ACT NO. 122
Financial and related institutions; insurance;
captive insurance; Health Care Administration
This act consists of a series of statutory amendments relating to the Department of Banking, Insurance, Securities, and Health Care Administration (BISHCA).
This act adds National Association of Insurance Commissioners (NAIC) language that requires that a reinsurance intermediary broker transact with the insurer it represents only through a written contract specifying each party's responsibilities, including the broker's record-keeping obligations, a provision that authorizes the insurer to terminate the broker's authority at any time, and a provision that requires the broker to act as a fiduciary to the insurer.
The act requires a service contract provider to continue to maintain proof of its financial stability and provide specified documentary proof to the Commissioner. Service contract provider that insure their service contracts must use an insurer that files a financial statement with the NAIC that shows compliance with the laws and financial accounting and statement provisions of its domiciliary state, sufficient financial stability, including capital and surplus of at least $5 million, written premiums not exceeding three times capital and surplus over the last five years, and profitable operations over the last five years. The provider's parent company may serve to evidence financial stability by filing a financial statement with the Commissioner that shows its net worth to be at least $50 million. The Commissioner is given discretion to distribute funds recovered from service contract providers.
The act eliminates the requirement for an association that owns a captive insurance company to have been in existence for a year or more. The authority of captive insurance companies is expanded to allow reinsurance of annuity contracts. It corrects language that allows a sponsored captive company to be a nonprofit corporation or as a manager-managed limited liability company. Sponsors of a sponsored captive may now include a broker-dealer, a financial institution, a financial institution holding company, and any affiliate or subsidiary thereof.
The act eliminates the requirement for an HMO to execute a power of attorney appointing the Commissioner its local agent for service of process. It also eliminates the requirement that an insurance company file a copy of its license with the Secretary of State before commencing business in Vermont.
The act requires the BISHCA Commissioner to make a recommendation to the legislature every 3 years, beginning in January, 2008, for conducting a survey of the health insurance status of Vermonters.
Effective Date: July 1, 2006, except the requirements concerning financial stability of service contract providers and the provision expanding the authority of captive insurers to reinsure annuity contracts, which were effective May 2, 2006.
The Vermont General Assembly
115 State Street