NO. 122. AN ACT RELATING TO THE DEPARTMENT OF BANKING, INSURANCE, SECURITIES, AND HEALTH CARE ADMINISTRATION.
It is hereby enacted by the General Assembly of the State of Vermont:
Sec. 1. 8 V.S.A. § 4818(c) is added to read:
(c) Transactions between a reinsurance intermediary broker and the insurer it represents in such capacity shall only be entered into pursuant to a written authorization specifying the responsibilities of each party. The authorization shall, at a minimum, provide that:
(1) The insurer may terminate the reinsurance intermediary broker’s authority at any time.
(2) The reinsurance intermediary broker will render accounts to the insurer accurately detailing all material transactions, including information necessary to support all commissions, charges, and other fees received by or owing to the reinsurance intermediary broker, and remit all funds due to the insurer within 30 days of receipt.
(3) All funds collected for the insurer’s account will be held by the reinsurance intermediary broker in a fiduciary capacity in a financial institution approved by the commissioner.
(4) The reinsurance intermediary broker will comply with subsection 4821(c) of this title.
(5) The reinsurance intermediary broker will comply with the written standards established by the insurer for the cession or retrocession of all risks.
(6) The reinsurance intermediary broker will disclose to the insurer any relationship with any reinsurer to which business will be ceded or retroceded.
Sec. 2. 8 V.S.A. § 4249 is amended to read:
§ 4249. PROOF OF FINANCIAL STABILITY
(a) In order to ensure the performance of a provider’s obligations to its contract holders, each provider shall continue to possess and provide the commissioner the following documents as proof of financial stability:
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evidence that all of its service contracts are insured through the purchase of
a service contract reimbursement policy issued by an insurer
do business in this state, or by an approved surplus line insurer that
files annually with the National Association of Insurance Commissioners a
financial statement prepared in accordance with the accounting practices and
procedures required or permitted by their domiciliary regulatory authority and
a corresponding audit report that reflects:
(A) capital and surplus of $5,000,000.00 or more;
(B) written premiums not exceeding three times capital and surplus over the most recent five years; and
(C) profitable operations over the most recent five years; or
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If the provider’s parent or affiliate company’s financial statement is filed
meet the provider’s financial stability requirement with the
commissioner pursuant to subdivision (a)(3) of this section as evidence of a
net worth of at least $50 million, then the parent or affiliate
company shall agree, on a form prescribed by the commissioner, to guarantee the
provider’s obligations relating to service contracts sold by the provider in
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(d) In the event that the department recovers funds from service contract providers, the commissioner in his or her discretion may distribute such funds in a manner that he or she determines is equitable and cost-effective, giving due consideration to the amount of funds recovered, the estimated amounts due to consumers, and the costs of administering any distribution. Distributions may be allocated based on claims made, premiums, or the number of consumers affected. If the commissioner determines that it would be prohibitively expensive or impossible to make restitution to consumers, the recovered funds will be remitted to the general fund.
Sec. 3. 8 V.S.A. § 6001(2) is amended to read:
§ 6001. Definitions
As used in this chapter, unless the context requires otherwise:
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“Association” means any legal association of individuals, corporations, limited
liability companies, partnerships, associations, or other entities
been in continuous existence for at least one year, the member
organizations of which or which does itself, whether or not in conjunction with
some or all of the member organizations:
(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
(B) have complete voting control over an association captive insurance company incorporated as a mutual insurer; or
(C) constitute all of the subscribers of an association captive insurance company formed as a reciprocal insurer.
Sec. 4. 8 V.S.A. § 6011(a) is amended to read:
(a) Any captive insurance company may provide
reinsurance, comprised in
section subsection 3301(a) of this
title, on risks ceded by any other insurer, and may provide reinsurance of
annuity contracts as defined in section 3717 of this title that are granted by
any other insurer.
Sec. 5. 8 V.S.A. § 6031(b) is amended to read:
(b) A sponsored captive insurance company shall be incorporated as a stock insurer with its capital divided into shares and held by the stockholders, as a nonprofit corporation with one or more members, or as a manager‑managed limited liability company.
Sec. 6. 8 V.S.A. § 6035 is amended to read:
§ 6035. QUALIFICATION OF SPONSORS
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 broker-dealer registered with the department pursuant to
chapter 150 of Title 9, a financial institution as defined under subdivision
11101(32) of this title, or a financial institution holding company as defined
under subdivision 11101(33) of this title, including any affiliate or
subsidiary of such financial institution holding company. A risk retention
group shall not be either a sponsor or a participant of a sponsored captive
Sec. 7. 8 V.S.A. § 5102(b) is amended to read:
Application for a certificate of authority shall be made to the commissioner
and include such information and in such form as
he the commissioner
prescribes, including but not limited to the following:
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A power of attorney duly executed by such applicant, if not domiciled in this
state, appointing the commissioner and his successors in office, and duly
authorized deputies, as the true and lawful attorney of such applicant in and
for this state upon whom all lawful process in any legal action or proceeding
against the health maintenance organization on a cause of action arising in
this state may be served;
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Sec. 8. 8 V.S.A. § 3361(c) is amended to read:
If the commissioner is satisfied with the copies and statements that such
insurer has complied with the provisions of this Part, he or she may grant a
license authorizing it to do insurance business by lawfully constituted and
licensed agents only, until April 1 thereafter, which license may be renewed.
In granting or renewing such license to do business the commissioner shall
consider the criteria established for the approval and certification of domestic
insurers hereinabove set forth, within the context of the stated legislative
policy. Notwithstanding the provisions of Title 11A, any insurer licensed by
the commissioner under this section may transact insurance business in this
upon the filing of a copy of such license with the secretary of state.
Such corporations shall not be required to make any annual report except as
provided in this title. This section shall not be construed to prohibit
residents of this state from procuring insurance at the home office of a
Sec. 9. 9 V.S.A. § 5102(3)(C) is amended to read:
a bank or savings institution if its activities as a broker-dealer are limited
to those specified in subdivisions
3(a)(4)(B)(i) 15 U.S.C. § 78c(a)(4)(B)(i)
through (vi), (viii) through (x), and (xi) if limited to unsolicited
transactions; and 15 U.S.C. § 78c(a) (4) and (5)(B) and (C) or a
bank that satisfies the conditions described in 15 U.S.C. § 78c(a)(4)(E);
Sec. 10. 9 V.S.A. § 5102(5)(B)(iii) is amended to read:
(iii) an industrial loan company that is not an “insured depository institution” as defined in Section 3(c)(2) of the Federal Deposit Insurance Act, 12 U.S.C. § 1813(c)(2), or any successor federal statute.
Sec. 11. 9 V.S.A. § 5102(17)(B) is amended to read:
The issuer of an equipment trust certificate or similar security serving the
is as the person by which the property is or will be
used or to which the property or equipment is or will be leased or
conditionally sold or that is otherwise contractually responsible for assuring
payment of the certificate.
Sec. 12. 9 V.S.A. § 5102(28)(E) is amended to read:
includes as an “investment contract” among other contracts, an interest in a
and, a limited liability company and,
an investment in a viatical settlement, or similar agreement.
Sec. 13. 9 V.S.A. § 5412(c) is amended to read:
If the commissioner finds that the order is in the public interest and
subdivisions (d)(1) through (6), (8), (9), (10),
or (12), and or
(13) of this section authorize the action, an order under this chapter may
censure, impose a bar on, or impose a civil penalty on a registrant in an
amount not more than $15,000.00 for each violation and not more than
$1,000,000.00 for more than one violation, and recover the costs of the
investigation from the registrant, and, if the registrant is a broker-dealer or
investment adviser ;, a partner, officer, director, or person
having a similar status or performing similar functions ;, or a
person directly or indirectly in control of the broker-dealer or investment
adviser. The limitations on civil penalties contained in this subsection shall
not apply to settlement agreements.
Sec. 14. 18 V.S.A. § 9410(i) is added to read:
(i) On or before January 15, 2008 and every three years thereafter, the commissioner shall submit a recommendation to the general assembly for conducting a survey of the health insurance status of Vermont residents.
Sec. 15. EFFECTIVE DATE
This act shall take effect on July 1, 2006, except that the provision adding
8 V.S.A. § 4249(d) and Sec. 4 shall take effect on passage.
Approved: May 2, 2006
The Vermont General Assembly
115 State Street