NO. 80. AN ACT RELATING TO CAPTIVE INSURANCE COMPANIES.
It is hereby enacted by the General Assembly of the State of Vermont:
Sec. 1. 8 V.S.A. § 6021(b) is amended to read:
(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:
* * *
(7) each sponsored captive insurance company shall notify the commissioner in writing within 10 business days of any protected cell that is insolvent or otherwise unable to meet its claim or expense obligations; *[
(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 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 funded by an irrevocable letter of credit or other asset 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 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, 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.
Sec. 2. 8 V.S.A. § 6022 is amended to read:
§ 6022. 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. *[
The business written by a sponsored captive insurance company shall be fronted by an insurance company licensed under the laws of any state.]* A risk retention group shall not be either a sponsor or a participant of a sponsored captive insurance company.
Sec. 3. EFFECTIVE DATE
This act shall be effective on passage.
Approved: April 11, 2000