except to the extent it is inconsistent with approved accounting standards in use by the association captive insurance company, sponsored captive insurance company or industrial insured captive insurance company insuring the risks of an industrial insured group as defined in subdivision 6001(9)(B) of this title.  Notwithstanding any other provision of this title, the commissioner may approve the use of alternative reliable methods of valuation and rating.

(b)  No pure captive insurance company or industrial insured captive insurance company insuring the risks of an industrial insured group as defined in subdivision 6001(9)(A) of this title shall be subject to any restrictions on allowable investments whatever, including those limitations contained in sections 3461-3472; provided, however, that the commissioner may prohibit or limit any investment that threatens the solvency or liquidity of any such company.

(c)  Only a No pure captive insurance company may make loans a loan to or an investment in its parent company or affiliates.  No loans to a parent company or any affiliate will be permitted without prior written approval of the commissioner, and any such loan or investment must be evidenced by a note in a form documentation approved by the commissioner.  Loans of minimum capital and surplus funds required by section 6004 of this title are prohibited.

§ 6011.  Reinsurance

(a)  Any captive insurance company may provide reinsurance, comprised in section 3301(a) of this title, on risks ceded by any other insurer.

(b)  Any captive insurance company may take credit for reserves on the reinsurance of risks or portions of risks ceded to reinsurers complying with the provisions of section subsections 3634a(a) through (f) of this title.  Prior approval of the commissioner shall be required for ceding or taking credit for reserves on the reinsurance of risks or portions of risks ceded to reinsurers not complying with section subsections 3634a(a) through (f) of this title, except for business written by an alien captive insurance company outside of the United States.

(c)  In addition to reinsurers authorized under the provisions of section 3634a of this title, a captive insurance company may take credit for reserves on the reinsurance of risks or portions of risks ceded to a pool, exchange or association acting as a reinsurer which has been authorized by the commissioner.  The commissioner may require any other documents, financial information or other evidence that such a pool, exchange or association will be able to provide adequate security for its financial obligations.  The commissioner may deny authorization or impose any limitations on the activities of a reinsurance pool, exchange or association that, in his the commissioner’s judgment, are necessary and proper to provide adequate security for the ceding captive insurance company and for the protection and consequent benefit of the public at large.

(d)  For all purposes of this chapter, insurance by a captive insurance company of any workers’ compensation qualified self-insured plan of its parent and affiliates shall be deemed to be reinsurance.

§ 6012.  Rating organizations; memberships

No captive insurance company shall be required to join a rating organization.

 

 

§ 6013.  Exemption from compulsory associations

No captive insurance company, including a captive insurance company organized as a reciprocal insurer under this chapter, shall be permitted to join or contribute financially to any plan, pool, association, or guaranty or insolvency fund in this state, nor shall any such captive insurance company, or its insured, or its parent or any affiliated company, or any member organization of its association, or in the case of a captive insurance company organized as a reciprocal insurer, any subscriber any insured or affiliate thereof, receive any benefit from any such plan, pool, association, or guaranty or insolvency fund for claims arising out of the operations of such captive insurance company.

§ 6014.  TAX ON PREMIUMS COLLECTED

(a)  Each captive insurance company shall pay to the commissioner of taxes, in the month of February of each year, a tax at the rate of four-tenths

38 hundredths of one percent on the first 20 million dollars and  three-tenths 285 thousandths of one percent on the next 20 million dollars and two-tenths 19 hundredths of one percent on the next 20 million dollars and seventy-five 72 thousandths of one percent on each dollar thereafter on the direct premiums collected or contracted for on policies or contracts of insurance written by the captive insurance company during the year ending December 31 next preceding, after deducting from the direct premiums subject to the tax the amounts paid to policyholders as return premiums which shall include dividends on unabsorbed premiums or premium deposits returned or credited to policyholders; provided, however, that no tax shall be due or payable as to considerations received for annuity contracts.

(b)  Each captive insurance company shall pay to the commissioner of taxes in the month of February of each year a tax at the rate of two hundred and twenty-five 214 thousandths of one percent on the first 20 million dollars of assumed reinsurance premium, and one hundred fifty 143 thousandths of one percent on the next 20 million dollars and fifty 48 thousandths of one percent on the next 20 million dollars and twenty-five 24 thousandths of one percent of each dollar thereafter.  However, no reinsurance tax applies to premiums for risks or portions of risks which are subject to taxation on a direct basis pursuant to subsection (a) of this section.  No reinsurance premium tax shall be payable in connection with the receipt of assets in exchange for the assumption of loss reserves and other liabilities of another insurer under common ownership and control if such transaction is part of a plan to discontinue the operations of such other insurer, and if the intent of the parties to such transaction is to renew or maintain such business with the captive insurance company.

(c)  If the aggregate taxes The annual minimum aggregate tax to be paid by a captive insurance company calculated under subsections (a) and (b) of this section amount to less than $5,000.00 in any year, such captive insurance company shall pay a tax of $5,000.00 for such year shall be $7,500.00, and the annual maximum aggregate tax shall be $200,000.00.  The maximum aggregate tax to be paid by a sponsored insurance company shall apply to each protected cell only and not to the sponsored captive insurance company as a whole.

* * *

(f)  For the purposes of this section common ownership and control shall mean:

* * *

(2)  in the case of mutual or nonprofit corporations, the direct or indirect ownership of 80 percent or more of the surplus and the voting power of two or more corporations by the same member or members.

* * *

(g)  In the case of a branch captive insurance company, the tax provided for in this section shall apply only to the branch business of such company.

(h)  The tax provided for in this section shall constitute all taxes collectible under the laws of this state from any captive insurance company, and no other occupation tax or other taxes shall be levied or collected from any captive insurance company by the state or any county, city, or municipality within this state, except ad valorem taxes on real and personal property used in the production of income.

(i)(h)  Annually, ten percent of the premium tax revenues collected pursuant to this section shall be transferred to the department of banking, insurance, securities, and health care administration for the regulation of captive insurance companies under this chapter.

(j)(i)  A captive insurance company, first licensed under this chapter after January 1, 2001, shall receive a nonrefundable credit of $5,000.00 applied against the aggregate taxes owed for the first taxable year for which the company has a liability under this section.

(j)  The tax provided for in this section shall be calculated on an annual basis, notwithstanding policies or contracts of insurance or contracts of reinsurance issued on a multiyear basis.  In the case of multiyear policies or contracts, the premium shall be prorated for purposes of determining the tax under this section.

§ 6015.  Rules and regulations

The commissioner may establish and from time to time amend such rules relating to captive insurance companies as are necessary to enable him the commissioner to carry out the provisions of this chapter.

§ 6016.  Laws applicable

No provisions of this title, other than those contained in this chapter or contained in specific references contained in this chapter, shall apply to captive insurance companies.  Risk retention groups shall have the privileges and be subject to the provisions of chapter 142 of this title in addition to the applicable provisions of this chapter.

§ 6017.  Captive insurance regulatory and supervision

               fund

(a)(1)  There is hereby created a fund to be known as the captive insurance regulatory and supervision fund for the purpose of providing the financial means for the commissioner of banking, insurance, securities, and health care administration to administer this chapter, chapter 142, and chapter 142A and for reasonable expenses incurred in promoting the captive insurance industry in Vermont.  The transfer of ten percent of the premiums premium tax under section subsection 6014(h) of this title, and all fees and assessments received by the department pursuant to the administration of these chapters shall be credited to this fund.  Of this amount, not more than two percent of the premium tax under section 6014 may be transferred to the agency of commerce and community development, with approval of the secretary of administration, for promotional expenses.  All fees received by the department from reinsurers who assume risk solely from captive insurance companies and are subject to the provisions of section subsections 3634a(a) through (f) of this title, shall be deposited into the captive insurance regulatory and supervision fund.  All fines and administrative penalties, however, shall be deposited directly into the general fund.

(2)  All payments from the captive insurance regulatory and supervision fund for the maintenance of staff and associated expenses, including contractual services as necessary, shall be disbursed from the state treasury only upon warrants issued by the commissioner of finance and management, after receipt of proper documentation regarding services rendered and expenses incurred.

(b)  At the end of each fiscal year, that portion of the balance in the captive insurance regulatory and supervision fund which exceeds one hundred thousand $250,000.00 shall be transferred to the general fund.

(c)  The commissioner of finance and management may anticipate receipts to the captive insurance regulatory and supervision fund and issue warrants based thereon.

§ 6018.  Delinquency

(a)  Except as otherwise provided in this section chapter, the terms and conditions set forth in chapter 145 of this title, pertaining to insurance reorganizations, receiverships and injunctions, shall apply in full to captive insurance companies formed or licensed under this chapter.

(b)  In the case of a sponsored captive insurance company:

(1)  the assets of a protected cell may not be used to pay any expenses or claims other than those attributable to such protected cell; and

(2)  its capital and surplus shall at all times be available to pay any expenses of or claims against the sponsored captive insurance company.

§ 6019.  Rules for controlled unaffiliated business

The commissioner shall may adopt rules establishing standards to ensure that a parent or affiliated company is able to exercise control of the risk management function of any controlled unaffiliated business to be insured by the pure captive insurance company; provided, however, that, until such time as rules under this section are adopted, the commissioner may approve the coverage of such risks by temporary order grant authority to a pure captive insurance company to insure such risks.

§ 6020.  Conversion to or merger with reciprocal insurer

(a)  An association captive insurance company, risk retention group, or industrial insured group captive insurance company formed as a stock or mutual corporation may be converted to or merged with and into a reciprocal insurer in accordance with a plan therefore and the provisions of this section.

(b)  Any plan for such conversion or merger shall:

(1)  be provide a fair and equitable to the shareholders, in the case plan for purchasing, retiring, or otherwise extinguishing the interests of the stockholders and policyholders of a stock insurer, or the and the members and policyholders, in the case of a mutual insurer; and, including a fair and equitable provision for the rights and remedies of dissenting stockholders, members, or policyholders.

(2)  provide for the purchase of the shares of any nonconsenting shareholder of a stock insurer or the policyholder interest of any nonconsenting policyholder of a mutual insurer in substantially the same manner and subject to the same rights and conditions as are accorded a dissenting shareholder under section 3428 of this title, in the case of a stock insurer, or a dissenting policyholder under section 3429 of this title, in the case of a mutual insurer.

(c)  In the case of a conversion authorized under subsection (a) of this section:

(1)  such conversion shall be accomplished under such reasonable plan and procedure as may be approved by the commissioner; provided, however, that the commissioner shall not approve any such plan of conversion unless such plan:

(A)  satisfies the provisions of subsection (b) of this section;

(B)  provides for a hearing, of which notice has been is given or to be given to the insurer captive insurance company, its directors, officers, and stockholders policyholders, and, in the case of a stock insurer, or policyholders, its stockholders, and in the case of a mutual insurer, its members, all of whom which persons shall have the right to appear at such hearing, except that the commissioner may waive or modify the requirements for be entitled to attend and appear at such hearing; provided, however, that if a notice of hearing is required, but no hearing is requested notice of a hearing is given and no director, officer, policyholder, member, or stockholder requests a hearing, the commissioner may cancel such hearing;

(C)  provides a fair and equitable plan for the conversion of existing stockholder, member, or policyholder interests into subscriber interests in the resulting reciprocal insurer, substantially proportionate to stockholder or policyholder the corresponding interests in the stock or mutual insurer; provided, however, that this requirement shall not preclude the resulting reciprocal insurer from applying underwriting criteria that could affect ongoing ownership interests; and

(D)  is approved:

(i)  in the case of a stock insurer, by a majority of the shares entitled to vote represented in person or by proxy at a duly called regular or special meeting at which a quorum is present; and

* * *

(7)  the commissioner shall approve the articles of merger if the commissioner finds that the merger will promote the general good of the state in conformity with those standards set forth in subdivision 6006(d)(2) of this title.  If the commissioner approves the articles of merger, the commissioner shall indorse his or her the commissioner’s approval thereon and the surviving insurer shall present the same to the secretary of state at the secretary of state’s office;

* * *

Sec. 8.  RECODIFICATION

8 V.S.A. §§ 6021- 6023 are recodified as 8 V.S.A. §§ 6034 - 6036.


Sec. 9.  8 V.S.A. chapter 141, subchapters 2 and 3 are added to read:

Subchapter 2.  Sponsored Captive Insurance Companies

§ 6031.  Formation

(a)  One or more sponsors may form a sponsored captive insurance company under this chapter.  In addition to the general provisions of this chapter, the provisions of this subchapter shall apply to sponsored captive insurance companies.

(b)  A sponsored captive insurance company shall be incorporated as a stock insurer with its capital divided into shares and held by the stockholders.

§ 6032.  Definitions

As used in this subchapter, unless the context requires otherwise:

(1)  “Participant” means an entity as defined in section 6036 of this title, and any affiliates thereof, that are insured by a sponsored captive insurance company, where the losses of the participant are limited through a participant contract to such participant’s pro rata share of the assets of one or more protected cells identified in such participant contract.

(2)  “Participant contract” means a contract by which a sponsored captive insurance company insures the risks of a participant and limits the losses of each such participant to its pro rata share of the assets of one or more protected cells identified in such participant contract.

(3)  “Protected cell” means a separate account established by a sponsored captive insurance company formed or licensed under the provisions of this chapter, in which assets are maintained for one or more participants in accordance with the terms of one or more participant contracts to fund the liability of the sponsored captive insurance company assumed on behalf of such participants as set forth in such participant contracts.

(4)  “Sponsor” means any entity that meets the requirements of section 6035 of this title and is approved by the commissioner to provide all or part of the capital and surplus required by applicable law and to organize and operate a sponsored captive insurance company.

(5)  “Sponsored captive insurance company” means any captive insurance company:

(A)  in which the minimum capital and surplus required by applicable law is provided by one or more sponsors;

(B)  that is formed or licensed under the provisions of this chapter;

(C)  that insures the risks only of its participants through separate participant contracts; and

(D)  that funds its liability to each participant through one or more protected cells and segregates the assets of each protected cell from the assets of other protected cells and from the assets of the sponsored captive insurance company’s general account.

§ 6033.  Supplemental Application Materials

In addition to the information required by subdivisions 6002(c)(1) and (2)


of this title, each applicant-sponsored captive insurance company shall file with the commissioner the following:

(1)  materials demonstrating how the applicant will account for the loss and expense experience of each protected cell at a level of detail found to be sufficient by the commissioner, and how it will report such experience to the commissioner;

(2)  a statement acknowledging that all financial records of the sponsored captive insurance company, including records pertaining to any protected cells, shall be made available for inspection or examination by the commissioner or the commissioner’s designated agent;

(3)  all contracts or sample contracts between the sponsored captive insurance company and any participants; and

(4)  evidence that expenses shall be allocated to each protected cell in a fair and equitable manner.

§ 6034.  Sponsored captive insurance companies

               PROTECTED CELLS

(a)  One or more sponsors may form a sponsored captive insurance company under this chapter.

(b)  A sponsored captive insurance company formed or licensed under the provisions of this chapter may establish and maintain one or more protected cells to insure risks of one or more participants, subject to the following conditions:

(1)  the shareholders of a sponsored captive insurance company shall be limited to its participants and sponsors, provided that a sponsored captive insurance company may issue nonvoting securities to other persons on terms approved by the commissioner;

* * *

(8)  no participant contract shall take effect without the commissioner’s prior written approval, and the addition of each new protected cell and withdrawal of any participant or termination of any existing protected cell shall constitute a change in the business plan requiring the commissioner’s prior written approval; and

(9)  the business written by a sponsored captive, with respect to each cell, shall be:

(A)  fronted by an insurance company licensed under the laws of any state;

(B)  reinsured by a reinsurer authorized or approved by the state of Vermont; or

(C)  secured by a trust fund in the United States for the benefit of policyholders and claimants or funded by an irrevocable letter of credit or other asset arrangement that is acceptable to the commissioner.  The amount of security provided by a trust fund shall be no less than the reserves associated with those liabilities which are neither fronted nor reinsured, including reserves for losses, allocated loss adjustment expenses, incurred but not reported losses and unearned premiums for business written through the participant’s protected cell.  The commissioner may require the sponsored captive to increase the funding of any trust as security arrangement established under this subdivision.  If the form of security in the trust is a letter of credit, the letter of credit must be established, issued or confirmed by a bank chartered in this state, a member of the federal reserve system Federal Reserve System, or a bank chartered by another state if such state chartered bank is acceptable to the commissioner.  A trust and trust instrument maintained pursuant to this subdivision shall be established in a form and upon such terms approved by the commissioner.

§ 6035.  Qualification of sponsors

A sponsor of a sponsored captive insurance company shall be an insurer licensed under the laws of any state, a reinsurer authorized or approved under the laws of any state, or a captive insurance company formed or licensed under this chapter.  A risk retention group shall not be either a sponsor or a participant of a sponsored captive insurance company.

§ 6036.  Participants in sponsored captive insurance

               companies

(a)  Associations, corporations, limited liability companies, partnerships, trusts, and other business entities may be a participant participants in any sponsored captive insurance company formed or licensed under this chapter.

(b)  A sponsor may be a participant in a sponsored captive insurance company.

(c)  A participant need not be a shareholder of the sponsored captive insurance company or any affiliate thereof.

(d)  A participant shall insure only its own risks through a sponsored captive insurance company.

§ 6037.  Investments by sponsored captive insurance

               companies

Notwithstanding the provisions of section 6034 of this title, the assets of two or more protected cells may be combined for purposes of investment, and such combination shall not be construed as defeating the segregation of such assets for accounting or other purposes.  Sponsored captive insurance companies shall comply with the investment requirements contained in sections 3461 through 3472 of this title, as applicable; provided, however, that compliance with such investment requirements shall be waived for sponsored captive insurance companies to the extent that credit for reinsurance ceded to reinsurers is allowed pursuant to section 6011 of this title or to the extent otherwise deemed reasonable and appropriate by the commissioner.  Section 3463a of this title shall apply to sponsored captive insurance companies except to the extent it is inconsistent with approved accounting standards in use by the company.  Notwithstanding any other provision of this title, the commissioner may approve the use of alternative reliable methods of valuation and rating.

§ 6038.  Delinquency of sponsored captive insurance

               companies

In the case of a sponsored captive insurance company, the provisions of section 6018 of this title shall apply, provided:

(1)  the assets of a protected cell may not be used to pay any expenses or claims other than those attributable to such protected cell; and

(2)  its capital and surplus shall at all times be available to pay any expenses of or claims against the sponsored captive insurance company.

Subchapter 3.  Branch Captive Insurance Companies

§ 6041.  Establishment of a branch captive

(a)  A branch captive may be established in this state in accordance with the provisions of this chapter to write in this state only insurance or reinsurance of the employee benefit business of its parent and affiliated companies which is subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended.  In addition to the general provisions of this chapter, the provisions of this subchapter shall apply to branch captive insurance companies.

(b)  No branch captive insurance company shall do any insurance business in this state unless it maintains the principal place of business for its branch operations in this state.

§ 6042.  Definitions

As used in this subchapter, unless the context requires otherwise:

(1)  “Alien captive insurance company” means any insurance company formed to write insurance business for its parents and affiliates and licensed pursuant to the laws of an alien jurisdiction which imposes statutory or regulatory standards in a form acceptable to the commissioner on companies transacting the business of insurance in such jurisdiction.

(2)  “Branch business” means any insurance business transacted by a branch captive insurance company in this state.

(3)  “Branch captive insurance company” means any alien captive insurance company licensed by the commissioner to transact the business of insurance in this state through a business unit with a principal place of business in this state.

(4)  “Branch operations” means any business operations of a branch captive insurance company in this state.

§ 6043.  Security required

In the case of a branch captive insurance company, as security for the payment of liabilities attributable to the branch operations, the commissioner shall require that a trust fund, funded by an irrevocable letter of credit or other acceptable asset, be established and maintained in the United States for the benefit of United States policyholders and United States ceding insurers under insurance policies issued or reinsurance contracts issued or assumed by the branch captive insurance company through its branch operations.  The amount of such security may be no less than the amount set forth in subdivision 6004(a)(1) of this title and the reserves on such insurance policies or such reinsurance contracts, including reserves for losses, allocated loss adjustment expenses, incurred but not reported losses, and unearned premiums with regard to business written through the branch operations; provided, however, the commissioner may permit a branch captive insurance company that is required to post security for loss reserves on branch business by its reinsurer to reduce the funds in the trust account required by this section by the same amount so long as the security remains posted with the reinsurer.  If the form of security selected is a letter of credit, the letter of credit must be established by, or issued or confirmed by, a bank chartered in this state or a member bank of the Federal Reserve System.

§ 6044.  Certificate of general good

In the case of a captive insurance company licensed as a branch captive, the alien captive insurance company shall petition the commissioner to issue a certificate setting forth the commissioner’s finding that, after considering the character, reputation, financial responsibility, insurance experience, and business qualifications of the officers and directors of the alien captive insurance company, the licensing and maintenance of the branch operations will promote the general good of the state.  The alien captive insurance company may register to do business in this state after the commissioner’s certificate is issued.

 

§ 6045.  Branch captive reports

Prior to March 1 of each year, or with the approval of the commissioner within 60 days after its fiscal year-end, a branch captive insurance company shall file with the commissioner a copy of all reports and statements required to be filed under the laws of the jurisdiction in which the alien captive insurance company is formed, verified by oath of two of its executive officers.  If the commissioner is satisfied that the annual report filed by the alien captive insurance company in its domiciliary jurisdiction provides adequate information concerning the financial condition of the alien captive insurance company, the commissioner may waive the requirement for completion of the captive annual statement for business written in the alien jurisdiction.

§ 6046.  Examination of branch captives

(a)  The examination of a branch captive insurance company pursuant to section 6008 of this title shall be of branch business and branch operations only, so long as the branch captive insurance company provides annually to the commissioner a certificate of compliance, or its equivalent, issued by or filed with the licensing authority of the jurisdiction in which the branch captive insurance company is formed, and demonstrates to the commissioner’s satisfaction that it is operating in sound financial condition in accordance with all applicable laws and regulations of such jurisdiction.

(b)  As a condition of licensure, the alien captive insurance company shall grant authority to the commissioner for examination of the affairs of the alien captive insurance company in the jurisdiction in which the alien captive insurance company is formed.

§ 6047.  Taxation of branch captives

In the case of a branch captive insurance company, the tax provided for in section 6014 of this title shall apply only to the branch business of such company.

Sec. 10.  8 V.S.A. § 6071(1)(C)(iii) is amended and (iv) is added to read:

(iii)  an association, society, or other entity, or any person under common ownership or control therewith, that has, directly or indirectly, as its owners or members, persons who are policyholders or are eligible to become policyholders of the risk retention group; and

(iv)  an attorney-in-fact of a risk retention group organized as a reciprocal, or any person affiliated with or under common control with the attorney-in-fact.

Sec. 10a.  3 V.S.A. § 253(c) is amended to read:

(c)  The commissioner of banking, insurance, securities, and health care administration, with the approval of the governor, shall appoint a deputy commissioner of banking and, a deputy commissioner of insurance and, a deputy commissioner of captive insurance, a deputy commissioner of securities, and a deputy commissioner of health care administration.  The commissioner of banking, insurance, securities, and health care administration may remove the deputy commissioners at pleasure and shall be responsible for their acts.  The functions and duties that relate to banks and banking shall be in the charge of the deputy commissioner of banking; those that relate to the business of insurance shall be in the charge of the deputy commissioner of insurance; those that relate to the business of captive insurance shall be in the charge of the deputy commissioner of captive insurance; those that relate to the business of securities shall be in the charge of the deputy commissioner of securities; and those that relate to health care administration shall be in the charge of the deputy commissioner of health care administration.

Sec. 11.  EFFECTIVE DATE

This act shall take effect on July 1, 2003, except:

(1)  Those provisions in Sec. 7 amending subsections (c) and (j) of 8 V.S.A. § 6014 shall take effect from passage and shall apply to taxes assessed for calendar year 2003 and thereafter.

(2)  Those provisions in Sec. 7 amending subsections (a) and (b) of 8 V.S.A. § 6014 shall take effect January 1, 2004 and shall apply to premiums  written in calendar year 2004 and thereafter. 

(3)  This section and Sec. 8, which shall take effect on June 30, 2003.

(4)  Sec. 10a shall take effect from passage.

Approved:  June 4, 2003