Vt. Passes New Captive Law
Vermont is celebrating its 20th year as a domicile for captive insurers with something even better than fireworks–new captive legislation.
"Everything passed the Senate and the House," said Len Crouse, director of captive insurance in the Vermont Department of Banking, Insurance and Securities in Montpelier.
The bill has not yet been signed into law by Gov. Howard Dean, "but in all honesty, we know its a done deal," he added.
(At press time, a representative at the governor's office said they were confident that Gov. Dean would sign the bill, but did not know exactly when.)
Senate Bill 139 "will lessen the investment restrictions for sponsored captives," said Derick White, assistant director of captive insurance.
At present, risk retention groups and sponsored captives "are only allowed to invest up to certain limits," he said. "The new law will remove those limits for sponsored captives and it will give both the regulators and the companies more leeway" as to what they can invest in. The law will also allow protected cells in Vermont to pool investments, he said.
(A sponsored captive is an insurer that is owned by an association or group. Each members assets are protected in a separate cell within the captive so that one member in the captive never pays for the expenses or losses of another.)
S.B. 139 went through the state's legislative conference committee, was passed by the Senate, adjusted by the House, and went back to the Senate for its approval, Mr. White said. The next step is the governor's signature.
The House "adjustment" was another birthday surprise. "In recognition of our 20th year, they want to give any captive formed in the next three years a $5,000 premium tax credit," Mr. White said. "Thats our minimum tax, so if [a new captive] only owes the minimum they dont owe anything."
Mr. White said the new tax credit may not "bring anyone to Vermont, but [the committee] just wanted to say thank you. It was nice that the Commerce Committee [members] thought this up on their own and they were all excited about it."
During its 20th anniversary year, Mr. White said Vermont will license its 500th captive. "We just did number 494 yesterday and I have two more sitting here," he said last week.
The captives currently coming in "arent unique," he said. "I keep saying, its back to the basics again. During the soft market, we had a lot of mortgage insurance formations, and that was the driving force, but weve only had one or two this year."
In general, he said, this year is "looking pretty good. The [insurance] market is hardening, so people are going to be putting more business into captives. Vermont managers say theyre busier than ever preparing feasibility studies, so those will be coming in soon."
Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, June 11, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.
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