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ACT SUMMARY 2007-2008


ACT NO. 49


Banking and insurance; the Department of Banking, Insurance, Securities, and Health Care Administration; miscellaneous amendments

This act enacts several miscellaneous amendments to the statutes administered by the Department of Banking, Insurance, Securities, and Health Care Administration as follows:

Banking Division

Criminal record check of banking examiner applicants. (Sec. 1) This provision will allow BISHCA to conduct out-of-state criminal record checks of bank examiner applicants, who have access to the personal, financial information of individual Vermonters and businesses.

Money transmission services licensee annual report date. (Sec. 2) This amendment will specify a single date for when the annual regulatory report of these firms is due.

Insurance Division

Accredited reinsurers - annual statement due date. (Sec. 3) The department proposes to establish specific deadlines for reinsurers filing annual statements and audited financial statements, consistent with the deadlines already established for licensed insurers.

Credit for reinsurance - letters of credit. (Sec. 3) This amendment will allow an insurer to take credit for reinsurance so long as the letter of credit is “effective” no later than December 31, regardless of when the letter of credit is actually issued or confirmed.

Annual audited financial reports. (Sec. 4) This is an amendment necessary to conform to the accreditation standards of the National Association of Insurance Commissioners. It will preclude CPAs conducting annual independent audits of insurance companies from entering into an agreement of indemnification or release from liability with respect to the insurer being audited. The amendment will explicitly allow mediation agreements.

Insurance company pension plans. (Sec. 5) This provision in the bill, as amended in the house committee on commerce, includes revisions to the provision for gender-neutral language and restores the requirement of express approval of the commissioner for domestic insurance company pension plans.

Annual NAIC report. (Sec. 6) This section of the bill proposes to remove the requirement for an annual report and legislative oversight of the NAIC.

Surplus lines insurers - annual fee. (Sec. 7) This section would simply change the due date for payment of a "listing fee" by surplus lines insurer from April 1 to March 1 of each year, to conform to the payment dates of licensed insurers.

Captive Insurance Division

Association captives - insuring the risk of the association. (Secs. 8 and 9) This amendment will allow an association captive to insure the risks of the association itself, as well as its members.

Industrial insured captives - controlled affiliated business. (Secs. 8, 9,and 13) This change will allow an industrial insured captive to insure the controlled affiliate business of an industrial insured or its affiliates. For example, in the case of a hospital group formed an industrial insured captive, the industrial insured will be authorized to insure doctors with privileges at each hospital.

Captive insurance company formed as a limited liability company. (Sec. 8) This section of the bill makes conforming amendments to legislation enacted in 2004 allowing a captive insurance company to be formed as a

manager-managed limited liability company.

Required accounting methods. (Sec. 10) The proposed amendment would clarify the commissioner's authority to require a captive to use statutory accounting principles, rather than the usual generally accepted accounting principles, in appropriate circumstances as determined by the commissioner.

Consolidation of captives for purposes of premium taxation. (Sec. 11) This amendment will clarify the rules for consolidating the tax liability of captive insurance companies formed as limited liability companies or sponsored captive insurance companies. The proposed amendments will also clarify the definitions of "ownership and control" and "common ownership and control" as applied to any captive insurance company eligible for consolidation.

Captive insurance companies - delinquency provisions. (Sec. 12) This section of the bill will clarify the applicability of Vermont's insurance insolvency procedures to captive insurance companies.

Definition of "captive insurance company." (Section 14) The definition of captive insurance company is amended to include a special purpose financial captive insurance company (described below).

Taxation of Special Purpose Financial Captive Insurance Companies. (Section 15) This amendment provides for the inclusion of a special purpose financial captive insurance company (described below) in a consolidated group for premium tax purposes. The $200,000.00 premium tax cap would be applied separately to each special purpose financial captive insurance company.

Qualification of the sponsor of a Sponsored Captive Insurance Company. (Section 16) This amendment would authorize the commissioner to approve a person as qualified to act as the sponsor of a sponsored captive insurance company, in addition to the types of persons currently designated by statute as qualified to act as sponsors.

Special Purpose Financial Captive Insurance Companies. (Section 17) This amendment would add a new subchapter 4 to the captive insurance company law, to provide for the organization, licensing and operation of a special purpose financial captive insurance company ("SPFC"). An SPFC will facilitate securitization of insurance risks. An insurance securitization typically involves a commercial insurance company using an SPFC to borrow funds from capital market investors. The commercial insurance company uses the funds to satisfy regulatory requirements for the establishment of reserves for insurance claims.

Securities Division

Conforming amendments to Title 8. (Secs. 18, 19, 20, and 21) These sections of the bill correct several erroneous cross-references made during the enactment of the New Vermont Securities Act in 2005.

Central Registration Depository. (Sec. 22) This amendment corrects a reference to the entity which registers investment advisor representatives: the Central Registration Depository.

The Securities Regulation and Supervision Fund. (Sec. 23) This section of the bill will correct a drafting error in the New Vermont Securities Act by recognizing the continued existence of the Securities Regulation and Supervision Fund. This is the special fund which supports the securities enforcement activities of BISHCA.

Recovery of investigation and examination expenses. (Sec. 24) This provision restores the authority of BISHCA with respect to the recovery of the Department's investigation and examination expenses.

Philanthropy Protection Act of 1995. (Sec. 25) This section will preserve Vermont's authority to over-ride federal preemption with respect to the regulation of certain securities offerings.

Broker-dealer registration - Commissioner's exemption authority. (Sec. 26) This change will permit the Commissioner to exempt broker-dealers from registration by rule or order, similar to her authority with respect to other registrants.

Registration exemption fee. (Sec. 27) This provision will restore to the New Vermont Securities Act the $200 fee imposed for filing a request for exemption from securities registration.

Notice filings and fees for certain federal covered securities. (Sec. 28) This amendment will restore the requirement for filing notice and paying a fee with respect to a very narrow category of federal covered securities. Reference to these securities was inadvertently omitted from the enactment of the New Vermont Securities Act.

This act shall take effect on July 1, 2007, except that the effective date section shall take effect on passage; and Secs. 18, 19, 20, 21, 23, and 25 clarify the intent of the general assembly in the enactment of chapter 150 of Title 9, and shall therefore take effect retroactively and apply on and after July 1, 2006.

Effective Date: July 1, 2007 with exceptions (see above).

Published by:

The Vermont General Assembly
115 State Street
Montpelier, Vermont