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Title 8: Banking and Insurance

Chapter 101: INSURANCE COMPANIES GENERALLY

  • Subchapter 001: Formation
  • § 3301. Purposes

    (a) Subject to the additional or varied requirements stated in this subchapter, a corporation may be formed pursuant to the general corporation law to do any and all insurance and reinsurance comprised in any one of the following numbered subdivisions:

    (1) "Life insurance" which is insurance on human lives. The business of life insurance includes also the granting of endowment benefits, additional benefits in event of death or dismemberment by accident or accidental means, additional benefits in event of the insured's disability, and optional modes of settlement of proceeds of life insurance. Life insurance does not include workers' compensation coverages.

    (2) "Health insurance" which is insurance of human beings against bodily injury, disablement, or death by accident or accidental means, or the expense thereof, or against disablement or expense resulting from sickness, and every insurance appertaining thereto. Health insurance does not include workers' compensation coverages.

    (3) "Casualty insurance" which includes:

    (A) "Vehicle insurance." Insurance against loss of or damage to any land vehicle or aircraft or any draft or riding animal or to property while contained therein or thereon or being loaded or unloaded therein or therefrom, from any hazard or cause, and against any loss, liability, or expense resulting from or incidental to ownership, maintenance, or use of any such vehicle, aircraft, or animal; and provision of medical, hospital, surgical, disability benefits to injured persons, and funeral and death benefits to dependents, beneficiaries, or personal representatives of persons killed, irrespective of legal liability of the insured, when issued as an incidental coverage with or supplemental to insurance on the vehicle, aircraft, or animal.

    (B) "Automobile guaranty." Insurance of the mechanical condition or freedom from defective or worn parts or equipment, of motor vehicles.

    (C) "Liability insurance." Insurance against legal liability for the death, injury, or disability of any human being, or for damage to property; and provision of medical, hospital, surgical, disability benefits to injured persons, and funeral and death benefits to dependents, beneficiaries, or personal representatives of persons killed, irrespective of legal liability of the insured, when issued as an incidental coverage with or supplemental to liability insurance.

    (D) "Workers' compensation." Insurance of the obligations accepted by, imposed upon, or assumed by employers under law for death, disablement, or injury of employees.

    (E) "Burglary and theft." Insurance against loss or damage by burglary, theft, larceny, robbery, forgery, fraud, vandalism, malicious mischief, confiscation, or wrongful conversion, disposal or concealment, or from any attempt at any of the foregoing; including supplemental coverage for medical, hospital, surgical, and funeral expense incurred by the named insured or any other person as a result of bodily injury during the commission of a burglary, robbery, or theft by another; also insurance against loss of or damage to monies, coins, bullion, securities, notes, drafts, acceptances, or any other valuable papers and documents, resulting from any cause.

    (F) "Personal property floater." Insurance upon personal effects against loss or damage from any cause, under a personal property floater.

    (G) "Glass." Insurance against loss or damage to glass, including its lettering, ornamentation, and fittings.

    (H) "Boiler and machinery." Insurance against any liability and loss or damage to property or interest resulting from accidents to or explosions of boilers, pipes, pressure containers, machinery, or apparatus, and to make inspection of and issue certificates of inspection upon boilers, machinery, and apparatus of any kind, whether or not insured.

    (I) "Leakage and fire extinguishing equipment." Insurance against loss or damage to any property or interest caused by the breakage or leakage of sprinklers, hoses, pumps, and other fire extinguishing equipment or apparatus, water pipes or containers, or by water entering through leaks or openings in buildings, and insurance against loss or damage to such sprinklers, hoses, pumps, and other fire extinguishing equipment or apparatus.

    (J) "Credit." Insurance against loss or damage resulting from failure of debtors to pay their obligations to the insured.

    (K) "Malpractice." Insurance against legal liability of the insured, and against loss, damage, or expense incidental to a claim of such liability, and including medical, hospital, surgical, and funeral benefits to injured persons, irrespective of legal liability of the insured, arising out of the death, injury, or disablement of any person or arising out of damage to the economic interest of any person, as the result of negligence in rendering expert, fiduciary, or professional service.

    (L) "Congenital defects." Insurance against congenital defects in human beings.

    (M) "Livestock insurance." Insurance against loss or damage to livestock, and services of a veterinary for such animals.

    (N) "Elevator." Insurance against loss of or damage to any property of the insured, resulting from the ownership, maintenance, or use of elevators, except loss or damage by fire, and to make inspections of and issue certificates of inspection upon, elevators.

    (O) "Entertainments." Insurance indemnifying the producer of any motion picture, television, radio, theatrical, sport, spectacle, entertainment, or similar production, event, or exhibition against loss from interruption, postponement, or cancellation thereof due to death, accidental injury, or sickness of performers, participants, directors, or other principals.

    (P) "Failure to file certain instruments." Insurance against loss resulting from failure to file or record written instruments affecting the title of or creating a lien upon personal property.

    (Q) "Miscellaneous." Insurance against any other kind of loss, damage, or liability properly a subject of insurance and not within any other kind of insurance as defined in this chapter, if such insurance is not disapproved by the commissioner as being contrary to law or public policy; provision of medical, hospital, surgical, and funeral benefits, and of coverage against accidental death or injury, as incidental to and part of other insurance as stated under subdivisions (3)(A), (C), (E), (H), (K), and (N) of this subsection shall for all purposes be deemed to be the same kind of insurance to which it is so incidental, and shall not be subject to provisions of this code applicable to life or health insurances.

    (4) "Marine and transportation insurance" which includes insurance against any and all kinds of loss or damage to:

    (A) Vessels, craft, aircraft, cars, automobiles, and vehicles of every kind, as well as all goods, freights, cargoes, merchandise, effects, disbursements, profits, money, bullion, precious stones, securities, choses in action, evidences of debt, valuable papers, bottomry and respondentia interests, and all other kinds of property and interests therein, in respect to, appertaining to, or in connection with any and all risks or perils of navigation, transit, or transportation, including war risks, on or under any seas or other waters, on land or in the air, or while being assembled, packed, crated, baled, compressed, or similarly prepared for shipment or while awaiting shipment or during delays, storage, transshipment, or reshipment incident thereto, including marine builder's risks and all personal property floater risks.

    (B) A person or to property in connection with or appertaining to a marine, inland marine, transit, or transportation insurance, including liability for loss of or damage to either, arising out of or in connection with the construction, repair, operation, maintenance, or use of the subject matter of the insurance (but not including life insurance or surety bonds or insurance against loss by reason of bodily injury to the person arising out of the ownership, maintenance, or use of automobiles).

    (C) Precious stones, jewels, jewelry, gold, silver, and other precious metals, whether used in business or trade or otherwise and whether in the course of transportation or otherwise.

    (D) Bridges, tunnels, and other instrumentalities of transportation and communication (excluding buildings, their furniture and furnishings, fixed contents, and supplies held in storage) unless fire, tornado, sprinkler leakage, hail, explosion, earthquake, riot or civil commotion, or both are the only hazards to be covered; piers, wharves, docks, and slips, excluding the risks of fire, tornado, sprinkler leakage, hail, explosion, earthquake, riot or civil commotion, or both, other aids to navigation and transportation, including dry docks and marine railways.

    (5) "Marine protection and indemnity insurance" which is insurance against, or against legal liability of the insured for, loss, damage, or expense arising out of, or incident to, the ownership, operation, chartering, maintenance, use, repair, or construction of a vessel, craft, or instrumentality in use in ocean or inland waterways, including liability of the insured for personal injury, illness, or death or for loss of or damage to the property of another person.

    (6) "Wet marine and transportation insurance" which is that part of marine and transportation insurance that includes only:

    (A) Insurance upon vessels, crafts, hulls, and of interests therein or with relation thereto.

    (B) Insurance of marine builder's risks, marine war risks and contracts or marine protection and indemnity insurance.

    (C) Insurance of freights and disbursements pertaining to a subject of insurance coming within this section.

    (D) Insurance of personal property and interests therein, in the course of exportation from or importation into any country, and in the course of transportation coastwise or on inland waters, including transportation by land, water, or air from point of origin to final destination, in respect to, appertaining to, or in connection with, any and all risks or perils of navigation, transit, or transportation, and while being prepared for and while awaiting shipment, and during delays, storage, transshipment, or reshipment incident thereto.

    (7) "Property insurance" which is insurance on real or personal property of every kind and of every interest therein, whether on land, water, or in the air, against loss or damage from any and all hazard or cause, and against loss consequential upon such loss or damage, other than noncontractual legal liability for such loss or damage. Property insurance does not include title insurance, as defined in subdivision (9) of this subsection.

    (8) "Surety insurance" which includes:

    (A) "Fidelity insurance" which is insurance guaranteeing the fidelity of persons holding positions of public or private trust.

    (B) Insurance or guaranty of the obligations of employers under workers' compensation laws.

    (C) Insurance guaranteeing the performance of contracts, other than insurance policies, and guaranteeing and executing bonds, undertakings, and contracts of suretyship.

    (D) Insurance indemnifying banks, bankers, brokers, financial or monied corporations or associations against loss, resulting from any cause, of bills of exchange, notes, bonds, securities, evidences of debt, deeds, mortgages, warehouse receipts, or other valuable papers, documents, money, precious metals and articles made therefrom, jewelry, watches, necklaces, bracelets, gems, precious and semiprecious stones, including any loss while the same are being transported in armored motor vehicles, or by messenger, but not including any other risks of transportation or navigation; also insurance against loss or damage to such an insured's premises or to his or her furniture, furnishings, fixtures, equipment, safes, and vaults therein, caused by burglary, robbery, theft, vandalism, or malicious mischief, or any attempt thereat.

    (9) "Title insurance" which is the certification or guarantee of title or ownership, or insurance of owners of property or others having an interest therein or liens or encumbrances thereon, against loss by encumbrance, or defective titles, or invalidity, or adverse claim to title. A title insurer may also insure the identity, due execution, and validity of any note or bond secured by mortgage or deed of trust and the identity, due execution, validity, and recording of any such mortgage or deed of trust. This definition shall not be deemed to apply to the business of preparing and issuing abstracts of title to or ownership of property or certifying to the validity of documents relative to such titles.

    (10) "Multiple line insurance" which is insurance combining on a mandatory basis in a single policy coverage coming within two or more of the kinds of insurance as defined in this chapter, other than title insurance, life insurance, or the granting of annuities, and for either a divisible or an indivisible rate or premium.

    (b) It is intended that certain insurance coverages may come within the definitions of two or more kinds of insurance as defined in this chapter, and the inclusion of such coverage within one definition shall not exclude it as to any other kind of insurance within the definition of which such coverage is likewise reasonably includible. Unless the context requires otherwise, a corporation engaged in the business described in subdivision (a)(1) of this section may also do any and all insurance business comprised in subdivision (a)(2) of this section relating to health insurance and subdivision (a)(3)(D) of this section relating to workers' compensation. A corporation engaged in business comprised in any subdivision except subdivision (a)(1) of this section may do any business comprised in any of the other subdivisions except subdivision (a)(1) of this section, provided the requirements of law are complied with, and provided further, that a company not engaged in writing a particular class of insurance on July 1, 1968, shall not write insurance of such class thereafter without approval of the Commissioner after he or she is satisfied that such insurance will be soundly underwritten on the strength of adequate capital and reserves considering the risks insured against and the experience, resources, and responsibility of the underwriter. In addition to any power to engage in any other kind of business besides an insurance business that may be specifically conferred by this part, an insurance company organized under this section may engage in other kinds of business to the extent necessarily or reasonably incidental to the kind or kinds of insurance business which it is authorized to do under this section.

    (c) Nothing in this section shall authorize a company to issue a policy of title insurance in this State until the applicant therefor has been notified in writing by such company of all defects in title which will be excluded from coverage under the prospective policy. Such notice shall set forth in descriptive terms the nature of such excluded defects. Upon receipt of such notice, the applicant shall have the option of cancelling his or her application without any liability therefor to said company.

    (d) Any corporation or organization which on July 1, 1968 had been organized and was existing under a special charter granted by the General Assembly prior hereto, or had been organized and was existing under insurance laws in effect prior hereto, may continue to do a business of insurance specified in this section and authorized by its charter under the continued supervision of the Commissioner.

    (e) The provisions of this title relating to the regulation of the business of insurance shall not apply to activities engaged in by ambulance services and first responder services for which they are licensed by the Board of Health pursuant to 24 V.S.A. chapter 71. (Added 1967, No. 344 (Adj. Sess.), § 1 (ch. 1, subch. 1, § 1); amended 1981, No. 165 (Adj. Sess.), § 1; 1993, No. 166 (Adj. Sess.), § 1.)

  • § 3301a. Insurance defined

    As used in this title, "insurance" means an agreement to indemnify or otherwise assume an obligation, provide services or any other thing of value on the happening of a particular event or contingency, or to provide indemnity for loss with respect to a specified subject by specified circumstances in return for a consideration. Without limiting the generality of the term, "insurance" shall include any business defined in section 3301 of this title, annuity contracts, and the business of health maintenance organizations and continuing care retirement communities. (Added 2001, No. 71, § 2, eff. June 16, 2001.)

  • § 3302. Plan of organization; incorporators

    For the purpose of this chapter an insurance company may be incorporated as a stock insurer with its capital divided into shares and owned by the stockholders, or a mutual insurer without capital stock the governing body of which is elected by its policyholders. There shall be not less than 15 incorporators of whom not less than two-thirds shall be citizens of this State. Except as provided in sections 4831 through 4856 of this title, no unincorporated association shall be formed after July 1, 1968, for the purpose of doing any insurance business in Vermont. Those domestic unincorporated associations which are doing insurance business of any kind under authority of the Commissioner on July 1, 1968, may continue to carry on their business subject to the provisions of this part. (Added 1967, No. 344 (Adj. Sess.), § 1 (ch. 1, subch. 1, § 2); amended 1971, No. 31, § 2, eff. March 31, 1971.)

  • § 3303. Mutual companies; directors, charter provisions as to

    The articles of association or bylaws of a mutual insurer shall set forth the manner in which its board of directors or other governing body shall be elected, and in which meetings of policyholders shall be called, held, and conducted, subject to such procedures as may be required by the Commissioner under section 75 of this title. (Added 1967, No. 344 (Adj. Sess.), § 1 (ch. 1, subch. 1, § 3); amended 1971, No. 51, § 1, eff. July 1, 1971.)

  • § 3304. Capital and surplus requirements

    To qualify for authority to transact the business of insurance, a stock insurer seeking such authorization shall possess and thereafter maintain unimpaired paid-in capital of not less than $2,000,000.00 and, when first so authorized, shall possess and maintain free surplus of not less than $3,000,000.00. Such capital and surplus shall be in the form of cash or marketable securities, a portion of which may be held on deposit with the State Treasurer, such securities as designated by the insurer and approved by the Commissioner, in an amount and subject to such conditions determined by the Commissioner. Such conditions shall include a requirement that any interest or other earnings attributable to such cash or marketable securities shall inure to the benefit of the insurer until such time as the Commissioner determines that the deposit must be used for the benefit of the policyholders of the insurer or some other authorized public purpose relating to the regulation of the insurer. The Commissioner may prescribe additional capital or surplus for all stock insurers authorized to transact the business of insurance based upon the type, volume, and nature of insurance business transacted. The Commissioner may reduce or waive the capital and surplus amounts required by this section pursuant to a plan of dissolution for the company approved by the Commissioner. (Added 1967, No. 344 (Adj. Sess.), § 1 (ch. 1, subch. 1, § 4); amended 1991, No. 101, § 1; 2003, No. 105 (Adj. Sess.), § 2; 2005, No. 36, § 9, eff. June 1, 2005.)

  • § 3305. Petition; hearing

    Before the articles of association are transmitted to the Secretary of State, the incorporators shall petition the Commissioner to hold a public hearing, in the county where the proposed corporation is to have its principal office, to determine whether the establishment and maintenance of the proposed corporation will promote the general good of the State. The Commissioner shall thereupon appoint a time and place in such county for hearing the petition and shall make an order for the publication of the substance of the petition and of the time and place of the hearing three weeks successively in a newspaper published in the county, or, for want thereof, in an adjoining county, the last publication to be at least 12 days before the day appointed for the hearing. If, after the hearing, the Commissioner finds and adjudges that the establishment and maintenance of the proposed corporation will promote the general good of the State, he or she shall give the incorporators a certificate to that effect under his or her seal. In determining the general good of the State as herein required, the Commissioner shall consider:

    (1) The character, reputation, financial standing, and purposes of the organizers, incorporators, and subscribers organizing the proposed insurer or organization.

    (2) The character, reputation, financial responsibility, insurance experience, and business qualifications of its proposed officers and directors.

    (3) Such other aspects of the proposed insurer or financing as he or she may deem advisable. (Added 1967, No. 344 (Adj. Sess.), § 1 (ch. 1, subch. 1, § 5).)

  • § 3306. Duties of Secretary of State, records

    The articles of association, the certificate, and the organization fee shall be transmitted to the Secretary of State, who shall thereupon record both the articles and the certificate. (Added 1967, No. 344 (Adj. Sess.), § 1 (ch. 1, subch. 1, § 6).)

  • § 3307. Consideration for stock

    (a) The capital stock of a corporation doing any and all insurance and reinsurance comprised in any one or more of the subdivisions of section 3301 of this title shall be issued at not less than par and under any of the following conditions, subject to the approval of the Commissioner:

    (1) For cash.

    (2) For the stock of another insurance company on a reorganization or merger.

    (3) For the stock of the same insurance company at the same or a different par value or preference than that of the stock called for exchange.

    (4) As a stock dividend. Any increase in par value under subdivisions (2) and (3) of this subsection and of the stock dividend provided in this subdivision are chargeable against the issuing corporation's surplus, undivided profits or a reserve established for that purpose. However, the limitations of this subdivision shall not exclude the payment of cash for a part of any increase in par value provided in subdivisions (2) and (3) of this subsection.

    (b) Whenever the charter or articles of association of an insurance company are so amended as to authorize an increase in its capital stock, it shall not be required to issue the whole amount of authorized increase, nor required to make any statement of capital except to the amount actually paid in or issued in accordance with the provisions of this chapter. (Added 1967, No. 344 (Adj. Sess.), § 1 (ch. 1, subch. 1, § 7).)

  • § 3308. List of stockholders; certificate to transact business; liability of president and directors

    When the entire capital stock of a corporation having capital stock has been issued, a complete list of the stockholders with the name and post office address of each and the number of shares held by each shall be filed with the Commissioner, who shall examine the corporation. If, after such examination, it appears that the whole capital stock has been paid in cash, and the Commissioner has considered the criteria in section 3361 of this chapter, the Commissioner shall issue a certificate under his or her seal authorizing the corporation to begin the transaction of business, which shall be filed with the Secretary of State. A corporation having capital stock shall not begin the transaction of business until the certificate has been issued and filed. If a corporation commences business before a certificate is issued and filed, the president and directors assenting thereto are personally liable for all debts incurred before the certificate is issued and filed. (Amended 1967, No. 344 (Adj. Sess.), § 1 (ch. 1, subch. 1, § 8); 2015, No. 15, § 1, eff. May 1, 2015.)

  • § 3308a. Reorganization formations

    Notwithstanding sections 3302, 3303, 3304, 3307, 3308, and 3309 of this title, the Commissioner may permit the formation of an insurance company without capital or surplus to be merged with or into or consolidated with an existing insurance company authorized to do business under this chapter for the purpose of facilitating a reorganization or acquisition transaction, including a triangular merger transaction, involving such existing company. There shall be no more than one authorized insurance company surviving reorganization under this section. (Added 1997, No. 54, § 1, eff. June 26, 1997.)

  • § 3309. Mutual insurers to commence business; when

    (a) A corporation that, according to its charter, is not to have a capital stock shall not receive authorization to commence business until:

    (1) it complies with preliminary requirements for the procurement of an adequate amount of subscriptions for insurance and possesses and thereafter maintains unimpaired basic surplus of not less than $2,000,000.00 and, when first authorized, shall possess free surplus of not less than $3,000,000.00; and

    (2) the Commissioner has considered the criteria in section 3361 of this chapter.

    (b) The Commissioner in his or her discretion may establish lesser surplus amount requirements in the case of affiliated corporations jointly conducting the business of insurance under a pooling agreement. Such surplus shall be in the form of cash or marketable securities, a portion of which may be held on deposit with the State Treasurer, such securities as designated by the insurer and approved by the Commissioner, in an amount and subject to conditions determined by the Commissioner. The conditions shall include a requirement that any interest or other earnings attributable to cash or marketable securities shall inure to the benefit of the insurer until the Commissioner determines that the deposit must be used for the benefit of the policyholders of the insurer or some other authorized public purpose relating to the regulation of the insurer. The Commissioner may prescribe additional surplus based upon the type, volume, and nature of insurance business transacted. (Amended 1967, No. 344 (Adj. Sess.), § 1 (ch. 1, subch. 1, § 9); 1991, No. 101, § 2; 2003, No. 105 (Adj. Sess.), § 3; 2015, No. 15, § 2, eff. May 1, 2015.)

  • § 3310. Amendment of charter

    A corporation formed under the provisions of this chapter or by a special act of the Legislature may amend its articles of association or its charter as provided therein or in the absence of such provision by vote of three-fourths of its stockholders (in the case of a stock company) or members (in the case of a mutual company) present at a meeting thereof, provided the Commissioner, in all cases, on petition and after a hearing held substantially as is specified in section 3305 of this title, certifies that such amendment shall not be detrimental to the policyholders and such other persons as have an interest in said corporation. His or her certificate shall be recorded with the certificate of amendment. (Added 1967, No. 344 (Adj. Sess.), § 1 (ch. 1, subch. 1, § 10).)

  • § 3311. Quorum

    In the case of a mutual insurance company, the policyholders or annuitants therein, who attend a duly called meeting, shall constitute a quorum. (Added 1967, No. 344 (Adj. Sess.), § 1 (ch. 1, subch. 1, § 11).)

  • § 3312. Construction with other laws

    (a) Corporations formed under the provisions of this subchapter shall have the privileges and be subject to the provisions of the general corporation law as well as the applicable provisions contained in this part. In the event of conflict between the provisions of the general corporation law and the provisions of this part, the latter shall control. Such corporations shall not be required to make any annual report except as provided in this part.

    (b) A corporation formed prior to July 1, 1968, for any purpose for which a corporation may be formed under this subchapter, with respect to all acts done after such date, shall be deemed to be within the provisions of this subchapter and of the general corporation law, in like manner as a corporation formed under this subchapter. But the foregoing provisions shall be subject to all such exceptions and qualifications as are contained in 11 V.S.A. § 2. (Added 1967, No. 344 (Adj. Sess.), § 1 (ch. 1, subch. 1, § 12).)

  • § 3313. Proxies

    (a) The Commissioner may prescribe by rules and regulations, the form, content and manner of solicitation of any proxy, consent, or authorization in respect of any voting security issued by a domestic insurer as necessary or appropriate in the public interest, or for protection of investors in the securities, or to insure the fair dealing in the securities.

    (b) The term "voting security" as used in this section shall mean any instrument issued by a domestic stock insurance company which, in law or by contract, gives the holder the right to vote, consent, or authorize any corporate action of the insurer.

    (c) This section shall not apply to voting securities of a domestic insurer if the securities are registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended.

    (d) Any person, domestic insurer, or director, officer, or employee of the insurer, shall not solicit or permit the use of his or her name to solicit, by mail or otherwise, any person to give a proxy, consent, or authorization in respect of a voting security issued by the insurer in contravention of any rule or regulation made under this section.

    (e) Failure to comply with any rule or regulation made under this section shall be unlawful and any proxy or consent obtained in violation of this section or in contravention of any rule or regulation made thereunder shall be void. Any domestic insurer or any person who is legally entitled to vote, consent, or authorize by virtue of being the holder of record of such a security, or the Commissioner, if the other parties fail to act within 15 days after the date on which the vote was cast or counted, may enforce compliance with any rule or regulation made under this section, by appropriate civil action, except that no suit shall be brought more than 30 days after the date on which the vote, consent, or authorization was to have been effected. (Added 1967, No. 344 (Adj. Sess.), § 1 (ch. 1, subch. 1, § 13).)

  • § 3314. Annual financial statements; reports; filing fee

    Notwithstanding any other provision of law, any insurer, of whatever form and description other than captive insurance companies organized under chapter 141 of this title, that is required by statute to file an annual statement or report of financial condition, shall pay a fee of $100.00 for filing its statement or report with the Commissioner. (Added 1985, No. 236 (Adj. Sess.), § 13.)

  • § 3315. Coordinated regulation

    Notwithstanding section 5112 of this title and any other provision of this title, the Commissioner may cooperate and coordinate with the insurance supervisory authorities of other states or through the facilities or subsidiaries of a national organization which facilitate regulatory efficiency and cooperation on a nationwide basis. The areas of cooperation and coordination contemplated by this section include the following: solvency oversight; company and producer licensing, appointment, and discipline; rate and forms review and approval; and investigation and examination of persons subject to the insurance laws of this State. The Commissioner may enter into agreements or contracts concerning the coordination and cooperation contemplated by this section with such other state or organization. The Commissioner may adopt, by rule, any uniform standards or procedures as are necessary to fully implement cooperative and coordinated supervision of the business of insurance. In the event of conflict between this provision and other pertinent provisions of parts 3 and 4 of this title, the Commissioner may elect that this provision prevail, if the Commissioner deems that such election is in the best interests of the State. (Added 2001, No. 71, § 3, eff. June 16, 2001.)

  • § 3316. Corporate governance; disclosure

    (a) Purpose. The purpose of this section is to:

    (1) provide the Commissioner a summary of an insurer or insurance group's corporate governance structure, policies, and practices so the Commissioner may gain and maintain an understanding of the insurer's corporate governance framework;

    (2) outline the requirements for completing a corporate governance annual disclosure with the Commissioner; and

    (3) provide for the confidential treatment of the corporate governance annual disclosure and related information that contains confidential and sensitive information related to an insurer or insurance group's internal operations and proprietary and trade secret information that, if made public, could potentially cause the insurer or insurance group competitive harm or disadvantage.

    (b) Scope. This section shall not be construed to prescribe or impose corporate governance standards and internal procedures beyond that which is required under applicable State corporate law. Nor shall it be construed to limit the Commissioner's authority, or the rights or obligations of third parties, under section 13 of this title.

    (c) Application. The requirements of this section shall apply to all insurers domiciled in Vermont.

    (d) Definitions. As used in this section:

    (1) "Corporate Governance Annual Disclosure" or "CGAD" means a confidential report on corporate governance filed by the insurer or insurance group as required by this section.

    (2) "Insurance group" means those insurers and affiliates included within an insurance holding company system as defined in subdivision 3681(4) of this title.

    (3) "Insurer" means an insurance company that offers any of the types of insurance itemized under subsection 3301(a) of this chapter, except that it shall not include agencies, authorities, or instrumentalities of the United States, its possessions and territories, the Commonwealth of Puerto Rico, the District of Columbia, or a state or political subdivision of a state. It shall also mean an insurance group.

    (4) "ORSA Summary Report" means a report as defined in subdivision 3582(6) of this chapter.

    (e)(1) Disclosure. On or before June 1 of each year, beginning in the year 2016, an insurer shall submit to the Commissioner a CGAD, which contains the information described in subdivision (g)(2) of this section. Notwithstanding a request from the Commissioner made under subdivision (3) of this subsection, if the insurer is a member of an insurance group, the insurer shall submit the report required by this subsection to the Commissioner of the lead state for the insurance group, in accordance with the laws of the lead state, as determined by the procedures outlined in the most recent Financial Analysis Handbook adopted by the National Association of Insurance Commissioners (NAIC).

    (2) The CGAD shall include a signature of the insurer's chief executive officer or corporate secretary attesting to the best of that individual's belief and knowledge that the insurer has implemented the corporate governance practices and that a copy of the disclosure has been provided to the insurer's board of directors or the appropriate committee thereof.

    (3) An insurer not required to submit a CGAD under this section shall do so upon the Commissioner's request.

    (4) For purposes of completing the CGAD, the insurer may provide information regarding corporate governance at the ultimate controlling parent level, an intermediate holding company level, or the individual legal entity level, depending upon how the insurer has structured its system of corporate governance. The insurer is encouraged to make the CGAD disclosures at the level at which: the insurer's risk appetite is determined; the earnings, capital, liquidity, operations, and reputation of the insurer are overseen collectively and at which the supervision of those factors is coordinated and exercised; or legal liability for failure of general corporate governance duties would be placed. If the insurer determines the level of reporting based on these criteria, it shall indicate which of the three criteria was used to determine the level of reporting and explain any subsequent changes in level of reporting.

    (5) The review of the CGAD and any additional requests for information shall be made through the lead state as determined by the procedures within the most recent Handbook referenced in subdivision (1) of this subsection.

    (6) Insurers providing information substantially similar to the information required by this section in other documents provided to the Commissioner, including proxy statements filed in conjunction with Form B requirements, or other state or federal filings provided to the Commissioner, shall not be required to duplicate that information in the CGAD, but shall only be required to cross reference the document in which the information is included.

    (f) Rules. The Commissioner may adopt rules and issue orders necessary to carry out the provisions of this section.

    (g)(1) CGAD contents. An insurer has discretion over the responses to CGAD inquiries, provided CGAD contains the material information necessary to permit the Commissioner to gain an understanding of the insurer's corporate governance structure, policies, and practices. The Commissioner may request additional information he or she deems material and necessary to provide the Commissioner with a clear understanding of the corporate governance policies, and the reporting or information system or controls implementing those policies.

    (2) Notwithstanding subdivision (1) of this subsection, CGAD shall be prepared consistent with CGAD rules adopted by the Commissioner. Rules adopted by the Commissioner under this subdivision shall be consistent with the NAIC Model Regulation on CGAD. Documentation and supporting information shall be maintained and made available upon examination or upon request of the Commissioner.

    (h)(1) Confidentiality. Documents, materials, or other information, including CGAD, in the possession or control of the Department obtained or created by, or disclosed to the Commissioner or any other person under this section, are recognized by this State as being proprietary and to contain trade secrets. All such documents, materials, or other information are confidential and privileged, and are exempt from public inspection and copying under the Public Records Act. In addition, they are not subject to subpoena nor discovery, nor admissible in evidence in any private civil action. However, the Commissioner is authorized to use the documents, materials, or other information in furtherance of any regulatory or legal action brought as a part of the Commissioner's official duties. The Commissioner shall not otherwise make the documents, materials, or other information public without the prior written consent of the insurer. Nothing in this subsection shall be construed to require written consent of the insurer before the Commissioner may share or receive confidential documents, materials, or other CGAD-related information pursuant to subdivision (3) of this subsection for the purpose of assisting in the performance of the Commissioner's regular duties.

    (2) Neither the Commissioner nor any person who receives documents, materials, or other CGAD-related information, through examination or otherwise, while acting under the authority of the Commissioner, or with whom such documents, materials, or other information are shared pursuant to this section, is permitted or required to testify in any private civil action concerning any confidential documents, materials, or information subject to subdivision (1) of this subsection.

    (3) In order to assist in the performance of the Commissioner's regulatory duties, the Commissioner may:

    (A) Upon request, share documents, materials, or other CGAD-related information including confidential and privileged documents, materials, or information subject to subdivision (1) of this subsection including proprietary and trade secret documents and materials with other state, federal, and international financial regulatory agencies, including members of any supervisory college as defined in subsection 3695(c) of this chapter, the NAIC, and with third-party consultants pursuant to subsection (i) of this section, provided the recipient agrees in writing to maintain the confidentiality and privileged status of the CGAD-related documents, materials, or other information and verifies in writing the legal authority to maintain confidentiality.

    (B) Receive documents, materials, or other CGAD-related information, including otherwise confidential and privileged documents, materials or information, including proprietary and trade-secret information or documents, from regulatory officials of other state, federal, and international financial regulatory agencies, including members of any supervisory college as defined in subsection 3695(c) of this chapter, and from the NAIC, and shall maintain as confidential or privileged any documents, materials, or information received with notice or the understanding that it is confidential or privileged under the laws of the jurisdiction that is the source of the document, materials, or information.

    (4) The sharing of information and documents by the Commissioner pursuant to this section does not constitute a delegation of regulatory authority or rulemaking, and the Commissioner is solely responsible for the administration, execution, and enforcement of the provisions of this section.

    (5) A waiver of any applicable privilege or claim of confidentiality in the documents, proprietary and trade-secret materials, or other CGAD-related information shall not occur as a result of disclosure of such CGAD-related information or documents to the Commissioner under this section or as a result of sharing as authorized under this section.

    (i)(1) NAIC and third-party consultants. The Commissioner may retain, at the insurer's expense, third-party consultants, including attorneys, actuaries, accountants, and other experts not otherwise a part of the Commissioner's staff he or she deems reasonably necessary to assist with the review of the CGAD and related information or with the insurer's compliance with this section.

    (2) A person retained under this subsection is under the direction and control of the Commissioner and shall act in a purely advisory capacity.

    (3) The NAIC and third-party consultants are subject to the same confidentiality standards and requirements as the Commissioner.

    (4) As part of the retention process, a third-party consultant shall verify to the Commissioner, with notice to the insurer, that it is free of a conflict of interest and that it has internal procedures in place to monitor compliance with a conflict and to comply with the confidentiality standards and requirements of this section.

    (5) A written agreement with the NAIC or a third-party consultant governing the sharing and use of information provided under this section shall contain the following provisions and expressly require the written consent of the insurer prior to making public such information:

    (A) Specific procedures and protocols for maintaining the confidentiality and security of CGAD-related information shared with the NAIC or a third-party consultant pursuant to this subdivision (5).

    (B) Procedures and protocols for sharing by the NAIC only with other state regulators from states in which an insurance group has domiciled insurers. The agreement shall provide that the recipient agrees in writing to maintain the confidentiality and privileged status of the CGAD-related documents, materials, or other information and has verified in writing the legal authority to maintain confidentiality.

    (C) A provision specifying that ownership of the CGAD-related information shared with the NAIC or a third-party consultant remains with the Department and that use of such information by the NAIC or a third-party consultant is subject to the direction of the Commissioner.

    (D) A provision prohibiting the NAIC and third-party consultants from storing the information in a permanent database after the underlying analysis is completed.

    (E) A provision requiring the NAIC and third-party consultants to provide prompt notice to the Commissioner and to the insurer regarding any subpoena, request for disclosure, or request for production of the insurer's CGAD-related information.

    (F) A requirement that the NAIC and third-party consultants consent to intervention by an insurer in any judicial or administrative action in which the NAIC or a third-party consultant may be required to disclose confidential information about the insurer shared with the NAIC or third-party consultant pursuant to this section.

    (j) Sanctions. An insurer failing, without just cause, to timely file the CGAD as required by this section shall be required, after notice and hearing, to pay a penalty of $10,000.00 for each day's delay, to be recovered by the Commissioner, and the penalty so recovered shall be paid into the General Fund of this State. The maximum penalty under this section is $1,000,000.00. The Commissioner may reduce the penalty if the insurer demonstrates to the Commissioner that the imposition of the penalty would constitute a financial hardship to the insurer.

    (k) Severability Clause. If any provision of this section other than subsection (h), or the application thereof to any person or circumstance, is held invalid, such determination shall not affect the provisions or applications of this section which can be given effect without the invalid provision or application, and to that end the provisions of this section, with the exception of subsection (h), are severable. (Added 2015, No. 10, § 1, eff. May 1, 2015.)


  • Subchapter 002: Foreign and Alien Companies Licensing and Regulation
  • § 3361. Requirements for license

    (a) A foreign or alien insurer shall not transact business in this State unless it first obtains from the Commissioner a license authorizing it to do so. Before receiving a license, it shall file with the Commissioner a certified copy of its charter and bylaws, a statement under oath of its president and secretary, showing its financial condition, and any other statements required by the Commissioner.

    (b) An insurer making an application or reapplication for an original license to transact business in this State shall pay to the Commissioner a nonrefundable fee of $200.00 for examining, investigating, and processing the application. In addition, each insurer shall pay a license fee for the year of registration and a renewal fee for each year thereafter of $300.00 not including fees for producers licenses and renewals thereof. The annual renewal fee of $300.00 shall be paid on or before March 1.

    (c) 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 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 foreign insurer. (Added 1967, No. 344 (Adj. Sess.), § 1 (ch. 1, subch. 2, § 1); amended 1977, No. 148 (Adj. Sess.), § 1, eff. date, see note set out below; 1981, No. 42, § 1; 1993, No. 235 (Adj. Sess.), § 9b, eff. June 21, 1994; 2001, No. 71, § 4, eff. June 16, 2001; 2005, No. 122 (Adj. Sess.), § 8.)

  • § 3362. Authority to transact various kinds of insurance business

    A foreign or alien insurer may transact more than one kind of insurance business, provided the charter of such corporation authorizes it to transact such different kinds of insurance business and its capital is sufficient to provide the required capital for each kind of business to be transacted. (Added 1967, No. 344 (Adj. Sess.), § 1 (ch. 1, subch. 2, § 2); amended 2017, No. 134 (Adj. Sess.), § 1.)

  • § 3363. Revocation of license

    If such insurer violates any of the laws of this State relating to insurance companies, the Commissioner may revoke its license and cause notice thereof to be published at least one week in two daily newspapers, one of general circulation in Montpelier and one of general circulation in Burlington. An agent of such insurer shall not, after the first publication of such notice, issue or renew a policy of insurance in its behalf. (Added 1967, No. 344 (Adj. Sess.), § 1 (ch. 1, subch. 2, § 3).)

  • § 3364. Authorization for investment purposes only

    Such insurer may make investments in this State without qualifying to do business in this State as a foreign corporation under the general corporation law or as a foreign or alien insurer under this article provided such insurer constitutes the Secretary of State as his or her agent for the service of process and enters into a stipulation with said Secretary to submit to the jurisdiction of the courts of this State. (Added 1967, No. 344 (Adj. Sess.), § 1 (ch. 1, subch. 2, § 4).)

  • § 3365. Plan of organization

    Such insurers admitted to do business in this State under authority of this article shall be incorporated as stock or mutual companies as defined in section 3302 of this title. Except as provided in sections 4831 through 4856 of this title, no unincorporated or joint stock association shall be admitted after July 1, 1968, for the purpose of doing any insurance business in Vermont. Such unincorporated or joint stock associations which are lawfully admitted and qualified on such date may continue to carry on their business in this State subject to the provisions of this part, but they shall not write any new or additional lines of insurance after such date. (Added 1967, No. 344 (Adj. Sess.), § 1 (ch. 1, subch. 2, § 5); amended 1971, No. 31, § 3, eff. March 31, 1971.)

  • § 3366. Assets of companies

    (a)(1) A foreign or alien insurer authorized to do business in this State shall possess and thereafter maintain unimpaired paid-in capital or basic surplus of not less than $2,000,000.00 and, when first so authorized, shall possess and maintain free surplus of not less than $3,000,000.00.

    (2) The capital and surplus shall be in the form of cash or marketable securities, a portion of which may be held on deposit with the State Treasurer, such securities as designated by the insurer and approved by the Commissioner, in an amount and subject to conditions determined by the Commissioner. The conditions shall include a requirement that any interest or other earnings attributable to such cash or marketable securities shall inure to the benefit of the insurer until such time as the Commissioner determines that the deposit must be used for the benefit of the policyholders of the insurer or some other authorized public purpose relating to the regulation of the insurer.

    (3) The Commissioner may prescribe additional capital or surplus for all insurers authorized to transact the business of insurance based upon the type, volume, and nature of insurance business transacted. The Commissioner may reduce or waive the capital and surplus amounts required by this section pursuant to a plan of dissolution for the company approved by the Commissioner.

    (b) The express purpose of subsection (a) of this section and the Commissioner's power to require the deposit of cash or marketable securities set forth therein is to protect the interests of Vermont policyholders in the event of the insolvency of the insurer. Except to the extent it would contravene applicable provisions of 9A V.S.A. Article 9, the State of Vermont shall be deemed to control the funds on deposit and to have a lien on the funds for the benefit of the Vermont policyholders affected by the insolvency. The lien so created shall be superior to any lien filed by a general creditor of the insurer. (Added 1967, No. 344 (Adj. Sess.), § 1 (ch. 1, subch. 2, § 6); amended 2003, No. 105 (Adj. Sess.), § 4; 2005, No. 36, § 10, eff. June 1, 2005; 2019, No. 57, § 3.)

  • § 3367. Retaliatory provisions

    (a) If another state or country imposes upon or requires of a domestic insurer, association, or society, or a surety or guaranty company, or its agents doing business therein, fees, fines, penalties, deposits, obligations, or prohibitions exceeding those imposed by this State upon or required of a foreign or alien insurer, association, or society, or a surety or guaranty company doing business herein, an insurer, association, or society or a surety or guaranty company organized under the laws of such other state or country and its agents doing business in this State, shall be subject to the fees, fines, penalties, deposits, obligations, or prohibitions similar to those so imposed in such other state or country, and the same shall be imposed, required, and enforced as like fees, fines, penalties, deposits, obligations, and prohibitions are under the laws of this State; but this section shall not apply unless the fees required by such other state or country of an insurer, association, or society, or a surety or guaranty company of this State doing business in such other state or country are larger in the aggregate on the same amount of business than the fees required by this State of an insurer, association, or society, or a surety or guaranty company of such other state or country doing business in this State. When any other state prohibits all foreign and domestic insurers and associations from writing therein any line or class of insurance permitted to be written in this State, companies and associations domiciled in such other state or country shall not by reason of this section be prohibited from writing such line or class in this State. The Commissioner need not assert the provisions of this section against a foreign company with respect to its request for a certificate of authority to do business in this State if the Commissioner determines that such company would otherwise comply with the requirements for such certificate.

    (b) If the Commissioner determines that an insurance department or other similar regulatory entity of any other state or territory of the United States has imposed any sanctions, fines, penalties, financial or deposit requirements, prohibitions, restrictions, regulatory requirements, or other obligations of any kind on domestic companies authorized to transact insurance in this State and licensed to transact business in such other state or territory, (1) because the insurance department of this State is not accredited or otherwise approved by the National Association of Insurance Commissioners, or by any agent or representative of the association; or (2) because the insurance department of this State has not complied with any directive, financial annual statement requirement, model act or regulation, market conduct or financial examination report or requirement, or any report or requirement of any kind imposed directly, or indirectly through the laws or regulations of another state, by the National Association of Insurance Commissioners, or by any agent or representative of the association; or (3) because a domestic insurer has refused to comply with, file, or pay any requirement, report, fee, assessment, or charge determined by the Commissioner to be unreasonable and imposed directly, or indirectly through the laws or regulations of another state, by the National Association of Insurance Commissioners, or by any agent or representative of the association, then the Commissioner shall impose similar sanctions, fines, penalties, financial or deposit requirements, prohibitions, restrictions, regulatory requirements, or other obligations of any kind on the domestic companies of such other state or territory. The Commissioner shall adopt by rule standards and procedures for imposing, calculating, apportioning, or collecting such similar sanctions, fines, penalties, financial or deposit requirements, prohibitions, restrictions, regulatory requirements, or other obligations.

    (c) If any other state requires a domestic insurer licensed to transact insurance in such state to pay, directly or indirectly, a fee, assessment, or charge of any kind to the National Association of Insurance Commissioners in excess of the fees, assessments, or charges, if any, approved by the Commissioner under section 3552 of this title, such fees, assessments, or charges shall be considered excessive and shall be imposed on the domestic insurers of such other state doing business in this State. The Commissioner shall adopt by rule standards and procedures for imposing, calculating, apportioning, and collecting such excessive fees, assessments, or charges. (Added 1967, No. 344 (Adj. Sess.), § 1 (ch. 1, subch. 2, § 7); amended 1967, No. 353 (Adj. Sess.), § 7; 1995, No. 83 (Adj. Sess.), § 4.)

  • § 3368. Transacting business without certificate of authority prohibited

    (a) It shall be unlawful for any insurer to enter into a contract of insurance as an insurer or to transact insurance business in this State as set forth in subsection (b) of this section, without a certificate of authority from the Commissioner of Financial Regulation; provided that this subsection shall not apply to:

    (1) The lawful transaction of surplus lines insurance.

    (2) The lawful transaction of reinsurance by insurers.

    (3) Transactions in this State involving a policy lawfully solicited, written, and delivered outside this State covering only subjects of insurance not resident, located, or expressly to be performed in this State at the time of issuance and which transactions are subsequent to the issuance of such policy.

    (4) Transactions in Vermont involving group or blanket insurance and group annuities if:

    (A) the master policy was lawfully issued and delivered in a state in which the insurer was authorized to do an insurance business;

    (B)(i) no more than 25 of the certificate holders are Vermont residents; or

    (ii) the master policy covers one or more certificate holders who reside in Vermont, are employed at a workplace located outside Vermont and have obtained insurance coverage through the workplace;

    (C) the person or entity holding the master policy exists primarily for purposes other than to procure insurance, is not a Vermont corporation or resident, and does not have its principal office in Vermont; and

    (D) the policy is not offered for sale by an agent or broker licensed in Vermont, offered by mail to a Vermont resident, directly advertised to a Vermont resident, or marketed in Vermont in a similar manner.

    An insurer exempted from the requirements of this subsection by the provisions of this subdivision shall not issue or deliver a policy or certificate to a resident of Vermont without including a notice approved by the Commissioner that the policy or certificate is not subject to regulation by Vermont.

    (5) Transactions involving contracts issued by a life insurance or annuity company, organized and operated without profit, to any private shareholder or individual exclusively for the purpose of aiding and strengthening educational institutions by issuing insurance and annuity contracts only to or for the benefit of such institutions and individuals engaged in the service of such institution.

    (6) Transactions involving any insurance company or underwriter issuing contracts of insurance to industrial insured, or to industrial insureds, or to contracts of insurance issued to an industrial insured. For purposes of this section, an "industrial insured" is:

    (A) an insured who procures the insurance of any risk or risks by use of the services of a full-time employee acting as an insurance manager or buyer; and

    (B) whose aggregate annual premiums for insurance on all risks total at least $25,000.00; and

    (C) has at least 25 full-time employees.

    (7) Transactions involving wet marine and transportation insurance covering property in the course of transportation by land, air, or water, to, from, or through this State and including any preparation or storage incidental thereto.

    (8) Transactions in this State involving insurance on the property or operations of aircraft or railroads engaged in interstate or foreign commerce.

    (9) Transactions in this State involving a policy of insurance or annuity contract issued prior to July 1, 1968, with regard to subdivisions (1) through (7) of this subsection (a) and prior to July 1, 1980, with regard to subdivision (8) of this subsection (a) of this section.

    (b) Any of the following acts in this State, effected by mail or otherwise by an unauthorized insurer, shall be included among those deemed to constitute transacting insurance business in this State:

    (1) the issuance or delivery of contracts of insurance to residents of this State;

    (2) the solicitation of applications for such contracts;

    (3) the collection of premium, membership fees, assessments, or other considerations for such contracts; or

    (4) the transaction of matters subsequent to the execution of such contracts and arising out of them.

    (c) Any insurer that violates subsection (a) of this section shall be required to pay an administrative penalty of not less than $500.00 nor more than $5,000.00 for each violation.

    (d) The failure of an insurer to obtain a certificate of authority shall not impair the validity of any act or contract of such insurer and shall not prevent such insurer from defending any action in any court of this State, but no insurer transacting insurance business in this State without a certificate of authority shall be permitted to maintain an action in any court of this State to enforce any right, claim, or demand arising out of the transaction of such business until such insurer shall have obtained a certificate of authority, and with respect to contracts solicited, issued, or delivered after passage of this act an insurer shall not maintain an action in this State upon such contract if, at the time of soliciting, issuing, or delivering such contract, it was doing business in this State without lawful authority. Nor shall an action be maintained in any court of this State by any successor or assignee of such insurer on any such right, claim, or demand originally held by such insurer until a certificate of authority shall have been obtained by such insurer or by an insurer which has acquired all or substantially all of its assets, and with respect to contracts solicited, issued, or delivered after passage of this act, a successor or assignee of such contract shall not maintain an action in this State upon such contract if, at the time of soliciting, issuing, or delivering such contract, the insurer was doing business in this State without lawful authority. (Added 1967, No. 353 (Adj. Sess.), § 1; amended 1979, No. 197 (Adj. Sess.), § 13; 1989, No. 106, § 1, eff. Sept. 1, 1989; 1989, No. 225 (Adj. Sess.), § 25(b); 1995, No. 167 (Adj. Sess.), § 1; 1995, No. 180 (Adj. Sess.), § 38(a); 2011, No. 78 (Adj. Sess.), § 2, eff. April 2, 2012.)

  • § 3368a. Unauthorized and misleading transactions

    (a) No person shall transact insurance business in this State unless the Commissioner has issued a license or certificate of authority to such person as required by section 3361 or 3368 of this title, or by chapters 123, 125, and 139 of this title. The provisions of this section shall not apply to an insurer licensed in this State or in any foreign or alien jurisdiction who is subject to section 3368 of this title.

    (b) No person shall act as an officer, director, or controlling person for a person who is engaged in a violation of subsection (a) of this section. As used in this subsection, "controlling" is defined by subdivision 3681(3) of this title.

    (c) No person shall directly or indirectly represent or aid a person in violating subsection (a) of this section.

    (d)(1) No person shall use in its advertisements or other marketing materials or communications the term "insurance" or any other term in a manner which could reasonably lead a person into believing that the product marketed, offered, or issued is insurance, unless such person is authorized under this title to transact the business of insurance.

    (2) No person shall use in its advertisements or other marketing materials or communications the terms "health plan," "coverage," "co-pay," "co-payments," "deductible," "preexisting conditions," "guaranteed issue," "premium," "enrollment," "preferred provider organization," or any other term in a manner that could reasonably mislead an individual into believing that the product marketed, offered, or issued is health insurance, unless such person is authorized under this title to transact the business of health insurance.

    (e) In addition to any other remedies or penalties provided by law:

    (1) For each violation of the provisions of subsection (a), (b), or (c) of this section a person shall be imprisoned not more than five years or fined not more than $10,000.00, or both.

    (2) For each violation of the provisions of subsection (d) of this section a person shall be imprisoned not more than two years or fined not more than $5,000.00, or both. (Added 2007, No. 178 (Adj. Sess.), § 6.)

  • § 3369. Commissioner may enjoin unauthorized insurer

    Whenever the Commissioner believes, from evidence satisfactory to him or her, that any foreign or alien insurer is violating or about to violate the provisions of section 3368 of this title, the Commissioner may, through the Attorney General of this State, cause a complaint to be filed in Superior Court to enjoin and restrain such insurer from continuing such violation or engaging therein or doing any act in furtherance thereof. The Court shall have the power to make and enter an order of judgment awarding such preliminary or final injunctive relief as in its judgment is proper. (Added 1967, No. 353 (Adj. Sess.), § 2; amended 1973, No. 193 (Adj. Sess.), § 3, eff. April 9, 1974.)

  • § 3370. Service of process upon unauthorized insurer by director

    (a) Any act of entering into a contract of insurance as an insurer or transacting insurance business in this State as set forth in subsection (b) of section 3368 of this title, by an unauthorized foreign or alien insurer is equivalent to and shall constitute an appointment by such insurer, of the Secretary of State and his or her successor or successors in office, to be its true and lawful attorney upon whom may be served all lawful process in any action or proceeding against it, arising out of a violation of section 3368 of this title, and the commission of any of these acts constitutes an agreement that any such process so served shall be of the same legal force and validity as if served upon the insurer.

    (b) Service of such process shall be made by delivering and leaving with the Secretary of State two copies thereof and the payment to the Secretary of State of the fee prescribed by law. The Secretary of State shall forthwith mail by registered mail one of the copies of such process to such insurer at its last known principal place of business, and shall keep a record of all process so served upon him or her. Such process shall be sufficient service upon such insurer provided notice of such service and a copy of the process are, within 14 days thereafter, sent by registered mail or on behalf of the director to such insurer at its last known principal place of business, and such insurer's receipt and the affidavit of compliance herewith by or on behalf of the director are filed with the clerk of the court in which such action or proceeding is pending on or before the return date of such process or within such further time as the court may allow.

    (c)(1) The court in any action or proceeding in which service is made in the manner provided in subsection (b) of this section may, in its discretion, order such postponement as may be necessary to afford such insurer reasonable opportunity to defend such action or proceeding.

    (2) Nothing in this section is to be construed to prevent an unauthorized foreign or alien insurer from filing a motion to quash a writ or to set aside service thereof made in the manner provided in subsection (b) of this section on the ground that such unauthorized insurer has not done any of the acts referred to in subsection (a) of this section.

    (d) No judgment by default shall be entered in any such action or proceeding until the expiration of 30 days from the date of the filing of the affidavit of compliance.

    (e) Nothing in this section contained shall limit or affect the right to serve any process, notice or demand required or permitted by law to be served upon any insurer in any other manner now or hereafter permitted by law. (Added 1967, No. 353 (Adj. Sess.), § 3; amended 2017, No. 11, § 3.)

  • § 3371. Limits of risk

    (a) No insurer shall retain any risk on any one subject of insurance, whether located or to be performed in this State or elsewhere, in an amount exceeding 10 percent of its surplus to policyholders unless otherwise authorized by the Commissioner.

    (b) A "subject of insurance" for the purposes of this section, as to insurance provided for protection against fire, perils, hazards, or causes of loss, other than earthquake and other catastrophic hazards, includes all properties insured by the same insurer which are customarily considered by underwriters to be subject to loss or damage from the same fire or the same occurrence of any other hazard insured against.

    (c) Reinsurance ceded as authorized by section 3634a of this title shall be deducted in determining risk retained. As to surety risks, deduction shall also be made of the amount assumed by any licensed or authorized co-surety and the fair market value of any security deposited, pledged, or held subject to the surety's consent and for the surety's protection.

    (d) As to alien insurers, this section shall relate only to risks and surplus to policyholders of the insurer's United States branch.

    (e) "Surplus to policyholders" for the purposes of this section, in addition to the insurer's unassigned capital and surplus, shall be deemed to include any voluntary reserves which are not required pursuant to law, and shall be determined from the last sworn statement of the insurer on file with the Commissioner, or by the last report of examination of the insurer, whichever is the more recent at time of assumption of risk.

    (f) This section shall not apply to life or health insurance, annuities, title insurance, insurance of wet marine and transportation risks, workers' compensation insurance, employers' liability coverages, nor to any policy or type of coverage as to which the maximum possible loss to the insurer is not readily ascertainable on issuance of the policy. (Added 1985, No. 145 (Adj. Sess.), § 1; amended 1993, No. 12, § 1, eff. April 26, 1993.)

  • § 3381. Legislative purpose and policy

    The purpose of this article is to subject certain insurers to the jurisdiction of courts of this State by or on behalf of insureds or beneficiaries under insurance contracts. The Legislature declares that it is a subject of concern that many residents of this State hold policies of insurance issued or delivered in this State by insurers while not authorized to do business in this State, thus presenting to such residents the often insuperable obstacle of resorting to distant forums for the purpose of asserting legal rights under such policies. In furtherance of such State interest, the Legislature herein provides a method of substituted service of process upon such insurers and declares that in so doing it exercises its power to protect its residents and to define, for the purpose of this article, what constitutes doing business in this State, and also exercises powers and privileges available to the State by virtue of The McCarran-Ferguson Act, 15 U.S.C. § 1011-1015, which declares that the business of insurance and every person engaged therein shall be subject to the laws of the several states. (Added 1967, No. 344 (Adj. Sess.), § 1 (ch. 1, subch. 3, § 1).)

  • § 3382. Acts which constitute Secretary of State agent for service of process

    Any of the following acts in this State, effected by mail or otherwise, by an unauthorized foreign or alien insurer:

    (1) the issuance or delivery of contracts of insurance to residents of this State or to corporations authorized to do business therein;

    (2) the solicitation of applications for such contracts;

    (3) the collection of premiums, membership fees, assessments, or other considerations for such contracts; or

    (4) any other transaction of insurance business; is equivalent to and shall constitute an appointment by such insurer of the Secretary of State and his or her successor or successors in office, to be its true and lawful attorney, upon whom may be served all lawful process in any action, suit, or proceeding instituted by or on behalf of an insured or beneficiary arising out of any such contract of insurance, and any such act shall be signification of its agreement that such service of process is of the same legal force and validity as personal service of process in this State upon such insurer. (Added 1967, No. 344 (Adj. Sess.), § 1 (ch. 1, subch. 3, § 2).)

  • § 3383. Service upon the Secretary of State notice to defendant

    Such service of process shall be made by delivering to and leaving with the Secretary of State or some person in apparent charge of his or her office two copies thereof and the payment to him or her of such fee as is required by 12 V.S.A. § 852. The Secretary of State shall forthwith mail by registered mail one of the copies of such process to the defendant at its last known principal place of business and shall keep a record of all processes so served upon him or her. Such service of process is sufficient, provided notice of such service and a copy of the process are sent within 14 days thereafter by registered mail by plaintiff or plaintiff's attorney to the defendant at its last known principal place of business, and the defendant's receipt, or receipt issued by the post office with which the letter is registered, showing the name of the sender of the letter and the name and address of the person to whom the letter is addressed, and the affidavit of the plaintiff or plaintiff's attorney showing a compliance herewith are filed with the clerk of the court in which such action is pending on or before the date the defendant is required to appear, or within such further time as the court may allow. (Added 1967, No. 344 (Adj. Sess.), § 1 (ch. 1, subch. 3, § 3); amended 2017, No. 11, § 4.)

  • § 3384. Service upon other agents; notice to defendant

    Service of process in any such action, suit, or proceeding shall in addition to the manner provided in section 3383 of this title be valid if served upon any person within this State who, in this State on behalf of such insurer, is:

    (1) soliciting insurance; or

    (2) making, issuing, or delivering any contract of insurance; or

    (3) collecting or receiving any premium, membership fee, assessment, or other consideration for insurance; and a copy of such process is sent within 14 days thereafter by registered mail by the plaintiff or plaintiff's attorney to the defendant at the last known principal place of business of the defendant, and the defendant's receipt, or the receipt issued by the post office with which the letter is registered, showing the name of the sender of the letter and the name and address of the person to whom the letter is addressed, and the affidavit of the plaintiff or plaintiff's attorney showing a compliance herewith are filed with the clerk of the court in which such action is pending on or before the date the defendant is required to appear, or within such further time as the court may allow. (Added 1967, No. 344 (Adj. Sess.), § 1 (ch. 1, subch. 3, § 4); amended 2017, No. 11, § 5.)

  • § 3385. Repealed. 1971, No. 185 (Adj. Sess.), § 237, eff. March 29, 1972.

  • § 3386. Effect on other modes of service

    Nothing in sections 3382-3384 of this title shall limit or abridge the right to serve any process, notice, or demand upon any insurer in any other manner now or hereafter permitted by law. (Added 1967, No. 344 (Adj. Sess.), § 1 (ch. 1, subch. 3, § 6).)

  • § 3387. Prerequisites to defense of action

    Before any unauthorized foreign or alien insurer shall file or cause to be filed any pleading in any action, suit or proceeding instituted against it, such unauthorized insurer shall:

    (1) deposit with the clerk of the court in which such action, suit, or proceeding is pending, cash or securities or file with such clerk a bond with good and sufficient sureties, to be approved by the court, in an amount to be fixed by the court sufficient to secure the payment of any final judgment which may be rendered in such action; or

    (2) procure a certificate of authority to transact the business of insurance in this State. (Added 1967, No. 344 (Adj. Sess.), § 1 (ch. 1, subch. 3, § 7).)

  • § 3388. Postponements

    The court in any action, suit, or proceeding, in which service is made in the manner provided in section 3383 or 3384 of this title may, in its discretion, order such postponement as may be necessary to afford the defendant reasonable opportunity to comply with the provisions of section 3387 of this title and to defend such action. (Added 1967, No. 344 (Adj. Sess.), § 1 (ch. 1, subch. 3, § 8).)

  • § 3389. Motion to quash for improper service

    Nothing in section 3387 of this title is to be construed to prevent an unauthorized foreign or alien insurer from filing a motion to quash a writ or to set aside service thereof made in the manner provided in section 3383 or 3384 of this title on the ground either:

    (1) that such unauthorized insurer has not done any of the acts enumerated in section 3382 of this title; or

    (2) that the person on whom service was made pursuant to section 3384 of this title was not doing any of the acts therein enumerated. (Added 1967, No. 344 (Adj. Sess.), § 1 (ch. 1, subch. 3, § 9).)

  • § 3390. Attorney's fees

    In any action against an unauthorized foreign or alien insurer upon a contract of insurance issued or delivered in this State to a resident thereof or to a corporation authorized to do business therein, if the insurer has failed for 30 days after demand prior to the commencement of the action to make payment in accordance with the terms of the contract, and the court finds that such refusal was vexatious and without reasonable cause, the court may allow to the plaintiff a reasonable attorney's fee and include such fee in any judgment that may be rendered in such action. Failure of an insurer to defend any such action shall be deemed prima facie evidence that its failure to make payment was vexatious and without reasonable cause. (Added 1967, No. 344 (Adj. Sess.), § 1 (ch. 1, subch. 3, § 10).)


  • Subchapter 003: Mergers, Consolidations, Conversions, Mutualizations, Bulk Reinsurance, Subsidiaries
  • § 3421. Mutualization of stock insurer

    (a) A domestic stock insurer may become a mutual insurer under such plan and procedure as may be approved by the Commissioner after a hearing held substantially in accordance with the provisions of section 3305 of this title.

    (b) The Commissioner shall not approve any such plan or mutualization unless:

    (1) It is equitable to its stockholders and policyholders.

    (2) It is subject to approval by the holders of not less than a majority of the insurer's outstanding capital stock having voting rights present at a duly called regular or special meeting thereof, and by not less than a majority of the insurer's policyholders who vote on such plan in person, by proxy or by mail pursuant to such notice and procedure as may be approved by the Commissioner.

    (3) If a life insurer, the right to vote thereon is limited to holders of policies other than term or group policies, and whose policies have been in force for more than one year.

    (4) Mutualization will result in retirement of shares of the insurer's capital stock at a price not in excess of the fair market value thereof as determined by competent disinterested appraisers.

    (5) The plan provides for the purchase of the shares of any nonconsenting stockholder in substantially the same manner and subject to the same rights and conditions as are accorded a dissenting shareholder under section 3428 of this title.

    (6) The plan provides for definite conditions to be fulfilled by a designated early date upon which such mutualization will be deemed effective and for notices substantially in accordance with section 3424 of this title.

    (7) The mutualization leaves the insurer with surplus funds reasonably adequate for the security of its policyholders and to enable it to continue successfully in business in states in which it is then authorized to transact business, and for the kinds of insurance included in its certificates of authority in such states.

    (c) No director, officer, agent, or employee of the insurer, nor any other person, shall receive any fee, commission, or other valuable consideration whatsoever for in any manner aiding, promoting, or assisting therein except as set forth in the plan of mutualization as approved by the Commissioner.

    (d) This section shall not apply to mutualization under order of court pursuant to rehabilitation or reorganization of an insurer. (Added 1967, No. 344 (Adj. Sess.), § 1 (ch. 1, subch. 4, § 1).)

  • § 3422. Mutual insurers- Prohibitions

    A domestic mutual insurer shall not merge or consolidate with a stock insurer where the surviving corporation will be a stock insurer. (Added 1967, No. 344 (Adj. Sess.), § 1 (ch. 1, subch. 4, § 2); amended 1993, No. 28, § 1, eff. May 21, 1993.)

  • § 3423. Converting mutual insurer or mutual insurance holding company

    (a) A mutual insurer may become a stock insurer or a mutual insurance holding company may become a stock company or reorganize under such reasonable plan and procedure as may be approved by the Commissioner after a hearing thereon of which notice was given to the eligible members, all of whom shall have the right to appear at the hearing.

    (b) The Commissioner shall not approve any such plan or procedure unless:

    (1) Its terms and conditions are fair and equitable.

    (2) The plan shall have been duly adopted by action of not less than three-fourths of the members of the board of directors or trustees of the mutual insurer or mutual insurance holding company, as the case may be.

    (3) It is subject to approval by vote of not less than three-fourths of the eligible members actually voting thereon in person, by proxy, or by mail at a meeting of members called for the purpose, for which at least 30 days' notice has been provided to eligible members, pursuant to such reasonable notice and procedure as may be approved by the Commissioner.

    (4) The plan provides the method by which the aggregate value of eligible members' interests will be determined. The method specified must be acceptable to the Commissioner and shall be based on the market value of the converted company, unless another method for determining this value is approved by the Commissioner.

    (5) The plan provides for each eligible member to receive a fixed component of consideration or a variable component of consideration, or both, or any other component of consideration acceptable to the Commissioner. Any component shall reflect, based upon fair and equitable formulas, methods and assumptions, factors such as estimated proportionate contributions of classes, or groupings of policies and contracts to the aggregate component of consideration being distributed to eligible members, or other factors the Commissioner may approve.

    (6) The plan specifies the consideration to the eligible members entitled thereto, which consideration may consist of cash, securities of the reorganized insurer or securities of another institution or institutions, subscription rights to purchase securities of the reorganized insurer or securities of another institution or institutions, a certificate of contribution, surplus notes, additional insurance or annuity benefits, policy credits, increased dividends or other consideration, or any combination of such forms of consideration as the Commissioner may approve. The form or forms of consideration to be distributed to any class or category of member need not be the same as the consideration to be distributed to any other class or category of member. The choice of the form or forms of consideration to be distributed may take into account such factors as the class or category of policy with respect to what consideration is being distributed, the country of residence or tax status of eligible members, the reasonableness of the cost of providing a particular form of consideration in relation to its value, or other appropriate factors. If the plan provides for the sale of securities to members, the securities shall be offered to members at a price not greater than that to be offered under the plan to others.

    (7) If the plan relates to the conversion of a mutual life insurer, the plan shall provide for the reasonable expectations of policyholders through the establishment of a closed block or other method acceptable to the Commissioner. Any provision for dividend expectations may be limited to participating individual life insurance policies and participating individual annuity contracts in force or deemed to be in force by the plan of conversion on the effective date of the plan for which the insurer has an experience-based dividend scale due, paid or accrued by action of the board of directors of the mutual insurer in the year in which the plan is adopted; provided, however, that other categories of policies and benefits may be included or excluded, subject to approval of the Commissioner.

    (8) If the plan relates to the conversion of a mutual insurer, the plan, when completed, would provide for the converted insurer paid-in capital stock in an amount not less than the minimum paid-in capital stock required of a domestic stock insurer upon initial authorization to transact like kinds of insurance, together with an amount of surplus which is no less than the amount that the Commissioner deems to be reasonably necessary for the insurer's future solvency.

    (9) If the plan relates to the conversion or reorganization of a mutual insurance holding company, the plan shall provide for:

    (A) the conversion of the mutual insurance holding company to a stock company followed by a merger or consolidation of the converted stock company with another stock company, which may include a subsidiary of the mutual insurance holding company;

    (B) a sale of an intermediate stock holding company or stock insurer with shares or other consideration being distributed to members of the mutual insurance holding company, followed by the liquidation or dissolution of the mutual insurance holding company;

    (C) a liquidation or dissolution of the mutual insurance holding company; or

    (D) any combination of the foregoing or other reorganization or transfer of assets and assumption of liabilities approved by the Commissioner.

    (10) The Commissioner finds that the insurer's management has not, through reduction in volume of new business written, or cancellation or through any other means sought to reduce, limit, or affect the number or identity of the insurer's members to be entitled to participate in such plan, in order to secure for the individuals comprising management any unfair financial advantage through such plan, or intentionally engaged in any other conduct designed to secure for the individuals comprising management any unfair financial advantage through such plan.

    (c) Subsection (b) of this section shall not be deemed to prohibit the inclusion in the demutualization plan of provisions under which the individuals comprising the insurer's management or mutual insurance holding company's management, as the case may be, and employee group may receive employee benefit and compensation arrangements, including arrangements through the use of stock of the reorganized insurer or stock of its parent corporation or other entity, which are to become effective simultaneously with the plan of reorganization or, subsequently, provided such provisions are approved by the Commissioner. If the plan provides for the distribution or sale to members of capital stock of the converted company, nothing in subsection (b) of this section shall be deemed to prohibit the inclusion in the plan of provisions under which the converting company's directors, officers, agents, or employees shall be entitled to purchase for cash at the same price as offered to the insurer's members, shares of stock not taken by members in accordance with such terms and reasonable classifications of such individuals as may be included in the plan and approved by the Commissioner.

    (d) No director, officer, agent, or employee of the insurer, the mutual insurance holding company, or any other person, shall receive any fee, commission, or other valuable consideration whatsoever, other than their usual regular salaries and compensation, for in any manner aiding, promoting, or assisting in such conversion except as set forth in the plan approved by the Commissioner. This provision shall not be deemed to prohibit the payment of reasonable fees and compensation to attorneys at law, accountants, and actuaries for services performed in the independent practice of their professions, even though also directors of the insurer.

    (e) Upon the effective date of the plan, the rights of members in the mutual insurer or mutual insurance holding company shall be extinguished. All policies of a mutual insurer in force on the effective date of the plan shall remain in force under the terms of those policies, except for any terms affected by the extinguishment of those membership rights.

    (f) If a plan provides for the distribution of common stock, but does not provide for registration and public trading of the common stock of the converted insurer or the parent corporation or the converted mutual insurance holding company or other entity as of the effective date of the plan, the plan shall require the appropriate entity or entities to use good faith efforts to encourage and assist in the establishment of a market for such stock as soon as reasonably possible and, in any event, not later than two years after the effective date of the reorganization unless otherwise approved by the Commissioner. Within two years after the effective date of the reorganization unless otherwise approved by the Commissioner, the converted insurer or the parent corporation or the converted mutual insurance holding company or other entity shall make available to each eligible policyholder or member who received and retained shares of common stock with minimal aggregate value upon reorganization, a procedure to dispose of shares of stock at market value without brokerage commissions or similar fees under a plan approved by the Commissioner.

    (g) At the option of the mutual insurer or mutual insurance holding company, as the case may be, any common shares or other securities of the converted stock company or of any other institution, included in the members' consideration, other than those acquired as a result of a member exercising any subscription rights, may be placed in a trust or other entity existing for the exclusive benefit of the members, and established solely for the purpose of effectuating the reorganization to which such common shares or other securities are issued by the issuer on the effective date of the reorganization, such consideration to be distributed to members during a process specified in the plan and approved by the Commissioner.

    (h) Except as otherwise specifically provided in the plan of conversion, prior to and for a period of five years following the effective date of such plan, no person other than the converted stock insurer or an institution controlling the converted stock insurer or a converted mutual insurance holding company or institutions controlling the converted mutual insurance holding company shall, directly or indirectly, offer to acquire or acquire in any manner the beneficial ownership of five percent or more of any class of a voting security of the new stock insurer or of an institution which owns a majority or all of the voting securities of the new stock insurer or converted mutual insurance holding company, without the prior approval of the Commissioner, of an application for acquisition filed by such person with the Commissioner. The Commissioner shall not approve an application for acquisition unless the Commissioner finds, after a public hearing, that the acquisition would not frustrate the plan of conversion as approved by the policyholders or members and the Commissioner, would be consistent with the purposes of this statute, and would be on terms and conditions that are fair and equitable to the policyholders or members, as the case may be. No security which is acquired or is to be acquired in contravention of this section or of any rule, regulation, or order of the Commissioner may be voted at any shareholders meeting. If the new stock insurer or converted mutual insurance holding company or any institution which owns a majority or all of the voting securities of the new stock insurer or converted mutual insurance holding company or the Commissioner believes that any voting securities have been or are about to be acquired in contravention of this section or of any rule, regulation, or order of the Commissioner, he or she may apply to any court of competent jurisdiction in the State of Vermont for an order to enjoin any offer or acquisition made or any voting of any security so acquired, or to void the vote of any such security in contravention of this section or any rule, regulation, or order of the Commissioner, and for such other equitable relief as may be appropriate.

    (i) A failure by a mutual insurer or a mutual insurance company to provide a member or members with the notice required by this section shall not impair the validity of any action taken under this section, if such mutual insurer or mutual insurance holding company has complied substantially and in good faith with all notice requirements, as determined by the Commissioner.

    (j) Documents submitted to the Commissioner by the mutual insurer or mutual insurance holding company in connection with obtaining approval of the plan of conversion shall be public documents, except that financial data, actuarial memoranda, and any other information which the Commissioner determines could result in harm to the mutual entity or the converted entity or to its members if disclosed, shall be considered confidential. This confidentiality shall not extend to information provided by the mutual entity which the Commissioner deems necessary to be provided to members to evaluate the plan of conversion.

    (k) Any aggrieved party to a plan, within the meaning of section 77 of this title, may appeal an order of the Commissioner, pursuant to the provisions of such section, within 30 days after the issuance of an order of the Commissioner approving or disapproving such plan. Any review by the court shall be confined to the record before the Commissioner.

    (l) As used in this section:

    (1) "Eligible member" means, in the case of a mutual insurer, a person who owns or, pursuant to the terms of the plan, is deemed to own a policy which was in force as of the record date or, in the case of a mutual insurance holding company, a person who was or, pursuant to the terms of the plan, is deemed to have been a member as of the record date. For this purpose, the record date is the date when the mutual company's board of directors first adopts the plan of conversion, unless another date is specified in the plan of conversion and approved by the Commissioner. In the case of a mutual life insurance company or a mutual insurance holding company, the membership of which is derived from the purchase of contracts from a life insurance company, eligibility may be limited to members holding contracts which have been in force not less than one year.

    (2) "Fair and equitable" means that any action undertaken, pursuant to this section, with respect to a plan of conversion, provides for full and proper consideration of the aggregate membership interests and corresponding values of eligible members, in no manner discriminates improperly among eligible members, and appropriately protects the interests of eligible members before and subsequent to the conversion. (Added 1967, No. 344 (Adj. Sess.), § 1 (ch. 1, subch. 4, § 2a); amended 1999, No. 86 (Adj. Sess.), § 1, eff. April 27, 2000.)

  • § 3424. Procedure for merger

    Any domestic insurer subject to the prohibitions of section 3422 of this title may merge with any other insurer in the following manner:

    (1) The board of directors of each insurer shall, by a resolution adopted by a majority vote of the members of such board, approve a joint agreement of merger setting forth:

    (A) The names of the insurers proposed to merge, and the name of the insurer into which they propose to merge, which is hereafter designated as the surviving company.

    (B) The terms and conditions of the proposed merger and the mode of carrying the same into effect.

    (C) The manner and basis of converting the shares of capital stock of stock insurers, if applicable, other than the surviving insurer into shares or other securities or obligations of the surviving insurer.

    (D) A restatement of such provisions of the articles of incorporation of the surviving insurer as may be deemed necessary or advisable to give effect to the proposed merger.

    (E) Such other provisions with respect to the proposed merger as are deemed necessary or desirable.

    (2) The resolution of the board of directors of each insurer approving the agreement shall direct that the agreement be submitted to a vote of the shareholders, members, or policyholders, as the case may be, of such insurer entitled to vote in respect thereof at a designated meeting thereof, which may be an annual meeting of shareholders, members, or policyholders entitled to vote in respect thereof. If the designated meeting of any insurer at which the agreement is to be submitted is an annual meeting, notice of the submission of the agreement shall be included in the notice of such annual meeting. If the designated meeting of any insurer at which the agreement is to be submitted is a special meeting of the shareholders, members, or policyholders, entitled to vote in respect thereof, such special meeting shall be called by the resolution designating the meeting, and notice of such meeting shall be given as provided in the bylaws or charter, as the case may be, of each insurer.

    (3) The agreement of merger so approved shall be submitted to a vote of the shareholders, members, or policyholders, as the case may be, of each insurer entitled to vote in respect thereof at the meeting directed by the resolution of the board of directors of such company approving the agreement, and the agreement shall be adopted by such insurer upon receiving the affirmative vote of such proportion of the shareholders, members or policyholders as provided in section 3427 of this title.

    (4) Following the adoption of the agreement by any insurer, the clerk or secretary thereof, within such time and in such manner as shall be approved by the Commissioner, shall give notice of the adoption of the agreement to each shareholder, member, or policyholder, as the case may be, of record of such insurer entitled to vote who was not present in person or represented by proxy at the meeting at which the agreement was adopted. The insurer shall file an affidavit with the Commissioner, signed by the clerk or secretary of such insurer, that such notice was given.

    (5) Any shareholder, member, or policyholder, as the case may be, of any such insurer, who did not vote in favor of the adoption of the agreement of merger, may object to such merger in the manner and with the effect provided in sections 3428 and 3429 of this title.

    (6) As soon as practicable after the expiration of a period of 30 days after the adoption of the agreement of merger by the shareholders, members, or policyholders, as the case may be, of that one of the merging insurers which is the last, in point of time, to adopt the same, the agreement shall again be considered by the board of directors of each insurer a party thereto, at a regular or special meeting of such board, and if the board of directors of each such insurer, by a majority vote of the members of such board, shall again approve the agreement and shall authorize the execution thereof, the agreement shall be signed on behalf of each such insurer by its president or a vice president and its clerk or secretary or an assistant clerk or secretary and shall have the corporate seal of each such insurer thereto affixed.

    (7) Articles of merger shall be adopted in the following manner:

    (A) Upon the execution of the agreement of merger by all of the insurers parties thereto, there shall be executed and filed, in the manner hereafter provided, articles of merger setting forth the agreement of merger, the signatures of the several insurers parties thereto, the manner of its adoption and the vote by which adopted by each of such insurers.

    (B) The articles of merger shall be signed on behalf of each insurer by its president or a vice president and its clerk or secretary or an assistant clerk or secretary, and acknowledged before a notary public by the officers signing the same, in such multiple copies as shall be required to enable the insurers to comply with the provisions of this subchapter with respect to filing and recording the articles of merger, and shall then be presented to the Commissioner.

    (C) The Commissioner shall approve the articles of merger if he or she finds that the merger will promote the general good of the State in conformity with those standards set forth in section 3305 of this title. If he or she approves the articles of merger, he or she shall indorse his or her approval thereon and shall present the same to the Secretary of State of the State of Vermont at his or her office.

    (8) Upon the presentation of the articles of merger, the Secretary of State, if he or she finds that they conform to law, shall indorse his or her approval on each of the multiple copies of the articles, and, when all fees have been paid as required by law, shall file one copy of the articles of merger in his or her office and issue a certificate of merger, and shall return the remaining copies of the articles bearing the indorsement of his or her approval, together with the certificate of merger, to the surviving insurer, or its representatives.

    (9) The surviving insurer shall obtain a certified copy of the certificate of merger from the Secretary of State and file the same with the Commissioner, accompanied by a copy of the articles of merger bearing the indorsement and approval of the Secretary of State. (Added 1967, No. 344 (Adj. Sess.), § 1 (ch. 1, subch. 4, § 3).)

  • § 3425. Procedure for consolidation

    Any domestic insurer, subject to the prohibitions of section 3422 of this title, may consolidate with any other insurer or insurers in the following manner:

    (1) The board of directors of each insurer shall, by a resolution adopted by a majority vote of the members of such board, approve a joint agreement of consolidation setting forth:

    (A) the names of the insurers proposing to consolidate, and the name of the new insurer into which they propose to consolidate, which is hereinafter designated as the new insurer;

    (B) the terms and conditions of the proposed consolidation and the mode of carrying the same into effect;

    (C) the manner and basis of converting the shares of capital stock of stock insurers into shares or other securities or obligations of the new insurer;

    (D) with respect to the new insurer, such provisions as are required to be set forth in original articles of incorporation for insurers formed under this part;

    (E) such other provisions with respect to the proposed consolidation as are deemed necessary or desirable.

    (2) The agreement of consolidation shall then be submitted to a vote of the shareholders, members, or policyholders, as the case may be, entitled to vote in respect thereof of each insurer in the same manner as provided in section 3424 of this title and this agreement shall be adopted by such insurer upon receiving the affirmative vote of such proportion of the shareholders, members, or policyholders, as provided in section 3427 of this title, and the adoption thereof by directors and by the shareholders, members, or policyholders shall be followed by the same notice to shareholders, members, or policyholders, as the case may be, as provided in section 3424 of this title.

    (3) Any shareholder, member, or policyholder, as the case may be, of any such insurer who did not vote in favor of the adoption of the agreement of consolidation, may object to such consolidation in the manner and with the effect provided in sections 3428 and 3429 of this title.

    (4) Upon the adoption of the agreement of consolidation it shall again be considered by the board of directors of each insurer a party to the agreement, and, if again approved and the execution of the agreement authorized by such board, the agreement shall be executed all in the same manner and within the same time as provided in subdivision 3424(6) of this title.

    (5) Upon the execution of the agreement of consolidation by all of the insurers and parties thereto, articles of consolidation shall be executed and filed, accompanied by the fees prescribed by law in the same manner and form and in such multiple copies as provided in subdivision 3424(7) of this title and shall then be presented to the Commissioner for approval and presentation to the Secretary of State in the manner provided in said subdivision 3424(7) of this title.

    (6) Upon the presentation of the articles of consolidation, the Secretary of State, if he or she finds that they conform to law, shall indorse his or her approval on each of the multiple copies of the articles, and, when all fees have been paid as required by law, shall file one copy of the articles of consolidation in his or her office and issue a certificate of consolidation and shall return the remaining copies of the articles bearing the indorsement of his or her approval, together with the certificate of consolidation, to the new insurer, or its representatives.

    (7) The new insurer shall obtain a certified copy of the certificate of consolidation and incorporation from the Secretary of State and file the same with the Commissioner, accompanied by a copy of the articles of consolidation bearing the indorsement of the approval of the Secretary of State. (Added 1967, No. 344 (Adj. Sess.), § 1 (ch. 1, subch. 4, § 4).)

  • § 3426. Effective date of merger or consolidation

    Upon the issuance of a certificate of merger or a certificate of consolidation by the Secretary of State, the merger or consolidation, as the case may be, shall be effected, subject to the rights of dissenting shareholders, members or policyholders, as provided in sections 3428 and 3429 of this title. (Added 1967, No. 344 (Adj. Sess.), § 1 (ch. 1, subch. 4, § 5).)

  • § 3427. Voting

    At any meeting of the shareholders, members, or policyholders, as the case may be, held pursuant to the resolution of the board of directors for the purpose of adopting an agreement of merger or consolidation, as provided for in sections 3424 and 3425 of this title, the shareholders, members, or policyholders, as the case may be, entitled to vote in respect thereof may vote in person or by proxy and shall have such votes as they are entitled to pursuant to the charter and bylaws of the insurer or as may otherwise be provided by law. Two-thirds of the votes cast at the meeting in person or by proxy, shall be necessary for the adoption of such proposed articles of merger or consolidation. (Added 1967, No. 344 (Adj. Sess.), § 1 (ch. 1, subch. 4, § 6).)

  • § 3428. Rights of dissenting shareholders

    (a) If any shareholder of any insurer, a party to a merger or consolidation, who did not vote in favor of such merger or consolidation at the meeting at which the agreement of merger or consolidation was adopted by the shareholders of such insurer shall, at any time within 30 days after the filing of the affidavit of notice of the adoption of the agreement of merger or consolidation as provided for in sections 3424 and 3425 of this title, object thereto in writing and demand payment of the value of his or her shares, the surviving or new insurer shall, in the event that the merger or consolidation shall be made effective, pay to such shareholder upon surrender of his or her certificates therefor, the value of such shares at the effective date of the merger or consolidation. If within 30 days after such effective date, the value of such shares is agreed upon between the shareholder and the surviving or new insurer, as the case may be, payment therefor may be made within 90 days after the effective date. If, within 30 days after such effective date, the surviving or new insurer, as the case may be, and the shareholder do not so agree, either such insurer or the shareholder may, within 90 days after such effective date, petition the Superior Court of the county in which the principal office of the insurer is located, to appraise the value of such shares; and payment of the appraised value thereof shall be made within 60 days after the entry of the judgment or order finding such appraised value. The practice, procedure, and judgment in the Superior Court upon such petition shall be the same, so far as practicable, as that under the eminent domain laws in this State.

    (b) Upon the effective date of the merger or consolidation, any shareholder who has made such objection and demand shall cease to be a shareholder and shall have no rights with respect to such shares except the right to receive payment therefor. Every shareholder who did not vote in favor of such merger or consolidation and who does not object in writing and demand payment of the value of his or her shares at the time and in the manner aforesaid, shall be conclusively presumed to have assented to such merger or consolidation. (Added 1967, No. 344 (Adj. Sess.), § 1 (ch. 1, subch. 4, § 7).)

  • § 3429. Rights of dissenting members or policyholders

    If not less than five percent of the members or policyholders in a mutual insurer, who did not vote in favor of such merger or consolidation at the meeting at which the agreement of merger or consolidation was adopted by the members or policyholders of such insurer, shall at any time within 30 days after the filing of the affidavit of notice of the adoption of the agreement of merger or consolidation as provided for in sections 3424 and 3425 of this title, file a petition with the Commissioner for a hearing upon the adoption of such agreement of merger or consolidation, the Commissioner shall order a hearing upon said petition and give notice fixing the time and place of such hearing, to the insurers which are parties to the merger or consolidation 15 days before the date of such hearing. The insurer whose policyholders file such petition shall give notice by mail to each member or policyholder of such insurer, at least 10 days before such hearing. At the time and place fixed in such notice, or at the time or times and place or places to which such hearing shall be adjourned, the Commissioner shall proceed with the hearing and make or order such examination into the affairs and condition of each of such insurers as he or she may deem proper. The Commissioner shall have the power to summon and compel the attendance and testimony of witnesses and the production of books and papers before him or her at such hearing. Any member or policyholder, as the case may be, of the insurer so petitioning may appear before the Commissioner and be heard with reference to said contract. If, upon such hearing being had, the Commissioner is not satisfied that the interests of the members or policyholders, as the case may be, of such insurer are properly protected, or if he or she finds that any reasonable objection exists to such contract, he or she shall revoke the approval already given, and the said agreement of merger or consolidation shall thereupon become null and void. The Commissioner shall have like power to revoke any approval of any such agreement of merger or consolidation if any officer, director, or employee of any insurer party to such agreement of merger or consolidation shall, after reasonable notice, fail or refuse to attend and testify at such hearing, or to produce any books or papers called for by said Commissioner. (Added 1967, No. 344 (Adj. Sess.), § 1 (ch. 1, subch. 4, § 8).)

  • § 3430. Effect of merger or consolidation

    When such merger or consolidation has been effected as hereinabove provided;

    (1) The several insurers parties to the agreement of merger or consolidation shall be a single insurer which shall be:

    (A) in case of a merger, the surviving insurer a party to the agreement of merger into which it has been agreed the other insurers parties to the agreement shall be merged, which surviving insurer shall survive the merger; or

    (B) in case of a consolidation, the new insurer into which it has been agreed the insurers parties to the agreement of consolidation shall be consolidated.

    (2) The separate existence of all of the insurers parties to the agreement of merger or consolidation, except the surviving insurer in the case of a merger, shall cease.

    (3) Such single insurer shall have all of the rights, privileges, immunities, and powers and shall be subject to all of the duties and liabilities of an insurer organized under this part.

    (4) Such single insurer shall thereupon and thereafter possess all the rights, privileges, immunities, powers, and franchises of a public as well as of a private nature of each of the insurers so merged or consolidated; and all property, real, personal, and mixed, and all debts due on whatever account, including subscriptions to shares of capital stock, and all other choses in action and all and every other interest, of or belonging to or due to each of the insurers so merged or consolidated shall be taken and deemed to be transferred to and vested in such single insurer without further act or deed; and the title to any real estate, or any interest therein, under the laws of this State vested in any of such insurers shall not revert or be in any way impaired by reason of such merger or consolidation.

    (5) Such single insurer shall thenceforth be responsible and liable for all the liabilities and obligations of each of the insurers so merged or consolidated in the same manner and to the same extent as if such single insurer had itself incurred the same or contracted therefor; and any claim existing or action or proceeding pending by or against any of such insurers may be prosecuted to judgment as if such merger or consolidation had not taken place. Neither the rights of creditors nor any liens upon the property of any such insurers shall be impaired by such merger or consolidation, but such liens shall be limited to the property upon which they were liens immediately prior to the time of such merger or consolidation, unless otherwise provided in the agreement of merger or consolidation.

    (6) In case of a merger, the articles of incorporation of the surviving insurer shall be supplanted and superseded to the extent, if any, that any provision or provisions of such articles shall be restated in the agreement of merger as provided in section 3424 of this title, and such articles of incorporation shall be deemed to be thereby and to that extent amended; and in case of a consolidation, the statements set forth in the agreement of consolidation as provided in section 3425 of this title shall be deemed to be articles of incorporation of the new insurer formed by such consolidation. (Added 1967, No. 344 (Adj. Sess.), § 1 (ch. 1, subch. 4, § 9).)

  • § 3431. Merger or consolidation between domestic and foreign insurers- Requirements

    (a) In case of a merger or consolidation between a domestic and a foreign insurer, the articles of merger or consolidation shall be regarded as executed by the proper officers of said foreign insurer when such officers are duly authorized to execute same through such action on the part of the directors, shareholders, members, or policyholders, as the case may be, of said foreign insurer as may be required by the laws of the state where the same is incorporated; and upon execution, the articles of merger or consolidation shall be submitted to the Commissioner of Financial Regulation or other officer at the head of the insurance department of the state where such foreign insurer is incorporated. No such merger or consolidation shall take effect until it shall have been approved by the insurance official of the state where said foreign insurer is incorporated nor until a certificate of his or her approval has been filed with the Commissioner of Financial Regulation for the State of Vermont; provided, that such submission to and approval by the proper official of such other state shall not be required unless the same are required by the laws of such foreign state. Provided, further, that the domestic insurer involved in such merger or consolidation shall not through anything contained in this section be relieved of any of the procedural requirements enumerated in the preceding sections of this subchapter.

    (b) No merger, consolidation, or reinsurance between a domestic and a foreign insurer shall take effect, unless and until the surviving, new, or accepting insurer, if such is a foreign insurer, shall file with the Department a power of attorney appointing the Secretary of State and his or her successors in office, the attorney for service of said foreign insurer, upon whom all lawful process against said insurers may be served. Said power of attorney shall be irrevocable so long as said foreign insurer has outstanding in this State any contract of insurance, or other obligation whatsoever, and shall by its terms so provide. Service upon the Secretary of State shall be deemed sufficient service upon the insurer. (Added 1967, No. 344 (Adj. Sess.), § 1 (ch. 1, subch. 4, § 10); amended 1989, No. 225 (Adj. Sess.), § 25(b); 1995, No. 180 (Adj. Sess.), § 38(a); 2011, No. 78 (Adj. Sess.), § 2, eff. April 2, 2012.)

  • § 3432. Transfer of deposits

    If the state in which a foreign, new, surviving, or accepting insurer is incorporated or organized shall require the maintenance with any official of such state of a deposit of the legal reserve on the policies so assumed and such foreign insurer shall maintain such deposit, then the State Treasurer is authorized to deliver to the proper custodian of such funds in the state in which the said foreign insurer is incorporated or organized, such deposits as he or she may hold pertaining to the policies so assumed by the new, surviving, or accepting insurer. If a surviving, new, or accepting domestic insurer assumes all or a substantial number of the risks of a foreign insurer incorporated in a state which requires the maintenance with a state official of a deposit of the legal reserve on policies so assumed, then the State Treasurer is hereby authorized to receive from such official such deposits as he or she may hold pertaining to the policies so assumed. The amount of deposit to be maintained from time to time for each policy on which liability is assumed shall be at least equal to the amount which would be required in the state where such deposit has theretofore been maintained. (Added 1967, No. 344 (Adj. Sess.), § 1 (ch. 1, subch. 4, § 11).)

  • § 3433. Certificates of fees and commissions paid

    Whenever articles of merger, consolidation, or reinsurance are filed with the Commissioner, there shall also be filed a certificate, executed by the president or a vice president and attested by the clerk or secretary, and under the corporate seal of each of the insurers parties to the agreement of merger, consolidation, and reinsurance, verified by the affidavits of all such officers, setting forth all fees, commissions, or other compensations, or valuable considerations paid or to be paid, directly or indirectly, to any person or persons, firm or firms, corporation or corporations whomsoever, which in any manner secured, aided, promoted, or assisted in any such merger, consolidation, or reinsurance. (Added 1967, No. 344 (Adj. Sess.), § 1 (ch. 1, subch. 4, § 12).)

  • § 3434. Fees- Penalty for receiving

    (a) No director, officer, or member of any such insurer or insurers except as fully expressed in the affidavits, described in section 3433 of this title, shall receive any fee, commission, other compensation, or valuable consideration whatever, direct or indirect, for in any manner aiding, promoting, or assisting in such merger, consolidation, or reinsurance.

    (b) Any person violating the provisions of this section shall be deemed guilty of a misdemeanor, and upon conviction thereof, shall be punished by a fine of not less than $5,000.00 and not more than $15,000.00. (Added 1967, No. 344 (Adj. Sess.), § 1 (ch. 1, subch. 4, § 13); amended 1995, No. 167 (Adj. Sess.), § 2.)

  • § 3435. Repealed. 1993, No. 235 (Adj. Sess.), § 11.

  • § 3436. Repealed. 1999, No. 84 (Adj. Sess.), § 7, eff. April 19, 2000.

  • § 3437. Redomestication; approval as a domestic insurer

    Any foreign or alien insurer may become a domestic insurer by complying with all of the requirements of law relative to the organization and licensing of a domestic insurer of the same type, and by filing with the Secretary of State its articles of association, charter, or other organization document, together with appropriate amendments thereto adopted in accordance with the laws of this State bringing such articles of association, charter, or other organizational document into compliance with the laws of this State, along with a certificate of general good issued by the Commissioner. Said domestic insurer shall be entitled to the necessary or appropriate certificates and licenses to continue its business and to transact business in this State, and shall be subject to the authority and jurisdiction of this State. In connection with any such redomestication, the Commissioner may waive any and all requirements for public hearings, including those relating to the amendment of an insurer's articles of association and that required by section 3305 of this title. No insurer redomesticating into this State need merge, consolidate, transfer assets, or otherwise engage in any other reorganization, other than as specified in this section. (Added 1991, No. 41, § 1.)

  • § 3438. Redomestication; conversion to foreign insurer

    Any domestic insurer may, upon the approval of and compliance with such conditions as may be imposed by the Commissioner, transfer its domicile, in accordance with the laws thereof, to any other state or jurisdiction, and upon such a transfer shall cease to be a domestic insurer, and its corporate or other legal existence in this State shall cease upon the filing of proof of such redomestication with the Secretary of State and upon payment to the Secretary of State of a filing fee in the amount of $100.00. Such insurer shall be admitted to this State if qualified as a foreign or alien insurer, upon compliance with the qualification requirements for foreign or alien insurers to the extent not waived by the Commissioner. (Added 1991, No. 41, § 2.)

  • § 3439. Effects of redomestication

    Upon redomestication in accordance with section 3437 of this title, the foreign or alien insurer shall become a domestic insurer organized under the laws of this State and have all the rights, privileges, immunities, and powers, and be subject to all applicable laws, duties, and liabilities, of domestic insurers of the same type. Such domestic insurer shall thereupon and thereafter possess all rights that obtained prior to the redomestication to the extent permitted by the laws of this State, and thenceforth be responsible and liable for all the liabilities and obligations that obtained prior to the redomestication. The certificate of authority, agents, appointments and licenses, rates, and other items that the Commissioner of insurance allows, in his or her discretion, which are in existence at the time any insurer licensed to transact the business of insurance in this State transfers its corporate domicile to this or any other state or jurisdiction by redomestication, shall continue in full force and effect upon such transfer if such insurer remains duly qualified to transact the business of insurance in this State. All transferring insurers qualified in this State shall notify the Commissioner of the transfer of domicile and shall provide the Commissioner such information and documentation as the Commissioner may request. All outstanding policies of any transferring insurer shall remain in full force and effect. (Added 1991, No. 41, § 3.)

  • § 3440. Redomestication; fees

    An insurer becoming a domestic insurer through the redomestication procedure specified in section 3437 of this title shall pay to the Commissioner such fees as would be payable by a like domestic insurer organizing and becoming licensed or transacting business in this State. An insurer becoming a domestic insurer pursuant to section 3437 shall pay to the Secretary of State a filing fee in the amount of $300.00 for the filing required under section 3437. (Added 1991, No. 41, § 4.)


  • Subchapter 003A: Mutual Insurance Holding Companies
  • § 3441. Formation of a mutual insurance holding company

    (a) A domestic mutual insurance company, upon approval of the Commissioner, may reorganize by forming an insurance holding company based upon a mutual plan and continue the corporate existence of the reorganizing insurance company as a stock insurance company subsidiary of the mutual insurance holding company. The mutual insurance company shall file with the Commissioner the plan of reorganization, proposed amended and restated charters for the mutual holding company and the insurance company, and such other relevant information as the Commissioner shall require. The Commissioner shall, in accordance with section 3305 of this title, make a determination as to the general good of the proposed reorganization. The Commissioner may, in his or her discretion, conduct a single public hearing as provided by section 3305 of this title to consider the formation of the mutual holding company and stock insurance company. The Commissioner shall, within 90 days, approve any proposed mutual holding company formation unless the Commissioner finds:

    (1) disapproval is necessary to prevent practices that will cause financial impairment to the mutual insurance company or proposed stock company;

    (2) the financial or management resources of the mutual insurance company warrant disapproval;

    (3) the mutual insurance company fails to furnish the information required by this section;

    (4) the mutual insurance company fails to provide certified copies of the approval of its plan of reorganization by two-thirds of its board of directors; or

    (5) the proposed reorganization would be unfair to policyholders.

    (b) All of the initial shares of the capital stock of the reorganized insurance company shall be issued to the mutual insurance holding company or to a stock insurance holding company which is wholly owned by the mutual insurance holding company. The membership interests of the policyholders of the reorganized insurance company shall become membership interests in the mutual insurance holding company. Policyholders of the reorganized insurance company shall be members of the mutual insurance holding company in accordance with the articles of incorporation and bylaws of the mutual insurance holding company. The mutual insurance holding company shall at all times own, directly or indirectly, a majority of the voting shares of the capital stock of the subsidiary stock insurance company. For purposes of this subchapter, "stock insurance holding company" means a corporation at least a majority of the voting shares of which is owned, directly or through another stock insurance holding company, by a mutual insurance holding company and which holds, directly or indirectly, all the voting shares of the reorganized insurer.

    (c) Reorganization of the domestic mutual insurance company shall be subject to approval of its members or policyholders in accordance with section 3427 of this title and dissenting members or policyholders may petition the Commissioner in accordance with section 3429 of this title, except the request for a hearing must be filed within 30 days of the giving of notice to policyholders of their right to dissent after the regular or special meeting of the policyholders at which the reorganization was approved; provided, however, that no notice is required to be sent to policyholders who voted in favor of the reorganization.

    (d) Notwithstanding the provisions of subsection (a) of this section, the Commissioner, in his or her discretion, may disapprove any proposed mutual holding company formation if he or she determines that the proposal is contrary to the financial interests of the policyholders. (Added 1995, No. 167 (Adj. Sess.), § 29a; amended 1997, No. 54, § 12, eff. June 26, 1997; 1999, No. 86 (Adj. Sess.), §§ 2, 3, eff. April 27, 2000.)

  • § 3442. Merger of mutual insurance company into an existing mutual insurance holding company; merger and acquisition by mutual insurance holding company or subsidiary of mutual insurance holding company

    (a) Merger of mutual insurance company into mutual insurance holding company. A domestic or foreign mutual insurance company, upon the approval of the Commissioner, may reorganize by merging its policyholders' membership interests into a mutual insurance holding company formed pursuant to section 3441 of this title and continue the corporate existence of the reorganizing insurance company as a stock insurance company subsidiary of the mutual insurance holding company. A merger pursuant to this section shall be governed by the terms, conditions, and procedure set forth in section 3441 of this title.

    (b) Merger and acquisition by mutual insurance holding company or subsidiary of mutual insurance holding company. Subject to applicable requirements of this chapter, a mutual insurance holding company may:

    (1) merge or consolidate with, or acquire the assets of, a mutual insurance holding company reorganized pursuant to this act or any similar entity organized pursuant to the laws of any other state;

    (2) either alone or together with one or more stock insurance holding companies as defined in subsection 3443(c) of this title, or other subsidiaries, directly or indirectly, acquire the stock of a stock insurance company or a mutual insurance company that reorganizes under this act or the law of its state of organization;

    (3) together with one or more of its stock insurance company subsidiaries, acquire the assets of a stock insurance company or a mutual insurance company; or

    (4) acquire a stock insurance company through the merger of such stock insurance subsidiary with a stock insurance company or stock insurance holding company.

    (c) A merger or consolidation pursuant to subsection (b) of this section is subject to the standards and procedures prescribed in sections 3424 through 3434 of this title. Mutual insurance holding companies and stock insurance holding companies shall be considered insurers for purposes of application of such sections.

    (d) No such merger or consolidation shall be effectuated unless in advance thereof, the plan and agreement therefor have been filed with and approved by the Commissioner. Such approval shall be given unless the Commissioner finds such plan or agreement:

    (1) is inequitable to the policyholders of any insurer involved in the merger or the members of any mutual insurance holding company involved in the merger; or

    (2) would substantially reduce the security of and service to be rendered to policyholders of an insurer involved in the merger or consolidation.

    (e) A stock or asset acquisition pursuant to subsection (b) of this section shall be subject to the provisions of subsection 3443(c) of this title.

    (f) The provisions of subsection 3441(b) of this title shall apply to any transaction under this section which involves the merger, consolidation, or acquisition of a mutual insurance company or mutual insurance holding company. (Added 1995, No. 167 (Adj. Sess.), § 29a; amended 1999, No. 86 (Adj. Sess.), § 4, eff. April 27, 2000.)

  • § 3443. Regulated as an insurance company

    (a) A stock insurance company resulting from the reorganization of a domestic mutual insurance company shall be regulated as a stock insurance company under this title and shall have all the rights, privileges, immunities, and powers of the former mutual insurance company and shall be subject to all the duties and liabilities of an insurer organized under this title.

    (b) The Commissioner shall retain jurisdiction over a mutual insurance holding company and any stock insurance holding company to assure that policyholder interests are protected. A mutual insurance holding company and any stock insurance holding company are deemed to be insurers subject to chapter 145 of this title. A mutual insurance holding company and any stock insurance holding company shall automatically be a party to any proceeding under chapter 145 of this title involving a stock insurance company reorganized under this subchapter. In any proceeding under chapter 145 of this title involving a reorganized stock insurance company, the assets of the mutual insurance holding company and any stock insurance holding company are deemed to be assets of the estate of the reorganized insurance company for purposes of satisfying the claims of the reorganized insurance company's policyholders. A mutual insurance holding company shall not dissolve or liquidate without the approval of the Commissioner or as ordered by the Superior Court pursuant to chapter 145 of this title. The Commissioner shall have jurisdiction over a stock insurance holding company as if it were a mutual insurance holding company.

    (c) Acquisitions and investments by mutual insurance holding companies, including those acquisitions pursuant to subsection 3442(b) of this title, shall be subject to the procedures and standards prescribed by chapter 101, subchapter 13 of this title. Mutual insurance holding companies and stock insurance holding companies shall be considered a domestic insurer for purposes of such acquisition. (Added 1995, No. 167 (Adj. Sess.), § 29a; amended 1999, No. 86 (Adj. Sess.), § 5, eff. April 27, 2000.)

  • § 3444. Demutualization of a mutual insurance holding company

    (a) Sections 3422 and 3423 of this title are not applicable to a reorganization or merger pursuant to section 3441 or 3442 of this title.

    (b) Sections 3422 and 3423 of this title are applicable to the demutualization of a mutual insurance holding company that resulted from the reorganization of a domestic mutual insurance company pursuant to section 3441 as if it were a mutual insurance company. (Added 1995, No. 167 (Adj. Sess.), § 29a.)

  • § 3445. Membership interest not a security

    A membership interest in a domestic mutual insurance holding company shall not constitute a security as defined by 9 V.S.A. § 4202a. (Added 1995, No. 167 (Adj. Sess.), § 29a.)

  • § 3446. Filing of amended charters

    Upon the consummation of a reorganization or merger pursuant to this subchapter, duplicate originals of amended and restated charter documents adopted by the mutual holding company and the insurance company shall be filed in the office of the Secretary of State, and shall take effect as of the date of the filing of such originals in such office. (Added 1995, No. 167 (Adj. Sess.), § 29a.)


  • Subchapter 004: Investments and Loans
  • § 3461. Definitions

    As used in this chapter:

    (1) "Admitted assets" means assets permitted to be reported as admitted assets on the annual statutory financial statement of the insurer for the next preceding year or as shown by a current financial statement.

    (2) "Appraised" or "appraised value" when used in connection with real estate shall refer to appraisals made or examined and approved by an insurer or its agents. An insurer shall have the right to make one or more renewals or extensions of a loan secured by real estate, provided any renewal or extension is based upon a reexamination of the facts and upon an appraisal made within three years.

    (3) "Asset-backed security" means a security or other instrument, excluding a mutual fund, evidencing an interest in, or the right to receive payments from, or payable from distributions on, an admitted asset, a pool of admitted assets, or specifically divisible cash flows which are legally transferred to a trust or another special purpose bankruptcy-remote business entity, on the following conditions:

    (A) The trust or other business entity is established solely for the purpose of acquiring specific types of admitted assets or rights to cash flows, issuing securities and other instruments representing an interest in or right to receive cash flows from those admitted assets or rights, and engaging in activities required to service the admitted assets or rights and any credit enhancement or support features held by the trust or other business entity.

    (B) The admitted assets of the trust or other business entity consist solely of interest-bearing obligations or other contractual obligations representing the right to receive payment from the cash flows from the admitted assets or rights. However, the existence of credit enhancements, such as letters of credit or guarantees, or support features such as swap agreements, shall not cause a security or other instrument to be ineligible as an asset-backed security.

    (4) "Canada" means Canada, any province of Canada, or any political subdivision of Canada.

    (5) "Cap" means an agreement obligating the seller to make payments to the buyer, with each payment based on the amount by which a reference price or level or the performance or value of one or more underlying interests exceeds a predetermined number, sometimes called the strike rate or strike price.

    (6) "Collar" means an agreement to receive payments as the buyer of an option, cap, or floor and to make payments as the seller of a different option, cap, or floor.

    (7) "Counterparty exposure amount" means:

    (A) The net amount of credit risk attributable to a derivative instrument entered into with a business entity other than through a qualified exchange or qualified foreign exchange or cleared through a qualified clearinghouse. Such derivative instruments are hereinafter referred to as "over-the-counter derivative instruments." The amount of credit risk equals:

    (i) the market value of the over-the-counter derivative instrument if the liquidation of the derivative instrument would result in a final cash payment to the insurer; or

    (ii) zero, if the liquidation of the derivative instrument would not result in a final cash payment to the insurer.

    (B) If over-the-counter derivative instruments are entered into under a written master agreement that provides for netting of payments owed by the respective parties, and the domiciliary jurisdiction of the counterparty is either within the United States or, if not within the United States, within a foreign jurisdiction listed in the Purposes and Procedures of the NAIC Investment Analysis Office as eligible for netting, the net amount of credit risk shall be the greater of zero or the net sum of:

    (i) the market value of the over-the-counter derivative instruments entered into under the agreement, the liquidation of which would result in a final cash payment to the insurer; and

    (ii) the market value of the over-the-counter derivative instruments entered into under the agreement, the liquidation of which would result in a final cash payment by the insurer to the business entity.

    (C) For open transactions, market value shall be determined at the end of the most recent quarter of the insurer's fiscal year and shall be reduced by the market value of acceptable collateral held by the insurer or placed in escrow by one or both parties.

    (8) "Covered" means that an insurer owns or can immediately acquire, through the exercise of options, warrants, or conversion rights already owned, the underlying interest in order to fulfill or secure its obligations under a call option, cap, or floor it has written or has set aside under a custodial or escrow agreement cash or cash equivalents with a market value equal to the amount required to fulfill its obligations under a put option it has written, in an income generation transaction.

    (9) "Derivative instrument" means an agreement, option, instrument, or a series or combination thereof:

    (A) to make or take delivery of, or assume or relinquish, a specified amount of one or more underlying interests or to make a cash settlement in lieu thereof; or

    (B) that has a price, performance, value, or cash flow based primarily upon the actual or expected price, level, performance, value, or cash flow of one or more underlying interests. Derivative instruments include options, warrants used in a hedging transaction and not attached to another financial instrument, caps, floors, collars, swaps, forwards, futures, and any other agreements, options, or instruments substantially similar thereto or any series or combination thereof and any agreements, options, or instruments permitted under this chapter. Derivative instruments shall not include an investment authorized under subdivisions 3463(a)(1) through (a)(14) and (a)(16) through (a)(29) of this title.

    (10) "Derivative transaction" means a transaction involving the use of one or more derivative instruments.

    (11) "Direct" when used in connection with "obligation" means that a designated obligor shall be primarily liable on the instrument representing the obligation.

    (12) "Domestic jurisdiction" means the United States, any state of the United States, or any political subdivision of any of the foregoing.

    (13) "Equity interest" means any of the following that are not rated credit instruments:

    (A) common stock;

    (B) preferred stock;

    (C) trust certificate;

    (D) equity investment in an investment company other than a money market mutual fund or a listed bond mutual fund;

    (E) investment in a common trust fund of a bank regulated by a federal or state agency;

    (F) an ownership interest in minerals, oil, or gas, the rights to which have been separated from the underlying fee interest in the real estate where the minerals, oil, or gas is located;

    (G) instruments that are mandatorily, or at the option of the issuer, convertible to equity;

    (H) limited partnership interests;

    (I) member interests in limited liability companies;

    (J) warrants or other rights to acquire equity interests that are created by the person that owns or would issue the equity to be acquired; or

    (K) instruments that would be rated credit instruments except for the provisions of subdivision (39)(B) of this section.

    (14) "Floor" means an agreement obligating the seller to make payments to the buyer in which each payment is based on the amount by which a predetermined number, sometimes called the floor rate or price, exceeds a reference price, level, performance, or value of one or more underlying interests.

    (15)(A) "Foreign investment" means an investment in a foreign jurisdiction, or an investment in a person, real estate, or asset domiciled in a foreign jurisdiction, that is substantially of the same type as those eligible for investment under this subchapter, other than under subdivision 3463(a)(28) of this title. An investment shall not be deemed to be foreign if the issuing person, qualified primary credit source, or qualified guarantor is a domestic jurisdiction or Canada or a person domiciled in a domestic jurisdiction or Canada, unless:

    (i) the issuing person is a shell business entity; and

    (ii) the investment is not assumed, accepted, guaranteed, or insured or otherwise backed by a domestic jurisdiction or Canada or a person that is not a shell business entity domiciled in a domestic jurisdiction or Canada.

    (B) For purposes of this definition:

    (i) "Qualified guarantor" means a guarantor against which an insurer has a direct claim for full and timely payment, evidenced by a contractual right for which an enforcement action can be brought in a domestic jurisdiction or Canada.

    (ii) "Qualified primary credit source" means the credit source to which an insurer looks for payment as to an investment and against which an insurer has a direct claim for full and timely payment, evidenced by a contractual right for which an enforcement action can be brought in a domestic jurisdiction or Canada.

    (iii) "Shell business entity" means a business entity having no economic substance except as a vehicle for owning interests in assets issued, owned, or previously owned by a person domiciled in a foreign jurisdiction.

    (16) "Foreign jurisdiction" means a jurisdiction other than a domestic jurisdiction or Canada.

    (17) "Forward" means an agreement (other than a future) to make or take delivery of, or effect a cash settlement based on the actual or expected price, level, performance, or value of, one or more underlying interests.

    (18) "Future" means an agreement, traded on a qualified exchange or qualified foreign exchange, to make or take delivery of, or effect a cash settlement based on the actual or expected price, level, performance, or value of, one or more underlying interests.

    (19) "Guaranteed" means that the guarantor will perform the obligation of the obligor or will purchase the obligation to the extent of the guaranty.

    (20) "Hedging transaction" means a derivative transaction that is entered into and maintained to reduce:

    (A) the risk of a change in the value, yield, price, cash flow, or quantity of assets or liabilities that the insurer has acquired or incurred or anticipates acquiring or incurring; or

    (B) the currency exchange rate risk or the degree of exposure as to assets or liabilities that an insurer has acquired or incurred or anticipates acquiring or incurring.

    (21) "High grade investment" means a rated credit instrument rated 1 or 2 by the SVO or that meets and continues to meet the conditions for exemption as provided in section 3461d of this title.

    (22) "Income generation transaction" means a derivative transaction involving the writing of covered call options, covered put options, covered caps, or covered floors that is intended to generate income or enhance return.

    (23) "Institution" or "business entity" includes a sole proprietorship, corporation, limited liability company, association, partnership, joint stock company, joint venture, mutual fund, trust, joint tenancy, or other similar form of business organization, whether organized for profit or not for profit.

    (24) "Listed bond mutual fund" means a mutual fund that at all times qualifies for inclusion on the "bond fund list" within the Purposes and Procedures of the NAIC Investment Analysis Office or any successor publication.

    (25) "Lower grade investment" or "lower grade obligation" means a rated credit instrument rated 4, 5, or 6 by the SVO.

    (26) "Medium grade investment" or "medium grade obligation" means a rated credit instrument rated 3 by the SVO.

    (27) "Money market mutual fund" means a mutual fund that meets the conditions of 17 C.F.R. Part 270.2a-7, under the Investment Company Act of 1940 (15 U.S.C. § 80a-1 et seq.), as amended or renumbered.

    (28) "Mortgage loan" means an obligation secured by a mortgage, deed of trust, trust deed, or other consensual lien on real estate.

    (29) "Mutual fund" means an investment company or, in the case of an investment company that is organized as a series company, an investment company series that, in either case, is registered with the U.S. Securities and Exchange Commission under the Investment Company Act of 1940 (15 U.S.C. § 80a-1 et seq.), as amended.

    (30) "NAIC" means the National Association of Insurance Commissioners.

    (31) "Obligation" means a bond, note, debenture, trust certificate, including an equipment certificate, production payment, negotiable bank certificate of deposit, bankers' acceptance, credit tenant plan, loan secured by financing net leases, and other evidence of indebtedness for the payment of money (or participations, certificates, or other evidences of interest in any of the foregoing).

    (32) "Option" means an agreement giving the buyer the right to buy or receive (a "call option"), sell or deliver (a "put option"), enter into, extend, or terminate or effect a cash settlement based on the actual or expected price, level, performance, or value of one or more underlying interests.

    (33) "Potential exposure" means the amount determined in accordance with the NAIC Annual Statement Instructions.

    (34) "Qualified bank" means:

    (A) a national bank, state bank, or trust company that at all times is no less than adequately capitalized as determined by standards adopted by U.S. banking regulators, and that is either regulated by state banking laws or is a member of the Federal Reserve System; or

    (B) a bank or trust company incorporated or organized under the laws of a country other than the United States that is regulated as a bank or trust company by that country's government or an agency thereof and that at all times is no less than adequately capitalized as determined by the standards adopted by international banking authorities.

    (35) "Qualified clearinghouse" means a clearinghouse for, and subject to the rules of, a qualified exchange or a qualified foreign exchange, which provides clearing services, including acting as a counterparty to each of the parties to a transaction, such that the parties no longer have credit risk as to each other.

    (36) "Qualified exchange" means:

    (A) a securities exchange registered as a national securities exchange or a securities market regulated under the Securities Exchange Act of 1934 (15 U.S.C. § 78 et seq.), as amended;

    (B) a board of trade or commodities exchange designated as a contract market by the Commodity Futures Trading Commission or any successor thereof;

    (C) Private Offerings, Resales and Trading through Automated Linkages (PORTAL);

    (D) a designated offshore securities market as defined in Securities Exchange Commission Regulation S, 17 C.F.R. Part 230, as amended; or

    (E) a qualified foreign exchange.

    (37) "Qualified foreign exchange" means a foreign exchange, board of trade, or contract market located outside the United States, its territories, or possessions:

    (A) that has received regulatory comparability relief under Commodity Futures Trading Commission (CFTC) Rule 30.10 (as set forth in Appendix C to Part 30 of the CFTC's Regulations, 17 C.F.R. Part 30);

    (B) that is, or its members are, subject to the jurisdiction of a foreign futures authority that has received regulatory comparability relief under CFTC Rule 30.10 (as set forth in Appendix C to Part 30 of the CFTC's Regulations, 17 C.F.R. Part 30) as to futures transactions in the jurisdiction where the exchange, board of trade, or contract market is located; or

    (C) upon which foreign stock index futures contracts are listed that are the subject of no-action relief issued by the CFTC's Office of General Counsel, provided that an exchange, board of trade, or contract market that qualifies as a "qualified foreign exchange" only under this subdivision shall only be a "qualified foreign exchange" as to foreign stock index futures contracts that are the subject of no-action relief.

    (38)(A) "Rated credit instrument" means a contractual right to receive cash or another rated credit instrument from another entity, which instrument:

    (i) is rated or required to be rated by the SVO or meets and continues to meet the conditions for exemption as provided in section 3461d of this title;

    (ii) in the case of an instrument with a maturity of 397 days or less, is issued, guaranteed, or insured by an entity that is rated by, or another obligation of such entity is rated by, the SVO or by a nationally recognized statistical rating organization recognized by the SVO;

    (iii) in the case of an instrument with a maturity of 90 days or less, is issued by a qualified bank;

    (iv) is a share of a listed bond mutual fund; or

    (v) is a share of a money market mutual fund.

    (B) "Rated credit instrument" does not mean:

    (i) an instrument that is mandatorily or, at the option of the issuer, convertible to an equity interest; or

    (ii) a security that has a par value and whose terms provide that the issuer's net obligation to repay all or part of the security's par value is determined by reference to the performance of an equity, a commodity, a foreign currency, or an index of equities, commodities, foreign currencies, or combinations thereof.

    (39) "Special rated credit instrument" means a rated credit instrument that is:

    (A) An instrument that is structured so that, if it is held until retired by or on behalf of the issuer, its rate of return, based on its purchase cost and any cash flow stream possible under the structure of the transaction, may become negative due to reasons other than the credit risk associated with the issuer of the instrument; however, a rated credit instrument shall not be a special rated credit instrument under this subdivision if it is:

    (i) a share in a listed bond mutual fund;

    (ii) an instrument, other than an asset-backed security, with payments of par value fixed as to amount and timing, or callable but in any event payable only at par or greater, and interest or dividend cash flows that are based on either a fixed or variable rate determined by reference to a specified rate or index;

    (iii) an instrument, other than an asset-backed security, that has a par value, and is purchased at a price no greater than 110 percent of par;

    (iv) an instrument, including an asset-backed security, whose rate of return would become negative only as a result of a prepayment due to casualty, condemnation or economic obsolescence of collateral, or change of law;

    (v) an asset-backed security that relies on collateral that meets the requirements of subdivision (ii) of this subdivision (39)(A), the par value of which collateral:

    (I) is not permitted to be paid sooner than one-half of the remaining term to maturity from the date of acquisition;

    (II) is permitted to be paid prior to maturity only at a premium sufficient to provide a yield to maturity for the investment, considering the amount prepaid and reinvestment rates at the time of early repayment, at least equal to the yield to maturity of the initial investment; or

    (III) is permitted to be paid prior to maturity at a premium at least equal to the yield of a treasury issue of comparable remaining life; or

    (vi) an asset-backed security that relies on cash flows from assets that are not prepayable at any time at par, but is not otherwise governed by subdivision (v) of this subdivision (39)(A), if the asset-backed security has a par value reflecting principal payments to be received if held until retired by or on behalf of the issuer, and is purchased at a price no greater than 105 percent of such par amount.

    (B) An asset-backed security that:

    (i) Relies on cash flows from assets that are prepayable at par at any time;

    (ii) Does not make payments of par that are fixed as to amount and timing; and

    (iii) Has a negative rate of return at the time of acquisition if a prepayment threshold assumption is used with such prepayment threshold assumption defined as either:

    (I) Two times the prepayment expectation reported by a recognized, publicly available source as being the median of expectations contributed by broker dealers or other entities, except insurers, engaged in the business of selling or evaluating such securities or assets. The prepayment expectation used in this calculation shall be, at the insurer's election, the prepayment expectation for pass-through securities of the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation, the Government National Mortgage Association, or for other assets of the same type as the assets that underlie the asset-backed security, in either case with a gross weighted average coupon comparable to the gross weighted average coupon of the assets that underlie the asset-backed security; or

    (II) Another prepayment threshold assumption specified by the Commissioner by rule.

    (C) For purposes of subdivision (B) of this subdivision (39), if the asset-backed security is purchased in combination with one or more other asset-backed securities that are supported by identical underlying collateral, the insurer may calculate the rate of return for these specific combined asset-backed securities in combination. The insurer must maintain documentation demonstrating that such securities were acquired and are continuing to be held in combination.

    (40) "State of the United States" means any state of the United States of America, the District of Columbia, and the Commonwealth of Puerto Rico.

    (41) "SVO" means the Securities Valuation Office of the NAIC or any successor office established by the NAIC.

    (42) "Swap" means an agreement to exchange or to net payments at one or more times based on the actual or expected price, level, performance, or value of one or more underlying interests.

    (43) "Underlying interest" means the assets, liabilities, other interests, or a combination thereof underlying a derivative instrument, such as any one or more securities, currencies, rates, indices, commodities, or derivative instruments.

    (44) "Warrant" means an instrument that gives the holder the right to purchase an underlying financial instrument at a given price and time or at a series of prices and times outlined in the warrant agreement. Warrants may be issued alone or in connection with the sale of other securities, for example, as part of a merger or recapitalization agreement or to facilitate divestiture of the securities of another business entity. (Added 1967, No. 344 (Adj. Sess.), § 1 (ch. 1, subch. 5, art. 4, §§ 1-10); amended 1999, No. 84 (Adj. Sess.), § 1, eff. April 19, 2000; 2017, No. 134 (Adj. Sess.), § 2.)

  • § 3461a. General limitations and diversification requirements for property and casualty, financial guaranty and mortgage guaranty insurers

    (a) General five percent diversification.

    (1) Except as otherwise specified in this subchapter, a domestic property and casualty, financial guaranty or mortgage guaranty insurer shall not acquire directly or indirectly through an investment subsidiary an investment under this subchapter if, as a result of and after giving effect to the investment, the insurer would hold more than five percent of its admitted assets in investments of all kinds issued, assumed, accepted, insured, or guaranteed by a single person.

    (2) This five percent limitation shall not apply to the aggregate amounts insured by a single financial guaranty insurer with the highest generic rating issued by a nationally recognized statistical rating organization.

    (3) Asset-backed securities shall not be subject to the limitations of subdivision (1) of this subsection; however, an insurer shall not acquire an asset-backed security if, as a result of and after giving effect to the investment, the aggregate amount of asset-backed securities secured by or evidencing an interest in a single asset or single pool of assets held by a trust or other business entity then held by the insurer would exceed five percent of its admitted assets.

    (b) An insurer subject to this section shall comply with applicable regulations addressing investments in lower and medium grade obligations.

    (c) Canadian investments.

    (1) An insurer subject to this section shall not acquire, directly or indirectly through an investment subsidiary, any Canadian investments authorized by this subchapter, if, as a result of and after giving effect to the investment, the aggregate amount of these investments then held by the insurer would exceed 40 percent of its admitted assets or if the aggregate amount of Canadian investments not acquired under subdivision 3461c(2) of this subchapter then held by the insurer would exceed 25 percent of its admitted assets.

    (2) However, as to an insurer that is authorized to do business in Canada or that has outstanding insurance, annuity or reinsurance contracts on lives or risks resident or located in Canada and denominated in Canadian currency, the limitations of subdivision (1) of this subsection shall be increased by the greater of:

    (A) the amount the insurer is required by Canadian law to invest in Canada or to be denominated in Canadian currency; or

    (B) 125 percent of the amount of its reserves and other obligations under contracts on risks resident or located in Canada. (Added 1999, No. 84 (Adj. Sess.), § 2, eff. April 19, 2000.)

  • § 3461b. General limitations and diversification requirements for life and health insurers

    (a) General three percent diversification.

    (1) Except as otherwise specified in this subchapter, a domestic life and health insurer shall not acquire, directly or indirectly through an investment subsidiary, an investment under this subchapter if, as a result of and after giving effect to the investment, the insurer would hold more than three percent of its admitted assets in investments of all kinds issued, assumed, accepted, insured or guaranteed by a single person.

    (2) This three percent limitation shall not apply to the aggregate amounts insured by a single financial guaranty insurer with the highest generic rating issued by a nationally-recognized statistical rating organization.

    (3) Asset-backed securities shall not be subject to the limitations of subdivision (1) of this subsection; however, an insurer shall not acquire an asset-backed security if, as a result of and after giving effect to the investment, the aggregate amount of asset-backed securities secured by or evidencing an interest in a single asset or single pool of assets held by a trust or other business entity then held by the insurer would exceed three percent of its admitted assets.

    (b) An insurer subject to this section shall comply with applicable regulations addressing investments in lower and medium grade obligations.

    (c) Canadian investments.

    (1) An insurer subject to this section shall not acquire, directly or indirectly through an investment subsidiary, a Canadian investment authorized by this subchapter if, as a result of and after giving effect to the investment, the aggregate amount of these investments then held by the insurer would exceed 40 percent of its admitted assets or if the aggregate amount of Canadian investments not acquired under subdivision 3461c(2) of this title then held by the insurer would exceed 25 percent of its admitted assets.

    (2) However, as to an insurer that is authorized to do business in Canada or that has outstanding insurance, annuity or reinsurance contracts on lives or risks resident or located in Canada and denominated in Canadian currency, the limitations of subdivision (1) of this subsection shall be increased by the greater of:

    (A) the amount the insurer is required by Canadian law to invest in Canada or to be denominated in Canadian currency; or

    (B) 115 percent of the amount of its reserves and other obligations under contracts on lives or risks resident or located in Canada. (Added 1999, No. 84 (Adj. Sess.), § 3, eff. April 19, 2000.)

  • § 3461c. Rated credit investments

    Subject to the limitations of subdivision (6) of this section, an insurer may acquire rated credit instruments.

    (1) Subject to applicable limitations of subsection 3461a(b) or 3461b(b) of this subchapter, but not the limitations of subsection 3461a(a) or 3461b(a), an insurer may acquire rated credit instruments issued, assumed, guaranteed or insured by:

    (A) the United States; or

    (B) a government-sponsored enterprise of the United States, if the instruments of the government-sponsored enterprise are assumed, guaranteed, or insured by the United States or are otherwise backed or supported by the full faith and credit of the United States.

    (2) Subject to applicable limitations of subsection 3461a(b) or 3461b(b) of this subchapter, but not the limitations of subsection 3461a(a) or 3461b(a), an insurer may acquire rated credit instruments issued, assumed, guaranteed or insured by:

    (A) Canada; or

    (B) a government-sponsored enterprise of Canada, if the instruments of the government-sponsored enterprise are assumed, guaranteed, or insured by Canada or are otherwise backed or supported by the full faith and credit of Canada;

    (C) an insurer shall not acquire an instrument under this subdivision if, as a result of and after giving effect to the investment, the aggregate amount of investments then held by the insurer under this subdivision would exceed 40 percent  of its admitted assets.

    (3)(A) Subject to applicable limitations of subsection 3461a(b) or 3461b(b) of this subchapter, but not the limitations of subsection 3461a(a) or 3461b(a), an insurer may acquire rated credit instruments, excluding asset-backed securities:

    (i) issued by a government money market mutual fund or a listed bond mutual fund;

    (ii) issued, assumed, guaranteed, or insured by a government-sponsored enterprise of the United States other than those eligible under subdivision (i) of this subdivision (3)(A);

    (iii) issued, assumed, guaranteed, or insured by a state, if the instruments are general obligations of the state; or

    (iv) issued by a multilateral development bank.

    (B) However, an insurer shall not acquire an instrument of any one fund, any one enterprise or entity or any one state under this section if, as a result of and after giving effect to the investment, the aggregate amount of investments then held in any one fund, enterprise, or entity or state under this subdivision would exceed 10 percent of its admitted assets.

    (4) Subject to the applicable limitations of section 3461a or 3461b of this subchapter, an insurer may acquire preferred stocks that are not foreign investments and that meet the requirements of rated credit instruments if, as a result of and after giving effect to the investment:

    (A) the aggregate amount of preferred stocks then held by the insurer under this subdivision does not exceed 20 percent  of its admitted assets; and

    (B) the aggregate amount of preferred stocks then held by the insurer under this subdivision which are not sinking fund stocks or rated P1 or P2 by the SVO does not exceed 10 percent of its admitted assets or does not meet or continue not to meet the conditions for exemption as provided in section 3461d of this title.

    (5) Subject to the applicable limitations of section 3461a or 3461b of this subchapter, in addition to those investments eligible under subdivisions (1), (2), (3), and (4) of this section, an insurer may acquire rated credit instruments that are not foreign investments.

    (6) An insurer shall not acquire special rated credit instruments under this section if, as a result of and after giving effect to the investment, the aggregate amount of special rated credit instruments then held by the insurer would exceed five percent of its admitted assets. (Added 1999, No. 84 (Adj. Sess.), § 4, eff. April 19, 2000; amended 2017, No. 134 (Adj. Sess.), § 3.)

  • § 3461d. Registration or filing exemption

    Notwithstanding the provisions of any other section of subchapter 4 of this chapter, an insurer shall not be required to register or file with the SVO any security that meets and continues to meet the conditions for exemption for certain nationally recognized statistical rating organization rated securities consistent with the Purposes and Procedures Manual of the NAIC Investment Analysis Office or any successor publication. (Added 1999, No. 84 (Adj. Sess.), § 5, eff. Jan. 1, 2000; amended 2017, No. 134 (Adj. Sess.), § 4.)

  • § 3462. Investments- Foreign insurers

    The investments of a foreign or alien insurer shall be as permitted by the laws of its domicile if of a quality substantially as high as that required under this chapter for similar funds of like domestic insurers. (1967, No. 344 (Adj. Sess.), § 1 (ch. 1, subch. 5, art. 2).)

  • § 3463. Domestic insurers

    (a) Subject to the provisions of sections 3461a, 3461b, and 3461c of this title, a domestic insurer, including a hospital service corporation established or licensed under the provisions of chapter 123 of this title and a medical service corporation established or licensed under the provisions of chapter 125 of this title, may prudently invest its assets in any of the following:

    (1) Government obligations. Direct obligations of the United States for the payment of money, or obligations for the payment of money which are guaranteed or insured as to the payment of principal and interest by the United States.

    (2) Government agency- Instrumentality obligations. Direct obligations for the payment of money, issued by an agency or instrumentality of the United States, or obligations for the payment of money which are guaranteed or insured as to the payment of principal or interest by an agency or instrumentality of the United States.

    (3) State obligations. Bonds and other legally created direct general obligations of any state of the United States for the payment of money provided that any such state at the date of such investment shall not be in default in the payment of principal or interest on any of its direct general obligations.

    (4) State political subdivision obligations. Bonds and other legally created direct general obligations of any political subdivision of any state of the United States for the payment of money provided that any such political subdivision at the date of such investment shall not be in default in the payment of principal or interest on any of its direct general obligations.

    (5) Development credit corporations. Evidences of indebtedness, and shares of stock issued by a development credit corporation incorporated under the general laws of the State of Vermont and subject to supervision by the Commissioner as provided by the laws of the State.

    (6) Obligations and stock of certain federal agencies. An insurer may invest in the obligations or stock, or both of the following agencies of the government of the United States of America, whether or not such obligations are guaranteed by such government:

    (A) Commodity Credit Corporation.

    (B) Federal Intermediate Credit Banks.

    (C) Federal Land Banks.

    (D) Central Bank for Cooperatives and Banks for Cooperatives.

    (E) Federal Home Loan Banks.

    (F) Federal National Mortgage Association.

    (G) Any other similar agency of the government of the United States of America and of similar financial quality.

    (7) International bank for reconstruction and development. Obligations issued or guaranteed by the international bank for reconstruction and development; provided, however, that the aggregate amount of such investments which are held at any time shall not exceed five percent of its total admitted assets.

    (8) Inter-American Development Bank. Obligations issued or guaranteed by the Inter-American Development Bank; provided, however, that the aggregate amount of such investments which are held at any time by any domestic insurer shall not exceed five percent of its total admitted assets.

    (9) Revenue bonds. Bonds and other obligations of the United States of America, of any state thereof, or of any political subdivision thereof, or of any public authority or instrumentality of one or more of the foregoing, which are payable as to both principal and interest from adequate special revenues pledged or otherwise appropriated or by law required to be provided for the purpose of such payment, but not including any obligations payable solely out of special assessments on properties benefited by local improvements.

    (10) Equipment trust obligations. Equipment trust obligations or other instruments evidencing an interest in or ownership of personal property where there is a right to receive determined portions of rental, purchase or other fixed obligatory payments for the use or purchase of such personal property, provided the aggregate investments therein shall not exceed 10 percent of the total admitted assets of such life insurance company.

    (11) Corporate obligations. Fixed interest and variable interest bearing obligations issued, assumed or guaranteed by any solvent institution, whether or not secured, which are not in default as to principal or interest and that have been or will be registered with the SVO or that meet and continue to meet the conditions for exemption as provided in section 3461d of this title.

    (12) Equity interests.

    (A) An insurer may acquire equity interests in business entities organized under the laws of any domestic jurisdiction or Canada.

    (B) A life and health insurer shall not acquire an investment under this section if, as a result of and after giving effect to the investment, the aggregate amount of investments then held by the insurer under this subdivision would exceed 20 percent of its admitted assets or the amount of equity interests then held by the insurer that are not listed on a qualified exchange would exceed five percent of its admitted assets. An accident and health insurer shall not be subject to this section but shall be subject to the same aggregate limitation on equity interests as a property and casualty insurer under subdivision (C) of this subdivision (12).

    (C) A property and casualty insurer shall not acquire an investment under this section if, as a result of and after giving effect to the investment, the aggregate amount of investments then held by the insurer under this section would exceed the greater of 25 percent of its admitted assets or 100 percent of its surplus as regards policyholders.

    (D) An insurer shall not acquire under this section any investments that the insurer may acquire under subdivisions (a)(19) through (a)(25) of this section.

    (E) An insurer shall not short sell equity investments unless the insurer covers the short sale by owning the equity investment or an unrestricted right to the equity instrument exercisable within six months of the short sale.

    (13) Asset-backed securities. An insurer's investment in the asset-backed securities secured by or representing an interest in a single asset or pool of assets held by a trust or other business entity shall not exceed five percent of the insurer's admitted assets.

    (14) Stock and obligations of mortgage companies.

    (A) Stock and obligations of any solvent institution created or existing under the laws of the United States or of any state thereof which is engaged primarily in the business of making, originating, purchasing, or otherwise acquiring or investing in, and servicing, or selling or otherwise disposing of, loans secured by mortgages on real property located in the United States, whether for its own account or as mortgage loan correspondent for others, or both, provided that immediately prior to such investment by a domestic insurer such institution shall be acting as, or shall be under a contract to act as, a mortgage loan correspondent for such insurer.

    (B) The amount invested under this subdivision in any one such institution shall not exceed one-tenth of one percent of the admitted assets of such insurer. The cost of any investment made under this subdivision when added to the aggregate cost of all other investments made under this subdivision and then held by such insurer shall not exceed one-half of one percent of the admitted assets of such insurer.

    (15) Derivative investments and transactions. An insurer may, directly or indirectly through an investment subsidiary, engage in derivative transactions under this subdivision, on the following conditions:

    (A) General conditions.

    (i) An insurer may use derivative instruments under this subchapter to engage in hedging transactions and certain income generation transactions;

    (ii) An insurer shall be able to demonstrate to the Commissioner the intended hedging characteristics and the ongoing effectiveness of the derivative transaction or combination of the transactions through cash flow testing or other appropriate analyses.

    (B) Limitations on hedging transactions. An insurer may enter into hedging transactions under this section if, as a result of and after giving effect to the transaction:

    (i) The aggregate statement value of options, caps, floors, and warrants not attached to another financial instrument purchased and used in hedging transactions does not exceed seven and one-half percent of its admitted assets;

    (ii) The aggregate statement value of options, caps, and floors written in hedging transactions does not exceed three percent of its admitted assets; or

    (iii) The aggregate potential exposure of collars, swaps, forwards, and futures used in hedging transactions does not exceed six and one-half percent of its admitted assets.

    (C) Limitations on income generation transactions. An insurer may enter into the following types of income generation transactions if, as a result of and after giving effect to the transactions, the aggregate statement value of the fixed income assets that are subject to call or that generate the cash flows for payments under the caps or floors, plus the face value of fixed income securities underlying a derivative instrument subject to call, plus the amount of the purchase obligations under the puts, does not exceed 10 percent of its admitted assets:

    (i) sales of covered call options on noncallable fixed income securities, callable fixed income securities if the option expires by its terms prior to the end of the noncallable period or derivative instruments based on fixed income securities;

    (ii) sales of covered call options on equity securities if the insurer holds in its portfolio or can immediately acquire through the exercise of options, warrants, or conversion rights already owned, the equity securities subject to call during the complete term of the call option sold;

    (iii) sales of covered puts on investments that the insurer is permitted to acquire under this subchapter if the insurer has escrowed or entered into a custodian agreement, segregating cash or cash equivalents with a market value equal to the amount of its purchase obligations under the put during the complete term of the put option sold; or

    (iv) sales of covered caps or floors if the insurer holds in its portfolio the investments generating the cash flow to make the required payments under the caps or floors during the complete term that the cap or floor is outstanding.

    (D) Counterparty exposure. An insurer shall include all counterparty exposure amounts in determining compliance with the limitations of sections 3461a and 3461b of this title.

    (16) Policy loans. Indebtedness secured by the extent thereof by the loan value of life insurance policies or annuity contracts.

    (17) Collateral loans. Obligations secured by a pledge of personal property, whether the same be tangible or intangible, upon the condition that the collateral be marketable and is fairly worth sufficiently in excess of the amount of the loan to make it a sound and prudent investment.

    (18) Unsecured loans. Unsecured obligations of any person or corporation, provided that any such loan or investment in excess of $2,500.00 shall be supported by the signed financial statement of the borrower, or supported by any other assurances satisfactory to insurer, which evidence the financial stability of such obligator. No insurer shall loan or make investments under this section in an amount greater than one-fourth of one percent of its admitted assets as to any one loan transaction or investment, nor shall the aggregate amounts so loaned or invested exceed two percent of the admitted assets of such insurer.

    (19) Acceptances and bills of exchange. Bank certificates of deposit and bankers' acceptances, and other bills of exchange of the kind and maturities made eligible by law for purchase in the open market by federal reserve banks.

    (20) Mortgage loans- Real estate. Obligations for the payment of money secured by first mortgages on real estate situated within any state or territory of the United States or the District of Columbia upon the following conditions:

    (A) The security for the loan shall be a first lien upon timberland or improved real estate, including mines, and quarries, except that a first mortgage on lands impressed with a public use, sometimes known as society or glebe lands, but held under a durable lease, or lands subject to lease under which rents are reserved to the owner and with all of the owner's rights and options under the lease are collaterally assigned to the insurer as security, shall nonetheless be deemed to be a first lien as in this subdivision (A) required; provided, however, there is no condition or right of reentry or forfeiture, not insured against by a responsible title insurance company qualified to do business in the state wherein the mortgaged property is located, under which, in the case of real estate other than leaseholds, such lien can be cut off or subordinated or otherwise disturbed or under which, in the case of leaseholds, the insurer is unable to continue the lease in force for the duration of the loan.

    (i) Nothing herein shall prohibit any loan or investment by reason of the existence of any prior lien for grounds rents, taxes, assessments, or other similar charges not delinquent.

    (ii) Real estate shall not be deemed to be encumbered, within the meaning of this subdivision, by reason of the existence of instruments reserving or granting rights-of-way, mineral rights, oil or timber rights or easements, provided such interests do not unreasonably interfere with the use of the real estate contemplated at the time of investment.

    (iii) A leasehold estate shall constitute real estate under this subdivision only if it has an unexpired term of not less than 21 years, inclusive of the term or terms which may be provided by enforceable options of renewal, provided the underlying fee simple estate is not subject to any prior lien or encumbrance; and no mortgage loan upon a leasehold shall be made or acquired unless the terms thereof shall provide for the complete amortization of principal by the end of four-fifths of the period of the leasehold, inclusive of the period or periods which may be provided by enforceable options of renewal, which is unexpired at the time the loan is made, and shall further provide that the amount of required principal and interest payable in any prior full year.

    (B) No such mortgage loan or loans made or acquired on any one property shall exceed 75 percent of the appraised value of the real estate, and the terms thereof shall provide for: (i) payments of principal, whatever the period of the loan so that at no time during the period of the loan shall the aggregate payments of principal theretofore required to be made under the terms of the loan be less than would have been necessary for a loan payable completely by the end of 30 years through payments of interest only for five years; and (ii) substantially equal payments of principal and interest at the end of each year thereafter, except that loans secured by dwellings for use by not more than two families may exceed 75 percent of the appraised value of the real estate but shall not be greater than 80 percent unless the secured real estate be located in the state of Vermont, in which event said loans shall not be greater than 90 percent; and, anything in this subdivision to the contrary notwithstanding, loans secured chiefly by timberland, mines or quarries shall not exceed 50 percent of the appraised value of the real estate nor have a maturity greater than five years. If there is no provision for substantially complete amortization of principal as hereinabove provided, then in that event no such mortgage loan or loans made or acquired on any one property shall exceed 662/3 percent of the appraised value and the same shall be made payable upon demand or within not to exceed two years.

    (C) The appraised value of real estate securing any mortgage loan shall be established and evidenced by the written appraisal of a qualified real estate appraiser who may be an employee of the insurer, except that in the case of property to be qualified hereunder as timberland, mines or quarries, the appraisal must be made by an engineer or geologist or other person qualified in the relevant field.

    (D) If the obligation is purchased, no payment thereon shall be more than 30 days overdue at the time of the investment.

    (E) No mortgage loan made or acquired which is a participation or a part of a series or issue secured by the same mortgage shall be a lawful investment under this subdivision unless (i) the entire series or issue is held by such insurer, or (ii) the insurer holds a participation in such mortgage giving it, by written agreement with all other participants, substantially, rights of a first mortgagee, or (iii) the loan is evidenced by bonds, notes or evidences of indebtedness forming part of an issue of bonds, notes or evidences of indebtedness secured by a mortgage which, if there are more than five holders of such issue at the time such mortgage loan is made or acquired by such insurer, or if there are more than three holders of such issue at that time and such issue aggregates less than $5,000,000.00 in original principal amount, shall be to a bank, trust company, or national bank duly authorized and licensed to act as a corporate trustee in its state of domicile (with or without a co-trustee), provided that such issue is all of equal rank.

    (F) Each mortgage loan must be supported by evidence satisfactory to insurer that such mortgage is a first lien on the secured real estate as in this subdivision provided.

    (G) Insurer shall not invest more than 60 percent of its admitted assets pursuant to this subdivision.

    (H) Insurer shall not invest under this subdivision more than two percent of its admitted assets in obligations of any one obligor.

    (21) Mortgage loans- Insured or guaranteed. Obligations for the payment of money secured by mortgages guaranteed or insured, as the case may be, as follows:

    (A) by the Federal Housing Administration under the terms of an act of Congress of the United States of June 27, 1934, entitled the "National Housing Act," as heretofore or hereafter amended;

    (B) by the Administrator of Veterans' Affairs, pursuant to the provisions of Title III of an act of Congress of the United States of June 22, 1944, entitled the "Servicemen's Readjustment Act of 1944," as heretofore or hereafter amended, provided that any excess investment over 80 percent of the appraised value is guaranteed;

    (C) by the United States, any state, territory, or district thereof, or of any instrumentality, agency or political subdivision of one or more of the foregoing, provided that any excess investment over 75 percent of the appraised value is so insured or guaranteed;

    (D) any mortgage loan so guaranteed or insured as in this subdivision (21) provided, shall not be subject to the provisions of any law of this state prescribing the nature, amount or form of security, or requiring security upon which loans or advances of credit may be made, or prescribing or limiting the period or principal amount for which loans or advances of credit may be made, or prescribing or limiting the interest which may be charged or taken upon any loan or advance of credit.

    (22) Mortgage loans- Additionally secured by assignment of certain leases. Obligations for the payment of money under the following conditions:

    (A) the obligation shall be secured by a first mortgage or lien on real or personal property and additionally secured by assignment of the mortgagor's interest, as lessor, on a lease or leases on said property located within any state of the United States, any territory thereof, or the District of Columbia;

    (B) such lease or leases shall be collaterally assigned for the benefit of the insurer, and shall be nonterminable upon foreclosure of any lien upon the leased property;

    (C) the rents payable under such lease or leases shall be sufficient to provide for amortization during the term of the lease of not less than 60 percent of the investment with interest thereon as to real property and 80 percent as to personal property;

    (D) such lease or leases shall be noncancelable by lessee during the term of the lease or period of the obligation, whichever is less, other than in the event of lessor's default therein, condemnation, or destruction of the leased property to the extent that it is no longer tenantable for the purposes to which it was devoted at the time of destruction, by any hazard excluding, however, from the provisions of this subdivision (D) leases to the United States government or its agencies;

    (E) the lessee or lessees under the lease or leases, or any corporation or corporations which have assumed or guaranteed any lessee's performance thereunder shall be the United States government, its agencies, any state of the United States, or political subdivision thereof, or a corporation or corporations whose obligations would be eligible for investment by an insurer in accordance with the provisions of this subdivision (11) of this section;

    (F) insurer shall not invest more than 10 percent of its admitted assets pursuant to this section; and

    (G) insurer shall not invest under this subdivision more than two percent of its admitted assets in the obligations of any one obligor or in obligations secured by leases to any one corporation.

    (23) Mortgage loans- Personal property. Obligations for the payment of money secured by first mortgages or liens, including conditional sale contracts, on tangible personal property situated within any state, territory or district of the United States, provided no such investment made or acquired shall at the time of acquisition exceed 75 percent of the fair market value of the property secured.

    (24) Real estate- Company business. Real estate (including leasehold interests) for the convenient accommodation of the insurer's business operations, including home office, branch office and field operations, on the following conditions:

    (A) any parcel of real estate acquired under this provision may include excess space for rent to others if it is reasonably anticipated that such excess will be required by the insurer for expansion or if the excess is reasonably required in order to have a building that will be an economic unit;

    (B) such real estate may be subject to a mortgage; and

    (C) an insurer's aggregate investment under this provision will not exceed 10 percent of its admitted assets, except with the permission of the commissioner if he or she finds that such percentage of its admitted assets are insufficient to provide convenient accommodation for the insurer's business.

    (25) Real estate and personal property under lease. Real estate in the United States or its territories under lease or commitment for lease and personal property for intended use in the United States under lease, or commitment for lease, on the following conditions:

    (A) the lessee or the guarantor of lessee's obligations under the lease is a corporation with tangible net worth of $500,000.00 or more;

    (B) the lease provides for a net rental sufficient to amortize the investment with interest over the primary term of the lease or 40 years, whichever is less;

    (C) insurer shall not invest in real estate  under lease more than 10 percent of its admitted assets pursuant to this subdivision; and

    (D) insurer shall not invest in personal property under lease more than five percent of its admitted assets pursuant to this subdivision.

    (26) Real estate- Income producing. Real estate and equipment incident and related to the operation of said real estate for the production of income, or as may be acquired to be improved or developed for such investment purpose pursuant to an existing program therefor, situated in any state of the United States of America, any territory thereof, or the District of Columbia, and the construction thereon of improvements, on the following conditions:

    (A) The term "real estate" as used in this subdivision shall include any real property and interest therein including, without limitation any interest on, above or below the surface of the land any leasehold estate therein and any interest held or to be held by the insurer in cotenancy with one or more other institutions.

    (B) The insurer's investment shall not exceed the reasonable value of the property or of the interest therein acquired.

    (C) The insurer may let contracts for construction and pay costs of construction and leasing, hold, maintain, lease, and manage the property, collect rents and other income therefrom, and sell the property in whole or in part.

    (D) The property may be encumbered by leases to tenants and by rights-of-way, easements, mineral reservations, building restrictions, and restrictive covenants, provided none of them can interfere substantially with the use of the property or result in a forfeiture of the property, unless a policy of title insurance, issued by a responsible title insurer qualified to do business in the state wherein the property is located, insures the company against loss or damage arising from such encumbrances or reversionary rights.

    (E) Insurer shall not invest more than 10 percent of its admitted assets under this subdivision.

    (27) Real estate- Participation. Any of the investments which are authorized by subdivisions (24), (25), and (26) of this subsection may be made by an insurer through ownership of:

    (A) voting capital stock of a corporation;

    (B) an interest in a partnership, joint venture, or other form of business entity.

    (28) Foreign investments. Investments in foreign jurisdictions subject to the following:

    (A) Any domestic insurer which is authorized to do business in a foreign jurisdiction or possession of the United States or which has outstanding insurance, annuity or reinsurance contracts on lives or risks resident or located in a foreign jurisdiction or possession of the United States may invest in, or otherwise acquire or loan upon securities and investments in such foreign jurisdiction or possession which are substantially of the same kind, classes, and investment grades as those eligible for investment under the provisions of this chapter; but the aggregate amount of such investments in a foreign jurisdiction or a possession of the United States and of cash in the currency of such jurisdiction or possession which is at any time held by such insurer shall not exceed one and one-half times the amount of its reserves and other obligations under such contracts or the amounts which such insurer is required by law to invest in such jurisdiction or possession;

    (B) In addition to the foreign investments permitted under subdivision (A) of this subdivision (28), any domestic insurer may invest or otherwise acquire or loan upon securities and investments in foreign countries which are substantially of the same kinds, classes and investment grades as those eligible for investment under this chapter; but:

    (i) The aggregate amount of such investments made pursuant to this subdivision (B) shall not exceed 20 percent of its admitted assets; and

    (ii) The aggregate amount of foreign investments then held by the insurer under this subdivision in a single foreign jurisdiction shall not exceed 10 percent of its admitted assets as to a foreign jurisdiction that has a sovereign debt rating of SVO 1 or five percent of its admitted assets as to any other foreign jurisdiction (three percent in the case of life and health insurers). Of the investments permitted under this subdivision, the aggregate amount of investments denominated in foreign currencies may not exceed 15 percent of the insurer's admitted assets (10 percent in the case of life and health insurers). Such investments denominated in the foreign currency of a single foreign jurisdiction which has a sovereign debt rating of SVO 1 may not exceed 10 percent of the insurer's admitted assets. Such investments denominated in the foreign currency of a single foreign jurisdiction which does not have a sovereign debt rating of SVO 1 may not exceed five percent of the insurer's admitted assets (three percent in the case of life and health insurers).

    (29) "Other loans or investments." Loans or investments not qualifying or permitted under this chapter in an amount not exceeding 10 percent of a domestic insurer's admitted assets regardless of whether the same or similar type investment has been included in or omitted from any provision of this chapter.

    (b) Investments in subsidiaries are subject to section 3682 of this title and are not subject to any other investment limitations contained in this subchapter. (Added 1967, No. 344 (Adj. Sess.), § 1 (ch. 1, subch. 5, art. 1, §§ 1-28); amended 1969, No. 12, eff. Feb. 26, 1969; 1981, No. 15, § 1; 1999, No. 84 (Adj. Sess.), § 6, eff. April 19, 2000; 2001, No. 71, § 5, eff. June 16, 2001; 2003, No. 163 (Adj. Sess.), § 43, eff. June 10, 2004.)

  • § 3463a. Valuation of investments

    Investments of domestic insurers shall be valued in accordance with the valuation procedures established by the National Association of Insurance Commissioners, unless the Commissioner requires or finds another method of valuation that is not inconsistent with the valuation method promulgated by the National Association of Insurance Commissioners and is reasonable under the circumstances. (Added 1991, No. 101, § 3; amended 1993, No. 12, § 11, eff. April 26, 1993.)

  • § 3464. Repealed. 1981, No. 15, § 3.

  • § 3465. Exemption from investment limitations

    (a) Nothing in this chapter or other statute law of the State shall be construed as denying to an insurer the right to invest its funds, operate a business, manage or deal in property, or take any other action over whatever period of time may be reasonably necessary to avoid loss on a loan or investment previously made or an obligation created in good faith, the conditions and limitations of the investment of funds in this chapter to the contrary notwithstanding.

    (b) No investment limitation contained in this chapter shall prohibit an insurer from investing in or acquiring securities or other properties of another insurance company in connection with a lawful agreement of bulk reinsurance, merger, consolidation, sale of assets, or acquisition of a subsidiary under subchapter 13 of this chapter.

    (c) No investment limitation contained in this chapter shall prohibit the acquisition and retention by an insurer of substitute or additional securities or property if:

    (1) received as a dividend;

    (2) a lawful distribution of assets;

    (3) through the exercise of rights of conversion, warrants, or rights to purchase stock or preemptive rights to subscribe to stock, contained in or attached to a previously existing investment in such company;

    (4) pursuant to a lawful plan of reorganization. (Added 1967, No. 344 (Adj. Sess.), § 1 (ch. 1, subch. 5, art. 3, § 1); amended 2003, No. 163 (Adj. Sess.), § 44, eff. June 10, 2004.)

  • § 3466. Repealed. 1999, No. 84 (Adj. Sess.), § 7, eff. April 19, 2000.

  • § 3467. Qualification of investments

    (a) Any restriction, exclusion, or provision appearing in any section of this chapter shall apply only with respect to the authorization of the particular section in which it appears and shall not be applicable to any other section. The qualification or disqualification of an investment under one section shall not prevent its qualification in whole or in part under another section, and an investment authorized by more than one section may be held under whatever authorizing section the insurer elects. An investment may be transferred from time to time at the election of the insurer to the authority of any section under which it qualifies whether originally qualifying thereunder or not.

    (b) The qualification of an investment under a particular section of this chapter shall be determined as of the date of its acquisition by the insurer or as of the date on which the insurer becomes legally obligated to acquire the same as the case may be.

    (c) As used herein, the word "section" shall include any subsections or specific provisions authorizing a particular kind or class of investments.

    (d) An investment instrument not specifically qualified under this subchapter shall be deemed to qualify under this subchapter, based on the underlying nature of the actual securities that comprise such investment instrument subject to the prior written permission of the Commissioner. (Added 1967, No. 344 (Adj. Sess.), § 1 (ch. 1, subch. 5, art. 3, § 3); amended 1999, No. 84 (Adj. Sess.), § 8, eff. April 19, 2000.)

  • § 3468. Investments qualified under prior law

    The provisions of this chapter shall not affect or operate to disqualify any investment which an insurer has made or which it is legally obligated to acquire prior to the effective date of this subchapter; provided, however, that an insurer at its option may transfer any previously made investment to the authority of the provisions of this chapter whereupon such investments shall be subject to and governed thereby. (Added 1967, No. 344 (Adj. Sess.), § 1 (ch. 1, subch. 5, art. 3, § 4).)

  • § 3469. Loans to directors and officers- Restrictions

    No domestic insurer shall invest in or loan upon any property, directly or indirectly, whether real or personal, in which any officer or director of such insurer has a financial interest, nor shall any such insurer make a loan of any kind to any officer or director of such insurer unless such officer or director neither participates in, nor votes at any management decision or meeting regarding such loan. This section shall not apply to policy loans or first mortgage loans on dwellings of not more than two families to be occupied by such officer as a residence, nor in circumstances where the financial interest of such officer or director is only nominal, trifling, or so remote as not to give rise to a conflict of interest. (Added 1967, No. 344 (Adj. Sess.), § 1 (ch. 1, subch. 5, art. 3, § 5).)

  • § 3470. Mortgage loans to minors

    An insurer is hereby authorized to make loans secured by a mortgage on real estate to a husband and wife where either or both is a minor 18 years old or over and where said real estate is to be used as a home by said husband and wife, subject to statutory conditions relating to such insurer, and may make any contract relating thereto with such minor. Such minors may be legally bound to the full performance of such mortgage and notes and contracts relating thereto without right of rescission because of their minority. The minority of such minor shall not be a defense nor a material issue in any civil action in which such mortgage or contract is material. (Added 1967, No. 344 (Adj. Sess.), § 1 (ch. 1, subch. 5, art. 3, § 6).)

  • § 3471. Mortgages on real and personal property as liens; priorities

    Any mortgages acquired by an insurer on real or personal property so written as to secure a present debt and any future advances by the mortgagee or an assignee shall be a lien upon the mortgaged property for the full amount of debt directly created between the mortgagor and the mortgagee and between the mortgagor and an assignee of the mortgagee subsequent to assignment, due to the mortgagee or assignee at any given time provided that if the mortgaged property includes a homestead, the spouse of the mortgagor must consent in writing to the creation of any subsequent indebtedness. Any such mortgage may be assigned for the full amount due thereon at the time of such assignment. A subsequent mortgage on the same premises shall be inferior to the first mortgage unless the second mortgagee in writing notifies the first mortgagee of the incidence of his or her mortgage, in which case indebtedness created by the mortgagor to the first mortgagee subsequent to such notice shall be inferior to the lien of the second mortgagee. In any conflict with other provisions of Vermont statutes this section shall control. (Added 1967, No. 344 (Adj. Sess.), § 1 (ch. 1, subch. 5, art. 3, § 7).)

  • § 3472. Earnings statements and income ratios- Special situations

    In the application of the provisions and requirements of this subchapter to determine whether a particular investment in any corporation, association, or institution is qualified the following shall be applicable:

    (1) When a corporation, association, or institution, whether or not it has been in existence during the whole or whatever period may be required by the particular provision of this chapter under which it is sought to be qualified as an investment, has been constituted in the form that it has at the time of such investment by consolidation, acquirement of merger, the adjusted pro forma consolidated earnings statement may be used to determine the income ratios as provided by any such provisions.

    (2) Similarly, for the purpose of determining such income ratios for holding corporations or institutions with subsidiaries, the consolidated earnings statement of parent and subsidiary institutions may be used. (Added 1967, No. 344 (Adj. Sess.), § 1 (ch. 1, subch. 5, art. 3, § 8).)


  • Subchapter 005: Reserves; Deposits; Pensions
  • § 3501. Life insurance and annuities

    For all life insurance policies and annuity contracts, the insurer shall maintain reserves as required by chapter 103, subchapter 4 of this title. (Added 1967, No. 344 (Adj. Sess.), § 1 (ch. 1, subch. 6, § 1).)

  • § 3502. Insurance- Other life insurance and annuities

    For all policies of insurance other than life insurance and annuities, the insurer shall maintain reserves which shall place a sound value on its liabilities under such policies and which shall not be less than the reserves according to appropriate standards set forth in regulations issued by the Commissioner and, in no event, less in the aggregate than the pro rata gross unearned premium reserve for such policies. (Added 1967, No. 344 (Adj. Sess.), § 1 (ch. 1, subch. 6, § 2).)

  • § 3503. Deposits of domestic insurer doing foreign business

    (a) A domestic insurer may deposit with the Treasurer of this State or with the comptroller or chief financial officer of another state or country funds or securities of the insurer which the laws of such state or country require to enable such insurer to establish agencies or prosecute the business of insurance within such state or country. The Treasurer of this State shall safely keep such securities so deposited with him or her for the benefit of the policyholders of the insurer, but it may receive interest or dividends from the securities, or exchange them for others of equal value.

    (b) If such insurer discontinues doing business in such other states or countries, it may at any time bring an action in the Superior Court against the State of Vermont, provided such deposit is made with the Treasurer of this State, to enforce, administer, or terminate the trust created by such deposit. The process in such action shall be served on the State Treasurer and the Commissioner, who shall appear and answer on behalf of the State. On proof by such company that it has paid or made sufficient provision for the payment of all liabilities arising from business written or transacted in such other states and countries, the court may make such orders and decrees for the payment or return of such funds or securities, or any part thereof, as shall protect the rights of all interested parties and the State Treasurer shall comply therewith. (Added 1967, No. 344 (Adj. Sess.), § 1 (ch. 1, subch. 7, § 1).)

  • § 3504. Pension system

    An insurance company now or hereafter organized and doing business under the laws of this State, in addition to all other powers granted to it by law, may provide a pension in pursuance of the terms of a retirement plan, adopted by its board of directors and approved by the Commissioner, for any person who is or has been an employee of such company, and who shall retire by reason of age or disability, and may further provide that, if such employee shall contribute to a retirement fund established under such retirement plan, and shall thereafter retire from the service of the company for reasons other than age or disability, the employee may withdraw from such fund the amount of the employee's contribution thereto with interest thereon at such rate, if any, and subject to such rules and regulations, as may be provided by the board of directors. However, such a company shall not grant a pension after the death of an officer, director, or trustee thereof, to a member of his or her family, or to his or her estate or to any other person for the benefit thereof. For the purposes of this section, the word "employee" shall include a salaried officer or an employee of such company and, in the case of a life insurance company, a soliciting or general agent of such company and an employee of such general agent, whether or not the person for whom such pension is to be provided is or shall be deemed for any other purpose an employee of such company. (Added 1967, No. 344 (Adj. Sess.), § 1 (ch. 1, subch. 7, § 2); amended 2007, No. 49, § 5.)


  • Subchapter 006: Filing of Policy Forms
  • § 3541. Filing and approval of forms

    (a) No basic insurance policy, certificate, or annuity contract form, or application form where written application is required and is to be made a part of the policy or contract, or printed rider or endorsement form or form of renewal certificate, shall be delivered, or issued for delivery in this State, unless the form has been filed with and approved by the Commissioner. This provision shall not apply to surety bonds, or to specially rated inland marine risks, nor to policies, riders, endorsements, or forms of unique character designed for and used with relation to insurance upon a particular subject, or which relate to the manner of distribution of benefits or to the reservation of rights and benefits under life or disability insurance policies and are used at the request of the individual policyholder, contract holder, or certificate holder. All certificates delivered or issued for delivery in this state shall be filed with the Commissioner for approval if the group policy does not qualify under subdivision 3368(a)(4) of this title at the time of delivery or issuance. As to forms for use in property, marine (other than wet marine and transportation insurance), casualty, and surety insurance coverages, the filing required by this subsection may be made by rating organizations on behalf of its members and subscribers; but this provision shall not be deemed to prohibit any such member or subscriber from filing any such forms on its own behalf.

    (b) Every such filing shall be made not less than 30 days in advance of any such delivery. At the expiration of such 30 days the form so filed shall be deemed approved unless prior thereto it has been affirmatively approved or disapproved by order of the Commissioner. Approval of any such form by the Commissioner shall constitute a waiver of any unexpired portion of such waiting period. The Commissioner may extend by not more than an additional 30 days the period within which he or she may so affirmatively approve or disapprove any such form, by giving notice to the insurer of such extension before expiration of the initial 30-day period. At the expiration of any such period as so extended, and in the absence of such prior affirmative approval or disapproval, any such form shall be deemed approved. The Commissioner may at any time, after notice and for cause shown, withdraw any such approval. In any notice of disapproval, or withdrawal of a previously approved form, the Commissioner shall state that a hearing will be granted within 20 days upon request of the insurer.

    (c) Any order of the Commissioner disapproving any such form or withdrawing a previous approval shall state the grounds therefor and the particulars thereof in such detail as reasonably to inform the insurer thereof. Any such withdrawal of a previously approved form shall be effective at expiration of such period, not less than 30 days after the giving of notice of withdrawal, as the Commissioner shall in such notice prescribe. Any demand for a hearing relative to the Commissioner's withdrawal of approval of a form which has been received by the Commissioner prior to the effective date of such withdrawal shall stay such action pending the hearing thereon.

    (d) The Commissioner may, by order, exempt from the requirements of this section for so long as he or she deems proper any insurance document or form or type thereof as specified in such order, to which, in his or her opinion, this section may not practicably be applied, or the filing and approval of which are, in his or her opinion, not desirable or necessary for the protection of the public.

    (e) Appeals from orders of the Commissioner disapproving any such form or withdrawing a previous approval may be taken as provided in section 77 of this title.

    (f) Each filing of a policy, contract, endorsement, rider, certificate, or application form shall be accompanied by payment to the Commissioner of a nonrefundable fee of $50.00, per filing submission. A minimum fee of $150.00 shall accompany each such filing if submitted by a rating, advisory or service organization. (Added 1967, No. 344 (Adj. Sess.), § 1 (ch. 1, subch. 8, § 1); amended 1985, No. 236 (Adj. Sess.), § 5; 1989, No. 106, § 2; 1991, No. 166 (Adj. Sess.), § 1; 1997, No. 161 (Adj. Sess.), § 5, eff. Jan. 1, 1998.)

  • § 3542. Grounds for disapproval

    The Commissioner shall disapprove any form filed under this subchapter or withdraw any previous approval thereof, only on one or more of the following grounds:

    (1) if it is in any respect in violation of or does not comply with this act;

    (2) if it contains or incorporates by reference, where such incorporation is otherwise permissible, any inconsistent, ambiguous, or misleading clauses, or exceptions and conditions which deceptively affect the risk purported to be assumed in the general coverage of the contract;

    (3) if it has any title, heading, or other indication of its provisions which is misleading;

    (4) if it is printed or otherwise reproduced in such manner as to render any provision of the form substantially illegible. (Added 1967, No. 344 (Adj. Sess.), § 1 (ch. 1, subch. 8, § 2).)

  • § 3543. Existing forms and filings

    Every form of insurance or annuity document or other filing referred to in section 3541 of this title lawfully in use immediately prior to July 1, 1968 may continue to be so used or be effective until the Commissioner otherwise prescribes; except, that before expiration of one year from and after such effective date neither this part nor the Commissioner shall prohibit the use of any such document or filing because of any power, prohibition, or requirement contained in this part which did not exist under laws in force immediately prior to such effective date. (Added 1967, No. 344 (Adj. Sess.), § 1 (ch. 1, subch. 8, § 3).)


  • Subchapter 007: Examination and Reports
  • § 3551. Repealed. 2007, No. 49, § 6.

  • § 3552. Fees assessed by the National Association of Insurance Commissioners

    A company domiciled in this State and licensed by the Commissioner of Financial Regulation under this title, including captive insurance companies and risk retention groups licensed under chapter 141 of this title shall not be required to pay any fee, assessment, or charge of any kind to the National Association of Insurance Commissioners, including annual statement filing fees, securities valuation fees, and any other such fees, assessments, and charges determined by the Commissioner to be necessary for such companies to do business, unless such fees, assessments, or charges have been established and authorized in rules adopted by the Commissioner. (Added 1995, No. 83 (Adj. Sess.), § 3; amended 1995, No. 180 (Adj. Sess.), § 38(a); 2011, No. 78 (Adj. Sess.), § 2, eff. April 2, 2012.)

  • §§ 3553-3560. [Reserved for future use.].

  • § 3561. Annual statement

    (a) Each domestic, foreign, and alien insurance company doing business in this state shall annually submit to the Commissioner a statement of its financial condition, verified by oath of two of its executive officers. The statement shall be prepared in accordance with the National Association of Insurance Commissioners' Instructions Handbook and Accounting Practices and Procedures Manual and shall be in such general form and context, as approved by, and shall contain any other information required by, the National Association of Insurance Commissioners with any useful or necessary modifications or adaptations thereof required or approved or accepted by the Commissioner for the type of insurance and kinds of insurers to be reported upon, and as supplemented by additional information required by the Commissioner. The statement of an alien insurer shall relate only to the insurer's transactions and affairs in the United States unless the Commissioner requires otherwise. A foreign or alien company, upon withdrawing from the State of Vermont shall pay to the Commissioner $25.00 for the filing of its final financial statement.

    (b)(1) At the direction of the Commissioner, each domestic, foreign, and alien insurance company doing business in this State shall annually submit to the Commissioner, in a manner and on forms approved by the Commissioner, a statement of its market conduct performance for the purpose of permitting the participation of this State in the Market Conduct Annual Statement program of the National Association of Insurance Commissioners. The statement shall be prepared in accordance with the Market Conduct Annual Statement instructions published by the National Association of Insurance Commissioners, with any useful or necessary modifications or adaptations thereof required or approved or accepted by the Commissioner for the type of insurance and kinds of insurers to be reported upon, and as supplemented by additional information required by the Commissioner.

    (2) Subject to section 22 of this title, all market conduct annual statements and other information filed pursuant to subdivision (1) of this subsection, all records, and other information of investigations conducted by the Department under this title, whether such statements, records, or information are in the possession of another regulatory or law enforcement agency, the National Association of Insurance Commissioners, or any person, shall be confidential and privileged, shall not be made public, shall not be subject to subpoena, and shall not be subject to discovery or introduction into evidence in any private civil action.

    (c) The Commissioner shall adopt by rule the Medical Professional Liability Closed Claim Reporting Model Law of the National Association of Insurance Commissioners, as amended from time to time, or in the Commissioner's discretion a substantially similar rule. Subject to section 22 of this title, information which identifies, directly or indirectly, the closed claims of a health care facility or a health care provider shall be confidential and privileged, shall not be made public, shall not be subject to subpoena, and shall not be subject to discovery or introduction into evidence in any private civil action. (Added 1967, No. 344 (Adj. Sess.), § 1 (ch. 1, subch. 9, § 1); amended 1991, No. 101, § 5; 1991, No. 249 (Adj. Sess.), § 1; 2009, No. 42, § 6.)

  • § 3562. Time reports due

    Reports of all insurance companies shall be made annually, on or before March 1 for the year ending December 31, or within any extension of time not to exceed 30 days which the Commissioner for good cause may have granted. Whenever the Commissioner deems it necessary, the Commissioner may demand an additional statement of the affairs of any company transacting business in this State. (1967, No. 344 (Adj. Sess.), § 1 (ch. 1, subch. 9, § 2); amended 1981, No. 15, § 2; 2001, No. 71, § 6, eff. June 16, 2001.)

  • § 3563. Examination of companies; fees

    The Commissioner shall thoroughly inspect and examine the affairs of each domestic insurer to ascertain its financial condition, its ability to fulfill its obligations, and whether it has complied with the provisions of law. Such an inspection and examination shall be conducted personally or by a competent person appointed by the Commissioner at least every three years and whenever determined to be prudent by the Commissioner. The Commissioner may enlarge the aforesaid three-year period to five years, provided the insurer is subject to a comprehensive annual audit during such period of a scope satisfactory to the Commissioner by independent auditors approved by the Commissioner. The examination shall include a review of the financial analysis performed by the Commissioner and shall be conducted in accordance with statutory accounting principles pursuant to guidelines, principles, manuals, instructions, and other procedures promulgated by the National Association of Insurance Commissioners, together with any useful or necessary modifications or adaptations thereof required or approved by the Commissioner. The expenses of the examinations shall be paid to the State by the company or companies examined and the Commissioner of Finance and Management shall issue his or her warrants for the proper charges incurred in all examinations. (Added 1967, No. 344 (Adj. Sess.), § 1 (ch. 1, subch. 9, § 3); amended 1971, No. 170 (Adj. Sess.), § 1, eff. April 27, 1982; 1983, No. 195 (Adj. Sess.), § 5(b); 1991, No. 101, § 6; 2003, No. 105 (Adj. Sess.), § 5; 2013, No. 29, § 22, eff. May 13, 2013.)

  • § 3564. Examination of foreign insurers; expenses

    (a) At least once every three years and when the Commissioner determines it to be prudent for the protection of policyholders in this State, he or she shall, in like manner, visit and examine or cause to be visited and examined by some competent person whom the Commissioner may appoint for that purpose, any foreign or alien insurer applying for admission or already admitted to do business in this State. The Commissioner may enlarge the aforesaid three-year period to five years. The examination of an alien insurer shall be limited to its insurance transactions and affairs in the United States unless otherwise required by the Commissioner. The examination shall be conducted in accordance with statutory accounting principles pursuant to guidelines, principles, manuals, instructions, and other procedures promulgated by the National Association of Insurance Commissioners, together with any useful or necessary modifications or adaptations thereof required or approved by the Commissioner. Such insurer shall pay the proper charges incurred in such examination, including the expenses of the Commissioner and the expenses and compensation of his or her assistants employed therein. Such examination shall include a computation of the reinsurance reserve.

    (b) In lieu of an examination under this section of any foreign or alien insurer licensed in this State, the Commissioner may accept an examination report on the company as prepared by the insurance department for the company's state of domicile or port-of-entry state. (Added 1967, No. 344 (Adj. Sess.), § 1 (ch. 1, subch. 9, § 4); amended 1991, No. 101, § 7; 1991, No. 249 (Adj. Sess.), § 2; 1993, No. 12, § 2, eff. April 26, 1993; 1995, No. 83 (Adj. Sess.), § 5; 2003, No. 105 (Adj. Sess.), § 6.)

  • § 3565. Examination of officers and books

    (a) The Commissioner, inspecting an insurance company, may require its officers, or any agent thereof, to exhibit books kept by them relating to their business and may examine under oath such agents and officers and other persons as he or she thinks proper, in relation to the business transactions and conditions of the company.

    (b) Every company or person from whom information is sought, its officers, directors, and agents must provide to the examiners appointed by the Commissioner, timely, convenient and free access at all reasonable hours at its offices to all books, records, accounts, papers, documents, and any or all computer or other recordings relating to the property, assets, business, and affairs of the company being examined. The officers, directors, employees, and agents of the company or person shall cooperate in the examination. (Added 1967, No. 344 (Adj. Sess.), § 1, (ch. 1, subch. 9, § 5); amended 1991, No. 249 (Adj. Sess.), § 3.)

  • § 3566. Penalty for refusal

    The Commissioner may suspend, revoke, or nonrenew the license of any company if the company, by its officers, directors, employees, or agents, refuses to submit to examination or to comply with any reasonable written request of the examiners. Any such proceedings for suspension, revocation, or nonrenewal of any license or authority before the Commissioner shall be conducted in accordance with 3 V.S.A. chapter 25. (Added 1967, No. 344 (Adj. Sess.), § 1 (ch. 1, subch. 9, § 6); amended 1991, No. 249 (Adj. Sess.), § 4.)

  • § 3567. Liquor liability insurance records

    (a) All insurers licensed to sell insurance, including nonadmitted insurers with whom certain types of insurance may be placed as permitted by chapter 138 of this title, shall submit the following liquor liability insurance statistics to the Commissioner of Financial Regulation who shall collect and maintain records on the following:

    (1) the number of policies written, premiums written, and premiums earned for liquor liability insurance;

    (2) the number of claims paid and dollar amount of claims paid; and

    (3) the number of claims incurred and dollar amount of claims incurred.

    (b) The Commissioner of Financial Regulation shall make available to the General Assembly the information collected and maintained under this section. The Commissioner shall report to the General Assembly the number of companies writing liquor liability insurance.

    (c) If an insurer cannot determine the amount of premiums written or premiums earned because the liquor liability coverage is part of a policy or policies providing other liability coverage, reasonable methods of estimation may be used as approved by the Commissioner of Financial Regulation.

    (d) "Liquor liability insurance" means that type of liability insurance which covers the selling or serving of alcoholic beverages for a consideration and includes policies which provide other liability coverage in addition to liquor liability insurance. (Added 1987, No. 103, § 5; amended 1989, No. 155 (Adj. Sess.), § 1; 1989, No. 225 (Adj. Sess.), § 25(b); 1995, No. 180 (Adj. Sess.), § 38(a).)

  • § 3568. Preservation of records

    (a) Every domestic and foreign insurer shall preserve their business records in accordance with the rules adopted under this section.

    (b) The Commissioner may by rule require insurers to preserve any records relating to the business of insurance as are necessary for efficient and effective insurance regulation.

    (c) If a record is disposed of in accordance with rules adopted by the commissioner, an insurer shall be under no duty to produce the record in any administrative or judicial proceeding.

    (d) The rules adopted by the Commissioner may designate methods of reproduction of records into electronic, microfilm or microfiche form, or other process. Any such reproduction shall have the same force and effect as the original and may be admitted in evidence as the original itself. (Added 1989, No. 155 (Adj. Sess.), § 2.)

  • § 3569. National Association of Insurance Commissioners filing requirements

    (a) Each domestic, foreign, and alien insurer who is authorized to transact insurance in this State shall annually on or before March 1 of each year, or within any extension of time not to exceed 30 days which the Commissioner, for good cause may have granted, file with the National Association of Insurance Commissioners a copy of its annual statement convention blank as prescribed and adopted by the National Association of Insurance Commissioners, along with such additional filings as prescribed by the Commissioner for the preceding year. The information filed with the National Association of Insurance Commissioners shall be in the same format and scope as that required by the Commissioner and shall include the signed jurat page and the actuarial certification. Any amendments and addendums to the annual statement filing subsequently filed with the Commissioner shall also be filed with the National Association of Insurance Commissioners. The Commissioner in his or her sole discretion may waive one or more of the requirements established by this subsection.

    (b) Foreign insurers that are domiciled in a state which has a law substantially similar to subsection (a) of this section shall be deemed in compliance with this section. (Added 1991, No. 101, § 8; amended 2013, No. 29, § 23.)

  • § 3570. Immunity

    In the absence of actual malice, members of the National Association of Insurance Commissioners, their duly authorized committees, subcommittees, and task forces, their delegates, National Association of Insurance Commissioners' employees, and all others charged with the responsibility of collecting, reviewing, analyzing, and disseminating the information developed from the filing of the annual statement convention blanks shall be acting as agents of the Commissioner under the authority of this act and shall not be subject to civil liability for libel, slander, or any other cause of action by virtue of their collection, review, and analysis or dissemination of the data and information collected from the filings required hereunder. The immunity conferred by this section shall not apply if the Commissioner, in his or her sole discretion, determines that the National Association of Insurance Commissioners has substantially failed to comply with the provisions of section 3551 of this title, or has imposed fees, assessments, or charges in excess of those provided in section 3552 of this title. (Added 1991, No. 101, § 9; amended 1995, No. 83 (Adj. Sess.), § 6.)

  • § 3571. Confidentiality

    All financial analysis ratios and examination synopses concerning insurance companies that are submitted to the Department by the National Association of Insurance Commissioners' Insurance Regulatory Information System are confidential and may not be disclosed by the Department. (Added 1991, No. 101, § 10.)

  • § 3572. Revocation of certificate of authority

    The Commissioner may suspend, revoke, or refuse to renew the certificate of authority of any insurer failing to file its annual statement when due or within any extension of time which the Commissioner, for good cause, may have granted. (Added 1991, No. 101, § 11.)

  • § 3573. Conduct of examinations

    (a) Upon determining that an examination should be conducted, the Commissioner or the Commissioner's designee shall issue an examination order appointing one or more examiners to perform the examination and instructing them as to the scope of the examination. In conducting a financial or a market conduct examination, the examiner shall observe those guidelines and procedures set forth in the Examiners' Handbook adopted by the National Association of Insurance Commissioners as amended from time to time. The Commissioner may also use such other guidelines or procedures as the Commissioner may deem necessary or appropriate under the circumstances.

    (b) When making an examination under this section, the Commissioner may retain attorneys, appraisers, independent actuaries, independent certified public accountants, or other professionals and specialists, the cost of which shall be borne by the company which is the subject of the examination.

    (c) The Commissioner is authorized to terminate or suspend any examination in order to pursue other legal or regulatory action pursuant to the insurance laws of this State.

    (d) Findings of fact made pursuant to any examination shall be prima facie evidence in any legal or regulatory action.

    (e) The Commissioner is authorized to use and make public any final or preliminary examination report, any examiner or company work papers or other documents, or any other information discovered or developed during the course of any examination in the furtherance of any legal or regulatory action. (Added 1991, No. 249 (Adj. Sess.), § 5; amended 1999, No. 38, § 1, eff. May 20, 1999.)

  • § 3574. Examination reports

    (a) General description. All examination reports shall be comprised of only facts appearing upon the books, records, or other documents of the company, its agents or other persons examined, or as ascertained from the testimony of its officers or agents or other persons examined concerning its affairs, and such conclusions and recommendations as the examiners find reasonably warranted from the facts.

    (b) Filing of examination report. No later than 60 days following completion of the examination, the examiner in charge shall file with the Department a written report of examination under oath. Upon receipt of the report, the Department shall transmit the report to the company examined, together with a notice which shall afford the company examined a reasonable opportunity of not more than 30 days to make a written submission or rebuttal with respect to any matters contained in the examination report.

    (c) Adoption of report on examination. Within 30 days of the end of the period allowed for the receipt of written submissions or rebuttals, the Commissioner shall fully consider and review the report, together with any written submissions or rebuttals and any relevant portions of the examiner's work papers and shall order the report adopted together with any modifications and amendments that he or she deems appropriate. If the examination report reveals that the company is operating in violation of any law, regulation or prior order of the Commissioner, the Commissioner may order the company to take any action the Commissioner considers necessary and appropriate to cure such violation. The company may file an administrative appeal within 30 days of the Commissioner's order. Such appeal shall be heard in accordance with 3 V.S.A. chapter 25.

    (d) Publication and use.

    (1) The Commissioner may hold the contents of the examination report confidential for 15 days following the issuance of the Commissioner's order under subsection (c) of this section.

    (2) The Commissioner may disclose the content of an examination report, preliminary examination report or results, or any related matter, to the insurance department of any other state or country, or to law enforcement officials of this or any other state or agency of the federal government at any time, as long as such agency or office receiving the report or related matters agrees in writing to hold it in a manner consistent with this section.

    (3) The Commissioner may refuse to disclose any information or records which would indicate or show the existence or content of any investigation or activity of a criminal justice agency.

    (4) All working papers, recorded information, documents and copies thereof produced by, obtained by or disclosed to the Commissioner or any other person in the course of an examination made under this section are confidential and are not subject to subpoena and may not be made public by the Commissioner or any other person, except to the extent provided in this subsection and subsection 3573(e) of this title. The Commissioner may grant access to such information to the National Association of Insurance Commissioners. Such parties must agree in writing prior to receiving the information to provide to it the same confidential treatment as required by this section, unless the prior written consent of the company to which it pertains has been obtained. (Added 1991, No. 249 (Adj. Sess.), § 6.)

  • § 3575. Conflict of interest

    (a) No examiner may be appointed by the Commissioner if such examiner, either directly or indirectly, has a conflict of interest or is affiliated with the management of or owns a pecuniary interest in any person subject to examination under this subchapter. This section shall not be construed to disqualify an examiner who is:

    (1) a policyholder or claimant under an insurance policy;

    (2) a grantor of a mortgage or similar instrument on the examiner's residence to a regulated entity if done under customary terms and in the ordinary course of business;

    (3) an investment owner in shares of regulated diversified investment companies; or

    (4) a settlor or beneficiary of a "blind trust" into which any otherwise impermissible holdings have been placed.

    (b) Notwithstanding the requirements of this section, the Commissioner may retain from time to time, on an individual basis, qualified actuaries, certified public accountants, or other similar individuals who are independently practicing their professions, even though said persons may from time to time be similarly employed or retained by persons subject to examination under this subchapter. (Added 1991, No. 249 (Adj. Sess.), § 7.)

  • § 3576. Immunity from liability

    (a) No insurer nor any of its officers, employees, or agents shall have a cause of action against an authorized representative of the Commissioner or an examiner appointed by the Commissioner as a result of any statements made or work performed in good faith while carrying out the provisions of this subchapter.

    (b) No cause of action shall arise, nor shall any liability be imposed against any person for the act of communicating or delivering information or data to the Commissioner or the Commissioner's authorized representative or examiner pursuant to an examination made under this section, if such act of communication or delivery was performed in good faith.

    (c) This section does not abrogate or modify in any way any common law or statutory privilege or immunity heretofore enjoyed by any person identified in subsection (a) or (b) of this section.

    (d) A person identified in subsection (a) or (b) of this section shall be entitled to an award of attorney's fees and costs if he or she is the prevailing party in a civil cause of action for libel, slander, or any other relevant tort arising out of activities in carrying out the provisions of this subchapter and the party bringing the action was not substantially justified in doing so. For purposes of this section, a proceeding is "substantially justified" if it had a reasonable basis in law or fact at the time that it was initiated. (Added 1991, No. 249 (Adj. Sess.), § 8.)

  • § 3577. Requirements for actuarial opinions

    (a) Each licensed insurance company shall include on or attached to its annual statement submitted under section 3561 of this title a statement of a qualified actuary, entitled "statement of actuarial opinion," setting forth an opinion on life and health policy and claim reserves and an opinion on property and casualty loss and loss adjustment expenses reserves.

    (b) The "statement of actuarial opinion" shall be treated as a public document and shall conform to the Standards of Practice promulgated by the Actuarial Standards Board of the American Academy of Actuaries, the standards of the Casualty Actuarial Society, and such additional standards as the Commissioner may establish by rule. The Commissioner by rule shall establish minimum standards applicable to the valuation of health disability, sickness, and accident plans.

    (c) Opinions required by this section shall apply to all business in force, and shall be stated in form and in substance acceptable to the Commissioner as prescribed by rule.

    (1) In the case of property and casualty insurance companies domiciled in this State, every company that is required to submit a statement of actuarial opinion shall annually submit an actuarial opinion summary, written by the company's appointed actuary. This actuarial opinion summary shall be filed in accordance with the appropriate Property and Casualty Annual Statement Instructions of the National Association of Insurance Commissioners (NAIC) and shall be considered as a document supporting the actuarial opinion required in subsection (a) of this section. A property and casualty insurance company licensed but not domiciled in this State shall provide the actuarial opinion summary upon request.

    (2) In the case of property and casualty insurance companies, an actuarial report and underlying work papers, as required by the appropriate Property and Casualty Annual Statement Instructions of the NAIC, shall be prepared to support each actuarial opinion. If the property and casualty insurance company fails to provide a supporting actuarial report or work papers at the request of the Commissioner or if the Commissioner determines that the supporting actuarial report or work papers provided by the insurance company is otherwise unacceptable to the Commissioner, the Commissioner may engage a qualified actuary at the expense of the company to review the opinion and the basis for the opinion and prepare the supporting actuarial report or work papers.

    (3) In the case of property and casualty insurance companies, the appointed actuary shall not be liable for damages to any person other than the insurance company and the Commissioner for any act, error, omission, decision, or conduct with respect to the actuary's opinion, except in cases of fraud or willful misconduct on the part of the appointed actuary.

    (d) In the case of life insurance companies doing business in this State, the opinion shall state whether the reserves and related actuarial items held in support of the policies and contracts specified by the Commissioner by rule are computed appropriately, are based on assumptions which satisfy contractual provisions, are consistent with prior reported amounts, comply with applicable laws of this State, and comply with such further standards as the Commissioner may establish by rule.

    (e) Every life insurance company shall annually include in the opinion required by this section an opinion of the same qualified actuary as to whether the reserves and related actuarial items held in support of the policies and contracts specified by the Commissioner by rule, when considered in light of the assets held by the company with respect to the reserves and related actuarial items, including the investment earnings on the assets and the considerations anticipated to be received and retained under the policies and contracts, make adequate provision for the company's obligations under the policies and contracts, including the benefits under and expenses associated with the policies and contracts.

    (f) In the case of an opinion required to be submitted by a foreign or alien company, the Commissioner may accept the opinion filed by that company with the insurance supervisory official of another state if the Commissioner determines that the opinion reasonably meets the requirements applicable to a company domiciled in this State.

    (g) The Commissioner may provide by rule for a transition period for establishing any higher reserves which the qualified actuary may deem necessary in order to render the opinion required by this section.

    (h) In the case of life and health insurance companies, "qualified actuary" is an individual who:

    (1) is a member of good standing of the American Academy of Actuaries;

    (2) is qualified to sign statements of actuarial opinion for life and health insurance company annual statements in accordance with the American Academy of Actuaries qualification standards for actuaries signing such statements; and

    (3) is familiar with the valuation requirements applicable to life and health insurance companies.

    (i) In the case of property and casualty insurance companies, "qualified actuary" is an individual who:

    (1) is a member of good standing of the Casualty Actuarial Society;

    (2) is qualified to sign statements of actuarial opinion for property and casualty insurance company annual statements in accordance with the Casualty Actuarial Society qualification standards for actuaries signing such statements; and

    (3) is familiar with the valuation requirements applicable to property and casualty insurance companies.

    (j) The Commissioner, after notice and administrative hearing, may disqualify an actuary who has:

    (1) violated any provision of, or any obligation imposed by, the insurance law or other law in the course of his or her dealings as a qualified actuary; or

    (2) been found guilty of fraudulent or dishonest practices; or

    (3) demonstrated his or her incompetency, lack of cooperation, or unethical behavior to act as a qualified actuary; or

    (4) submitted to the Commissioner during the past five years an actuarial opinion or memorandum that the Commissioner rejected because it did not meet the provisions of this section or the standards set by the Actuarial Standards Board or the Casualty Actuarial Society; or

    (5) resigned or been removed as an actuary within the past five years as a result of acts or omissions indicated in any adverse report on examination or as a result of failure to adhere to generally acceptable actuarial standards; or

    (6) has failed to notify the Commissioner of any action taken by any commissioner of any other state similar to that under this subsection.

    (k) Upon written application of any insurer, the Commissioner may, in his or her discretion, grant an exemption from compliance with this section if the Commissioner finds, upon review of the application, that compliance with this rule would constitute a financial or organizational hardship upon the insurer. An exemption may be granted at any time and from time to time for a specified period or periods.

    (l) Actuarial reports, actuarial opinion summaries, work papers, and any other documents, information, or materials provided to the Department in connection with the actuarial report, work papers, or actuarial opinion summary shall be confidential by law and privileged, shall not be subject to inspection and copying under 1 V.S.A. § 316, shall not be subject to subpoena, and shall not be subject to discovery or admissible in evidence in any private litigation.

    (1) This subsection shall not be construed to limit the Commissioner's authority to release documents to the Actuarial Board for Counseling and Discipline, provided the material is required for the purpose of professional disciplinary proceedings and further provided that procedures satisfactory to the Commissioner are established for preserving the confidentiality of the documents, nor shall this subsection be construed to limit the Commissioner's authority to use the documents, materials, or other information in furtherance of any regulatory or legal action brought as part of the Commissioner's official duties.

    (2) Neither the Commissioner nor any person who receives documents, materials, or other information while acting under the authority of the Commissioner shall be permitted or required to testify in any private civil action concerning any confidential documents, materials, or information under this subsection.

    (3) In order to assist in the performance of the Commissioner's duties, the Commissioner may:

    (A) Share documents, materials, or other information, including the confidential and privileged documents, materials, or information subject to subsection (d) of this section, with other state, federal, and international regulatory agencies, with the NAIC and its affiliates and subsidiaries, and with state, federal, and international law enforcement authorities, provided that the recipient agrees to maintain the confidentiality and privileged status of the document, material, or other information and has the legal authority to maintain confidentiality.

    (B) Receive documents, materials, or information, including otherwise confidential and privileged documents, materials, or information, from the NAIC and its affiliates and subsidiaries, and from regulatory and law enforcement officials of other foreign or domestic jurisdictions, and shall maintain as confidential or privileged any document, material, or information received with notice or the understanding that it is confidential or privileged under the laws of the jurisdiction that is the source of the document, material, or information.

    (4) No waiver of any applicable privilege or claim of confidentiality in the documents, materials, or information shall occur as a result of the disclosure to the Commissioner under this section or as a result of sharing as authorized by subdivision (3) of this subsection. (Added 1991, No. 249 (Adj. Sess.), § 9; amended 2009, No. 137 (Adj. Sess.), § 4a.)

  • § 3578. Repealed. 2013, No. 29, § 24, eff. May 13, 2013.

  • § 3578a. Annual financial reporting

    The Commissioner shall adopt by rule the Annual Financial Reporting Model Regulation of the National Association of Insurance Commissioners, as may be amended from time to time, or in the Commissioner's discretion a regulation substantially similar thereto. (Added 2009, No. 42, § 7; amended 2013, No. 29, § 25, eff. May 13, 2013..)

  • § 3579. Qualified accountants

    (a) A certified public accountant retained to perform audits of an insurer pursuant to the annual financial reporting rule adopted by the Commissioner under section 3578a of this title:

    (1) shall be a member in good standing of the American Institute of Certified Public Accountants and in all states in which the accountant is licensed, or, for a Canadian or British company, be a chartered accountant;

    (2) shall be independent with respect to the insurer;

    (3) shall conform to the standards of the profession as contained in the code of professional ethics of the American Institute of Certified Public Accountants and of the Vermont Board of Public Accountancy or similar codes governing such accountant's professional conduct or ethics;

    (4) shall not directly or indirectly enter into an agreement of indemnification or release from liability with respect to the insurer being audited where the intent or effect is to shift or limit in any manner the potential liability of the person or firm for failure to adhere to applicable auditing or professional standards, whether or not resulting in part from knowing or other misrepresentations made by the insurer or its representatives; and

    (5) may enter into an agreement with an insurer to have disputes relating to an audit resolved by mediation or arbitration; provided, however, in the event of a delinquency proceeding commenced against the insurer under chapter 145 of this title, the mediation or arbitration provisions shall operate at the option of the statutory successor.

    (b) A domestic insurer required to be audited pursuant to the annual financial reporting rule adopted by the Commissioner under section 3578a of this title shall register with the Commissioner the name and address of the certified public accountant retained in compliance with this section and pay a registration fee of $100.00. If the Commissioner determines that a report filed by a foreign or alien insurer under subsection 3578(f) of this title is not substantially similar to the requirements imposed by the annual financial reporting rule adopted by the Commissioner under section 3578a of this title, the foreign or alien insurer shall, within 30 days of such determination, register the name and address of the certified public accountant retained in compliance with this section and pay a registration fee of $100.00. The notice of registration shall include the accountant's statement that the accountant:

    (1) meets the requirements of this section;

    (2) is familiar with the insurance laws of the insurer's state of domicile that relate to accounting and financial matters;

    (3) will express his or her opinion on whether the financial statements conform to the statutory accounting practices prescribed or permitted by the Department, and specify any exceptions;

    (4) understands that the Commissioner will be relying on the accountant's report to monitor the financial position of the insurer;

    (5) agrees to make available to the Commissioner for inspection or copying any and all work papers generated in the audit including, procedures followed, tests performed, information obtained, conclusions, planning documentation, work programs, analyses, memoranda, letters of confirmation and representation, abstracts of documents, schedules, or commentaries prepared or obtained by the independent certified public accountant in the course of examination; and

    (6) agrees to retain the audit work papers until the Department has filed a report of examination on the period of the audit, but no longer than seven years from the date of the audit report.

    (c) An insurer shall notify the Commissioner in writing within five business days of the dismissal or resignation of the accountant who prepared the insurer's immediately preceding filed audited financial report. The insurer shall notify the Commissioner in writing, within 10 business days of the notice of dismissal or resignation, whether in the 24 months preceding such dismissal or resignation there were any substantial, material disagreements with the former accountant on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, including disagreements resolved to the former accountant's satisfaction and disagreements not resolved to the former accountant's satisfaction. Substantial disagreements include those that occur between the former accountant and personnel of the insurer responsible for the insurer's audited financial report. Material disagreements include those which, if not resolved to the satisfaction of the former accountant, would have caused him or her to make reference to the subject matter of the disagreement in connection with his or her opinion.

    (d)(1) The Commissioner shall disqualify any certified public accountant who:

    (A) has engaged in unprofessional conduct as defined by 26 V.S.A. § 76;

    (B) has been found to have violated the insurance laws of any state with respect to prior audit reports; or

    (C) has demonstrated a pattern or practice of failing to detect or disclose material information in previous reports filed under this section.

    (2) After notice and hearing, the Commissioner may find that a certified public accountant is not qualified to express his or her opinion in the report required by this section and may require the insurer to replace the accountant with an accountant qualified under this section. Any hearing held under this subsection shall be governed by 3 V.S.A. chapter 25.

    (e) No partner or other person rendering the report required by the annual financial reporting rule adopted by the Commissioner under section 3578a of this title may act in that capacity for more than five consecutive years. Upon application by the insurer, the Commissioner may find that the rotation requirement of this subsection would pose an unreasonable hardship on the insurer and may extend the accountant's period of qualification for an additional term. In making such determinations, the Commissioner may consider the experience of the retained accountant and the size of his or her business, the premium volume of the insurer, and the number of jurisdictions in which the insurer transacts business, as provided by the annual financial reporting rule adopted by the Commissioner under section 3578 of this title.

    (f) In the case of Canadian and British insurers, the annual audited financial report shall be defined as the annual statement of total business on the form filed by such companies with their domiciliary supervision authority duly audited by an independent chartered accountant. (Added 1991, No. 249 (Adj. Sess.), § 11; amended 1993, No. 12, § 5, eff. April 26, 1993; 2007, No. 49, § 4; 2013, No. 29, § 26.)


  • Subchapter 007A: Own Risk and Solvency Assessment
  • § 3581. Purpose; scope; intent

    (a) The purpose of this subchapter is to provide the requirements for maintaining a risk management framework and completing an Own Risk and Solvency Assessment (ORSA) and provide guidance and instructions for filing an ORSA Summary Report with the Commissioner.

    (b) The requirements of this subchapter shall apply to all insurers domiciled in this State unless exempt under section 3586 of this subchapter.

    (c) The General Assembly finds and declares that the ORSA Summary Report will contain confidential and sensitive information related to an insurer's or insurance group's identification of risks material and relevant to the insurer or insurance group filing the report. This information will include proprietary and trade secret information that has the potential for harm and competitive disadvantage to the insurer or insurance group if the information is made public. It is the intent of the General Assembly that the summary report required under this subchapter shall be a confidential document filed with the Commissioner, that it shall be shared only as stated in this subchapter and to assist the Commissioner in the performance of his or her duties, and that in no event shall the summary report be subject to public inspection and copying under the Public Records Act. (Added 2013, No. 29, § 44, eff. Jan. 1, 2015.)

  • § 3582. Definitions

    As used in this subchapter:

    (1) "Insurance group" means those insurers and affiliates included within an insurance holding company system as defined in subdivision 3681(5) of this title.

    (2) "Insurer" shall have the same meaning as in subdivision 3681(6) of this title.

    (3) "NAIC" means the National Association of Insurance Commissioners.

    (4) "Own Risk and Solvency Assessment" or "ORSA" or "assessment" means a confidential, internal assessment, appropriate to the nature, scale, and complexity of an insurer or insurance group and conducted by that insurer or insurance group, of the material and relevant risks associated with the insurer's or insurance group's current business plan and the sufficiency of capital resources to support those risks.

    (5) "Guidance Manual" means the current version of the Own Risk and Solvency Assessment Guidance Manual developed and adopted by the NAIC, as may be amended from time to time. A change in the Manual shall be effective on the January 1 following the calendar year in which the changes have been adopted by the NAIC.

    (6) "Summary Report" means a confidential high-level summary of an insurer or insurance group's ORSA. (Added 2013, No. 29, § 44, eff. Jan. 1, 2015.)

  • § 3583. Risk management framework

    An insurer shall maintain a risk management framework to assist the insurer with identifying, assessing, monitoring, managing, and reporting on its material and relevant risks. This requirement may be satisfied if the insurance group of which the insurer is a member maintains a risk management framework applicable to the operations of the insurer. (Added 2013, No. 29, § 44, eff. Jan. 1, 2015.)

  • § 3584. ORSA requirement

    Subject to section 3586 of this subchapter, an insurer or the insurance group of which the insurer is a member shall regularly conduct an ORSA consistent with a process comparable to the Guidance Manual. The assessment shall be conducted no less than annually but also at any time when there are significant changes to the risk profile of the insurer or the insurance group of which the insurer is a member. (Added 2013, No. 29, § 44, eff. Jan. 1, 2015.)

  • § 3585. Summary report

    (a) Upon the Commissioner's request and no more than once each year, an insurer shall submit to the Commissioner a summary report or any combination of reports that together contain the information described in the Guidance Manual applicable to the insurer or the insurance group of which it is a member. Notwithstanding any request from the Commissioner, if the insurer is a member of an insurance group, the insurer shall submit the report required by this subsection if the Commissioner is the lead state commissioner of the insurance group as determined by the procedures within the Financial Analysis Handbook adopted by the NAIC.

    (b) Each report shall include a signature of the insurer or insurance group's chief risk officer or other executive having responsibility for the oversight of the insurer's enterprise risk management process attesting to the best of his or her belief and knowledge that the insurer applies the enterprise risk management process described in the summary report and that a copy of the report has been provided to the insurer's board of directors or the appropriate committee thereof.

    (c) An insurer may comply with subsection (a) of this section by providing the most recent and substantially similar report provided by the insurer or another member of an insurance group of which the insurer is a member to the commissioner of another state or to a supervisor or regulator of a foreign jurisdiction if that report provides information that is comparable to the information described in the Guidance Manual. Any such report in a language other than English must be accompanied by a translation of that report into the English language. (Added 2013, No. 29, § 44, eff. Jan. 1, 2015.)

  • § 3586. Exemption

    (a) An insurer shall be exempt from the requirements of this subchapter if:

    (1) the insurer has annual direct written and unaffiliated assumed premium, including international direct and assumed premium but excluding premiums reinsured with the Federal Crop Insurance Corporation and Federal Flood Program, less than $500,000,000.00; and

    (2) the insurance group of which the insurer is a member has annual direct written and unaffiliated assumed premium including international direct and assumed premium, but excluding premiums reinsured with the Federal Crop Insurance Corporation and Federal Flood Program, less than $1,000,000,000.00.

    (b) If an insurer qualifies for exemption under subdivision (a)(1) of this section but the insurance group of which the insurer is a member does not qualify for exemption under subdivision (a)(2), then any summary report required under section 3585 of this subchapter shall include every insurer within the insurance group. This requirement may be satisfied by the submission of more than one summary report for any combination of insurers provided any combination of reports includes every insurer within the insurance group.

    (c) If an insurer does not qualify for exemption under subdivision (a)(1) of this section but the insurance group of which it is a member qualifies for exemption under subdivision (a)(2), then the only summary report required under section 3585 of this subchapter shall be the report applicable to that insurer.

    (d) An insurer that does not qualify for exemption under subsection (a) of this section may apply to the Commissioner for a waiver from the requirements of this subchapter based upon unique circumstances. In deciding whether to grant the insurer's request for waiver, the Commissioner may consider the type and volume of business written, ownership and organizational structure, and any other factor the Commissioner considers relevant to the insurer or insurance group of which the insurer is a member. If the insurer is part of an insurance group with insurers domiciled in more than one state, the Commissioner shall coordinate with the lead State Commissioner and with the other domiciliary Commissioners in considering whether to grant the insurer's request for a waiver.

    (e) Notwithstanding the exemptions stated in this section:

    (1) The Commissioner may require that an insurer maintain a risk management framework, conduct an ORSA, and file an ORSA Summary Report based on unique circumstances including the type and volume of business written, ownership and organizational structure, federal agency requests, and international supervisor requests.

    (2) The Commissioner may require that an insurer maintain a risk management framework, conduct an ORSA assessment, and file a summary report if the insurer has risk based capital for company action level event as set forth in section 8303 of this title, meets one or more of the standards of an insurer deemed to be in hazardous financial condition as defined in Department Regulation I-93-2, sections 3-4, or otherwise exhibits qualities of a troubled insurer as determined by the Commissioner.

    (f) If an insurer that qualifies for an exemption under subsection (a) of this section subsequently no longer qualifies for that exemption due to changes in premium as reflected in the insurer's most recent annual statement or in the most recent annual statements of the insurers within the insurance group of which the insurer is a member, the insurer shall have one year following the year the threshold is exceeded to comply with the requirements of this subchapter. (Added 2013, No. 29, § 44, eff. Jan. 1, 2015.)

  • § 3587. Contents of ORSA summary report

    (a) The summary report shall be prepared consistent with the ORSA Guidance Manual, subject to the requirements of subsection (b) of this section. Documentation and supporting information shall be maintained and made available upon examination or upon request of the Commissioner.

    (b) The review of the summary report, and any additional requests for information, shall be made using similar procedures currently used in the analysis and examination of multistate or global insurers and insurance groups. (Added 2013, No. 29, § 44, eff. Jan. 1, 2015.)

  • § 3588. Confidentiality

    (a) Documents, materials, or other information, including the summary report, in the possession of or control of the Department that are obtained by, created by, or disclosed to the Commissioner or any other person under this subchapter, is recognized by this State as being proprietary and to contain trade secrets. All such documents, materials, or other information shall be confidential by law and privileged, shall be exempt from public inspection and copying under the Public Records Act, shall not be subject to subpoena, and shall not be subject to discovery or admissible in evidence in any private civil action. The Commissioner, however, is authorized to use the documents, materials, or other information in the furtherance of any regulatory or legal action brought as a part of the Commissioner's official duties. The Commissioner shall not otherwise make the documents, materials, or other information public without the prior written consent of the insurer.

    (b) Neither the Commissioner nor any person who received documents, materials, or other ORSA-related information, through examination or otherwise, while acting under the authority of the Commissioner or with whom such documents, materials, or other information are shared pursuant to this subchapter shall be permitted or required to testify in any private civil action concerning any confidential documents, materials, or information subject to subsection (a) of this section.

    (c) In furtherance of his or her regulatory duties, the Commissioner:

    (1) may, upon request, share documents, materials, or other ORSA-related information, including the confidential and privileged documents, materials, or information subject to subsection (a) of this section, including proprietary and trade secret documents and materials, with other state, federal, and international financial regulatory agencies, including members of any supervisory college as defined in section 3695 of this title, with the NAIC and with any third-party consultants designated by the Commissioner, provided that the recipient agrees in writing to maintain the confidentiality and privileged status of the ORSA-related documents, materials, or other information and has verified in writing the legal authority to maintain confidentiality; and

    (2) may receive documents, materials, or other ORSA-related information, including otherwise confidential and privileged documents, materials, or information, including proprietary and trade-secret information or documents, from regulatory officials of other foreign or domestic jurisdictions, including members of any supervisory college as defined in section 3695 of this title and from the NAIC, and shall maintain as confidential or privileged any documents, materials, or information received with notice or the understanding that it is confidential or privileged under the laws of the jurisdiction that is the source of the document, materials, or information.

    (3) shall enter into a written agreement with the NAIC or a third-party consultant governing sharing and use of information provided under this subchapter consistent with this subsection that shall:

    (A) specify procedures and protocols regarding the confidentiality and security of information shared with the NAIC or a third-party consultant pursuant to this subchapter, including procedures and protocols for sharing by the NAIC with other state regulators from states in which the insurance group has domiciled insurers. The agreement shall provide that the recipient agrees in writing to maintain the confidentiality and privileged status of the ORSA-related documents, materials, or other information and has verified in writing the legal authority to maintain confidentiality;

    (B) specify that ownership of information shared with the NAIC or a third-party consultant under this subchapter remains with the Commissioner and that the NAIC's or a third-party consultant's use of the information is subject to the direction of the Commissioner;

    (C) prohibit the NAIC or third-party consultant from storing the information shared under this subchapter in a permanent database after the underlying analysis is completed;

    (D) require prompt notice to be given to an insurer whose confidential information in the possession of the NAIC or a third-party consultant under this subchapter is subject to a request or subpoena to the NAIC or a third-party consultant for disclosure or production;

    (E) require the NAIC or a third-party consultant to consent to intervention by an insurer in any judicial or administrative action in which the NAIC or a third-party consultant may be required to disclose confidential information about the insurer shared with the NAIC or a third-party consultant under this subchapter; and

    (F) in the case of an agreement involving a third-party consultant, provide for the insurer's written consent.

    (d) The sharing of information and documents by the Commissioner under this subchapter shall not constitute a delegation of regulatory authority or rulemaking, and the Commissioner is solely responsible for the administration, execution, and enforcement of the provisions of this subchapter.

    (e) No waiver of any applicable privilege or claim of confidentiality in the documents, proprietary and trade-secret materials, or other ORSA-related information shall occur as a result of disclosure of such ORSA-related information or documents to the Commissioner under this section or as a result of sharing as authorized under this subchapter.

    (f) Documents, materials, or other information in the possession or control of the NAIC or a third-party consultant under this subchapter shall be confidential by law and privileged, shall be exempt from public inspection and copying under the Public Records Act, shall not be subject to subpoena, and shall not be subject to discovery or admissible in evidence in any private civil action. (Added 2013, No. 29, § 44, eff. Jan. 1, 2015.)

  • § 3589. Sanctions

    Any insurer failing without just cause to timely file the summary report as required by this subchapter shall be required, after notice and hearing, to pay a penalty of $10,000.00 for each day's delay, to be recovered by the Commissioner, and the penalty so recovered shall be paid into the General Fund of this State. The maximum penalty under this section is $1,000,000.00. The Commissioner may reduce the penalty if the insurer demonstrates to the Commissioner that the imposition of the penalty would constitute a financial hardship to the insurer. (Added 2013, No. 29, § 44, eff. Jan. 1, 2015.)


  • Subchapter 008: Reorganization; Receivership; Injunctions
  • §§ 3591-3603. Repealed. 1991, No. 45, § 3, eff. May 29, 1991.

  •  [Section 3604 repealed by 1991, No. 45, §   3; see note .]

    § 3604. Offset

    (a) In all cases of mutual debts or mutual credits between the insurer and another person in connection with any action or proceeding under this chapter, such credits and debits shall be set off and the balance only shall be allowed or paid, except as provided in subsection (b) of this section. Any remaining debit of the insolvent insurer after offset under this section shall be treated as provided by section 3595 of this title.

    (b) No offset shall be allowed in favor of any such person where:

    (1) the obligation of the insurer to such person would not at the date of the entry of any liquidation order or otherwise entitle him or her to share as a claimant in the assets of the insurer;

    (2) the obligation of the insurer to such person was purchased by or transferred to such person with a view of its being used as an offset;

    (3) the obligation of such person is to pay an assessment levied against the members of a mutual insurer, or against the subscribers of a reciprocal insurer, or is to pay a balance upon the subscription to the capital stock of a stock insurer; or

    (4) the obligation of the person is to pay premiums whether earned or unearned, to the insurer, unless provided for otherwise in a final order for liquidation issued by the Commissioner or approved by a court of competent jurisdiction. (Added 1985, No. 145 (Adj. Sess.), § 6.)


  • Subchapter 009: Property and Casualty Insurance Guaranty Association
  • § 3611. Scope of subchapter; short title

    This subchapter shall apply to all kinds of direct insurance, except life, title, surety, health, credit, mortgage guaranty, and ocean marine insurance. This subchapter shall be known as the Vermont Property and Casualty Insurance Guaranty Association Act. (Added 1969, No. 279 (Adj. Sess.), § 2; amended 1979, No. 18, § 6.)

  • § 3612. Definitions

    As used in this subchapter:

    (1) "Account" means any one of the three accounts created under section 3613 of this title.

    (2) "Association" means the Vermont Property and Casualty Insurance Guaranty Association created under section 3613 of this title.

    (3) "Commissioner" means the Commissioner of Financial Regulation.

    (4) "Covered claim" means an unpaid claim, including a claim for unearned premiums:

    (A) which is asserted against an insurer which becomes an insolvent insurer after the effective date of this chapter or against the insured of such an insurer; and

    (B) which arises out of and is in an amount not in excess of the applicable limits of an insurance policy to which this subchapter applies; and

    (C)(i) where the claimant or insured is a resident of this State at the time of the insured event; or

    (ii) where the claim arises from property permanently located in this State; and

    (D) which does not include a claim for services rendered to or for the insolvent insurer; and

    (E) which does not include any amount due any reinsurer, insurer, insurance pool or underwriting association; provided, that claims which would be covered claims but for this subdivision may be filed directly with the receiver of the insolvent insurer and shall not be asserted against an insured of the insolvent insurer.

    (5) "Insolvent insurer" means an insurer, including a cooperative fire insurance corporation existing under the authority of chapter 105, subchapter 2 of this title:

    (A) licensed to transact insurance in this State either at the time the policy was issued or when the insured event occurred; and

    (B) against whom a final order of liquidation has been entered with a finding of insolvency by a court of competent jurisdiction in the insurer's state of domicile.

    (6) "Member insurer" means any person who:

    (A) writes any kind of insurance to which this subchapter applies, including the exchange of reciprocal or interinsurance contracts; and

    (B) is licensed to transact business in this State.

    (7) "Net direct written premiums" means direct gross premiums written in this State on insurance policies to which this subchapter applies, less return premiums thereon and dividends paid or credited to policyholders on such direct business. "Net direct written premiums" does not include premiums on contracts between insurers or reinsurers.

    (8) "Person" means any individual, corporation, partnership, association, or voluntary organization. (Added 1969, No. 279 (Adj. Sess.), § 4; amended 1979, No. 18, § 7; 1989, No. 225 (Adj. Sess.), § 25(b); 1995, No. 180 (Adj. Sess.), § 38(a); 2001, No. 95 (Adj. Sess.), § 1, eff. May 1, 2002.)

  • § 3613. Creation of Association

    There is created a nonprofit unincorporated legal entity to be known as the Vermont Property and Casualty Insurance Guaranty Association. All insurers defined as member insurers in subdivision 3612(6) of this title shall be and remain members of the Association as a condition of their authority to transact business in this State. The Association shall perform its functions under a plan of operation established and approved under section 3616 of this title and shall exercise its powers through a Board of Directors established under section 3614 of this title. For purposes of administration and assessment, the Association shall be divided into three separate accounts:

    (1) the workers' compensation insurance account;

    (2) the automobile insurance account; and

    (3) the account for all other insurance to which this subchapter applies. (Added 1969, No. 279 (Adj. Sess.), § 5; amended 1979, No. 18, § 8; 1981, No. 165 (Adj. Sess.), § 1.)

  • § 3614. Board of Directors

    (a) The Board of Directors of the Association shall consist of not less than five nor more than nine persons, at least three of whom shall be persons who are officers, directors, or employees of insurance companies incorporated under the laws of this State, unless there are fewer than three such companies, in which case there shall be one Director for each such company. The Directors shall serve terms as established in the plan of operation. The members of the Board shall be selected by member insurers subject to the approval of the Commissioner. Vacancies on the Board shall be filled for the remaining period of the term by a majority vote of the remaining Board members, subject to the approval of the Commissioner.

    (b) In approving selections to the Board, the Commissioner shall consider among other things whether all member insurers are fairly represented.

    (c) Members of the Board may be reimbursed from the assets of the association for expenses incurred by them as members of the Board of Directors. (Added 1969, No. 279 (Adj. Sess.), § 6; amended 1979, No. 18, § 9; 2007, No. 178 (Adj. Sess.), § 12.)

  • § 3615. Powers and duties of Association

    (a) The Association shall:

    (1) Be obligated to the extent of the covered claims existing prior to the order of liquidation, arising within 30 days after the order of liquidation, or before the policy expiration date if less than 30 days after the order of liquidation, or before the insured replaces the policy or causes its cancellation, if the insured does so within 30 days of the determination, but this obligation shall include only that amount of each covered claim which, unless it is a claim arising out of a workers' compensation policy, is less than $500,000.00 and which, if it is a claim for unearned premium, is in excess of $25.00. In no event shall the Association be obligated to a policyholder or claimant in an amount in excess of the obligation of the insolvent insurer under the policy from which the claim arises, nor for any claim filed with the Association after the final date set for the filing of claims against the liquidator or receiver of the insolvent insurer, nor in any event after the expiration of three years from the date of determination of the insolvency of such insurer.

    (2) Be deemed the insurer to the extent of its obligation on the covered claims and to such extent shall have all rights, duties, and obligations of the insolvent insurer as if the insurer had not become insolvent.

    (3) Allocate claims paid and expenses incurred among the three accounts and assess member insurers separately for each account those amounts necessary to pay the obligations of the Association under subdivision (1) of this subsection subsequent to an insolvency, the expense of handling claims subsequent to an insolvency, and the cost of examinations under section 3620 of this title and other expenses authorized by this subchapter. The assessments of each member insurer shall be in the proportion that the net direct written premiums of the member insurer for the calendar year preceding the assessment bears to the net direct written premiums of all member insurers and for the calendar year preceding the assessment. Each member insurer shall be notified of the assessment not later than 30 days before it is due. No member insurer may be assessed in any year on any account an amount greater than two percent of that member insurer's net direct written premiums for the calendar year preceding the determination of insolvency on the kinds of insurance in the account. If the maximum assessment, together with the other assets of the Association, does not provide in any year in any account an amount sufficient to make all necessary payments from that account, the funds available may be pro-rated and the unpaid portion shall be paid as soon thereafter as funds become available. The Association shall pay claims in any order which it considers reasonable, including the payment of claims as they are received from the claimants or in groups or categories of claims. The Association may exempt or defer, in whole or in part, the assessment of any member insurer if the assessment would cause the member insurer's financial statement to reflect amounts of capital or surplus less than the minimum amounts required for a certificate of authority by any jurisdiction in which the member insurer is authorized to transact insurance. While an assessment is deferred, however, the member insurer shall not pay dividends to its shareholders or policyholders. Deferred assessments shall be paid by the insurer when payment will not reduce capital or surplus below required minimums, and the payments shall be either refunded to those members which received larger assessments because of the deferment, or, at the election of the member, credited against future assessments. Each member insurer authorized by the Association to act as a servicing facility may set off against any assessment all authorized payments made on covered claims and all expenses incurred in the payment of those claims.

    (4) Investigate claims brought against the Association and adjust, compromise, settle, and pay covered claims to the extent of the Association's obligation and deny all other claims and may review settlements, releases and judgments to which the insolvent insurer or its insureds were parties to determine the extent to which such settlements, releases and judgments may be properly contested.

    (5) Notify such persons as the Commissioner directs under subdivision 3617(b)(1) of this title.

    (6) Handle claims through its employees or through one or more insurers or other persons designated as servicing facilities. Designation of a servicing facility is subject to the approval of the Commissioner, but such designation may be declined by a member insurer.

    (7) Reimburse each servicing facility for obligations of the Association paid by the facility and for expenses incurred by the facility while handling claims on behalf of the Association and shall pay the other expenses of the Association by this subchapter.

    (b) The Association may:

    (1) employ or retain such persons as are necessary to handle claims and perform other duties of the Association;

    (2) borrow funds necessary to effect the purposes of this subchapter in accord with the plan of operating;

    (3) sue or be sued;

    (4) negotiate and become a party to such contracts as are necessary to carry out the purpose of this subchapter;

    (5) perform such other acts as are necessary or proper to effectuate the purpose of this subchapter;

    (6) refund to the member insurers in proportion to the contribution of each member insurer to that account that amount by which the assets of the account exceed the liabilities if, at the end of any calendar year, the Board of Directors finds that the assets of the Association in any account exceed the liabilities of that account as estimated by the Board of Directors for the coming year. (Added 1969, No. 279 (Adj. Sess.), § 7; amended 1979, No. 18, §§ 10, 11; 1981, No. 165 (Adj. Sess.), § 1; 1993, No. 55, § 10, eff. June 3, 1993; 2001, No. 95 (Adj. Sess.), § 2, eff. May 1, 2002; 2009, No. 42, § 15, May 27 2009.)

  • § 3616. Plan of operation

    (a)(1) The Association shall submit to the Commissioner a plan of operation and any amendments thereto necessary or suitable to assure the fair, reasonable, and equitable administration of the Association. The plan of operation and any amendments thereto shall become effective upon approval in writing by the Commissioner.

    (2) If after approval by the Commissioner of the plan of operation, the Association fails to submit amendments to the plan when necessary or advisable to effectuate the provisions of this subchapter, the Commissioner may adopt appropriate rules under 3 V.S.A. chapter 25 which shall continue in force until superseded by amendments submitted by the Association to the Commissioner and approved by him or her.

    (b) All member insurers shall comply with the plan of operation.

    (c) The plan of operation shall:

    (1) Establish the procedures whereby all the powers and duties of the Association under section 3615 of this title will be performed.

    (2) Establish procedures for handling assets of the Association.

    (3) Establish the amount and method of reimbursing members of the Board of Directors under section 3614 of this title.

    (4) Establish procedures by which claims may be filed with the Association and establish acceptable forms of proof of covered claims. Notice of claims to the receiver or liquidator of the insolvent insurer shall be deemed notice to the Association or its agent and a list of such claims shall be periodically submitted to the Association or similar organization in another state by the receiver or liquidator.

    (5) Establish regular places and times for meetings of the Board of Directors.

    (6) Establish procedures for records to be kept of all financial transactions of the Association, its agents, and the Board of Directors.

    (7) Provide that any member insurer aggrieved by any final action or decision of the Association may appeal to the Commissioner within 30 days after the action or decision.

    (8) Establish the procedures whereby selections for the Board of Directors will be submitted to the Commissioner.

    (9) Contain additional provisions necessary or proper for the execution of the powers and duties of the Association.

    (d) The plan of operation may provide that any or all powers and duties of the Association, except those under subdivisions 3615(a)(3) and 3615(b)(2) of this title, are delegated to a corporation, Association, or other organization which performs or will perform functions similar to those of this Association, or its equivalent, in two or more states. Such a corporation, association or organization shall be reimbursed as a servicing facility would be reimbursed and shall be paid for its performance of any other functions of the Association. A delegation under this subsection shall take effect only with the approval of both the Board of Directors and the Commissioner, and may be made only to a corporation, association, or organization which extends protection not substantially less favorable and effective than that provided by this subchapter. (Added 1969, No. 279 (Adj. Sess.), § 8; amended 1979, No. 18, § 12.)

  • § 3617. Powers and duties of Commissioner

    (a) The Commissioner shall:

    (1) notify the Association of the existence of an insolvent insurer not later than three days after he or she receives notice of the determination of the insolvency and furnish to the Association a copy of any complaint or order which was served on his or her office;

    (2) upon request of the Board of Directors, provide the Association with a statement of the net written premiums of each member insurer.

    (b) The Commissioner may:

    (1) Require that the Association notify the insureds of the insolvent insurer and any other interested parties of the determination of insolvency and of their rights under this subchapter. Such notification shall be by mail at their last known address, where available, but if sufficient information for notification by mail is not available, notice by publication in a newspaper of general circulation shall be sufficient.

    (2) Suspend or revoke, after notice and hearing, the certificate of authority to transact insurance in this State of any member insurer which fails to pay an assessment when due or fails to comply with the plan of operation. As an alternative, the Commissioner may levy a fine on any member insurer which fails to pay an assessment when due. The fine shall not exceed five percent of the unpaid assessment per month, except that no fine shall be less than $500.00 per month.

    (3) Revoke the designation of any servicing facility if he or she finds claims are being handled unsatisfactorily.

    (c) Any final action or order of the Commissioner under this subchapter shall be subject to judicial review by the Superior Court for the county in which the aggrieved party resides, or if a corporation, in which the principal office of the corporation is located, or if a nonresident, by the Superior Court for the County of Washington. (Added 1969, No. 279 (Adj. Sess.), § 9; amended 1973, No. 193 (Adj. Sess.), § 3, eff. April 9, 1974; 1979, No. 18, §§ 13, 14; 1995, No. 167 (Adj. Sess.), § 3.)

  • § 3618. Effect of paid claims

    (a) Any person recovering under this subchapter shall be deemed to have assigned his or her rights under the policy to the Association to the extent of his or her recovery from the Association. Every insured or claimant seeking the protection of this subchapter shall cooperate with the Association to the same extent as such person would have been required to cooperate with the insolvent insurer. The Association shall have no cause of action against the insured of the insolvent insurer for any sums it has paid out except such causes of action as the insolvent insurer would have had if such sums had been paid by the insolvent insurer. In the case of an insolvent insurer operating on a plan with assessment liability, payments of claims of the Association shall not operate to reduce the liability of insured's to the receiver, liquidator, or statutory successor for unpaid assessments.

    (b) The receiver, liquidator, or statutory successor of an insolvent insurer shall be bound by settlements of covered claims by the Association or a similar organization in another state. The court having jurisdiction shall grant such claims priority equal to that which the claimant would have been entitled in the absence of this subchapter against the assets of the insolvent insurer. The expenses of the Association or similar organization in handling claims shall be accorded the same priority as the liquidator's expenses.

    (c) The Association shall periodically file with the receiver or liquidator of the insolvent insurer statements of the covered claims paid by the Association, the expenses paid in the handling of paid or contested covered claims, estimates of anticipated claims on the Association, and estimates of the expenses of handling those anticipated claims, which shall preserve the rights of the Association against the assets of the insolvent insurer. (Added 1969, No. 279 (Adj. Sess.), § 10; amended 1979, No. 18, § 15.)

  • § 3619. Nonduplication of recovery

    (a) Any person having a claim against an insurer under any provision in an insurance policy other than policy of an insolvent insurer which is also a covered claim, shall be required to exhaust first his or her right under such policy. Any amount payable on a covered claim under this subchapter shall be reduced by the amount of any recovery under such insurance policy.

    (b) Any person having a claim which may be recovered from more than one insurance guaranty association or its equivalent shall seek recovery first from the Association of the place of residence of the insured except that if it is a first party claim for damage to property with a permanent location, he or she shall seek recovery first from the association of the location of the property, and if it is a workers' compensation claim, he or she shall seek recovery first from the association of the residence of the claimant. Any recovery under this subchapter shall be reduced by the amount of recovery from any other insurance guaranty association or its equivalent. (Added 1969, No. 279 (Adj. Sess.), § 11; amended 1979, No. 18, § 16; 1981, No. 165 (Adj. Sess.), § 1.)

  • § 3620. Prevention of insolvencies

    To aid in the detection and prevention of insurer insolvencies:

    (1) It shall be the duty of the Board of Directors, upon majority vote, to notify the Commissioner of any information indicating any member insurer may be insolvent or in a financial condition hazardous to the policyholders or the public.

    (2) The Board of Directors may, upon majority vote, request that the Commissioner order an examination of any member insurer which the Board in good faith believes may be in a financial condition hazardous to the policyholders or the public. Within 30 days of the receipt of such request, the Commissioner shall begin such examination. The examination may be conducted as a National Association of Insurance Commissioners examination or may be conducted by such persons as the Commissioner designates. The cost of such examination shall be paid by the Association and the examination report shall be treated as are other examination reports. In no event shall such examination report be released to the Board of Directors prior to its release to the public, but this shall not preclude the Commissioner from complying with subdivision (3) of this section. The Commissioner shall notify the Board of Directors when the examination is completed. The request for an examination shall be kept on file by the Commissioner but it shall not be open to public inspection prior to the release of the examination report to the public.

    (3) It shall be the duty of the Commissioner to report to the Board of Directors when he or she has reasonable cause to believe that any member insurer examined or being examined at the request of the Board of Directors may be insolvent or in a financial condition hazardous to the policyholders or the public.

    (4) The Board of Directors may, upon majority vote, make reports and recommendations to the Commissioner upon any matter germane to the solvency, liquidation, rehabilitation or conservation of any member insurer. Such reports and recommendations shall not be considered public documents.

    (5) The Board of Directors may, upon majority vote, make recommendations to the Commissioner for the detection and prevention of insurer insolvencies.

    (6) The Board of Directors shall, at the conclusion of any insurer insolvency in which the Association was obligated to pay covered claims, prepare a report on the history and causes of such insolvency, based on the information available to the Association, and submit such report to the Commissioner. (Added 1969, No. 279 (Adj. Sess.), § 12.)

  • § 3621. Examination of Association

    The Association shall be subject to examination and regulation by the Commissioner. The Board of Directors shall submit, not later than March 30 of each year, a financial report for the preceding calendar year in a form approved by the Commissioner. (Added 1969, No. 279 (Adj. Sess.), § 13.)

  • § 3622. Tax exemption

    The Association shall be exempt from payment of all fees and all taxes levied by this State or any of its subdivisions except taxes levied on real or personal property. (Added 1969, No. 279 (Adj. Sess.), § 14.)

  • § 3623. Recognition of assessments in rates

    The rates and premiums charged for insurance policies to which this subchapter applies shall include amounts sufficient to recoup a sum equal to the amounts paid to the Association by the member insurer less any amounts returned to the member insurer by the Association and such rates shall not be deemed excessive because they contain an amount reasonably calculated to recoup assessments paid by the member insurer. (Added 1969, No. 279 (Adj. Sess.), § 15.)

  • § 3624. Immunity

    There shall be no liability on the part of, and no cause of action of any nature shall arise against, any member insurer, the Association or its agents or employees, the Board of Directors, or the Commissioner or his or her representatives for any action taken by them in the performance of their powers and duties under this subchapter. (Added 1969, No. 279 (Adj. Sess.), § 16.)

  • § 3625. Stay of proceedings; reopening of default judgment

    All proceedings in which the insolvent insurer is a party or is obligated to defend a party in any court in this State shall be stayed for up to six months and such additional time thereafter as may be determined by the court from the date on which the insolvency is declared or an ancillary proceeding is instituted in the State, whichever is later, to permit proper defense by the Association of all pending causes of action. As to any covered claims arising from a judgment under any decision, verdict, or finding based on the default of the insolvent insurer or its failure to defend an insured, the Association either on its own behalf or on behalf of such insured may apply to have such judgment, order, decision, verdict, or finding set aside by the same court or administrator that made such judgment, order, decision, verdict, or finding and shall be permitted to defend against such claim on the merits. (Added 1969, No. 279 (Adj. Sess.), § 17; amended 1979, No. 18, § 17.)

  • § 3626. Prohibition against advertising of membership in Association

    A person who makes, publishes, or circulates, or causes to be made, published or circulated, any statement which uses the existence of the Association for the purpose of sales, solicitation or inducement to purchase any form of insurance within the scope of this subchapter shall be subject to an administrative penalty of not more than $500.00 for each violation. (Added 1979, No. 18, § 18; amended 1995, No. 167 (Adj. Sess.), § 4.)


  • Subchapter 010: Reinsurance of Risks
  • §§ 3631-3633. Repealed. 1985, No. 145 (Adj. Sess.), § 4.

  • § 3634. Repealed. 1991, No. 249 (Adj. Sess.), § 12.

  • § 3634a. Credit for reinsurance

    (a) It is the purpose of this section to protect the interest of insureds, claimants, ceding insurers, assuming insurers, and the public generally. The General Assembly hereby declares its intent is to ensure adequate regulation of insurers and reinsurers and adequate protection for those to whom they owe obligations. In furtherance of that State interest, the General Assembly hereby provides a mandate that upon the insolvency of a non-U.S insurer or reinsurer that provides security to fund its U.S. obligations in accordance with this section, the assets representing the security shall be maintained in the United States and claims shall be filed with and valued by the state insurance Commissioner with regulatory oversight, and the assets shall be distributed in accordance with the insurance laws of the state in which the trust is domiciled that are applicable to the liquidation of domestic U.S. insurance companies. The General Assembly declares that the matters contained in this section are fundamental to the business of insurance in accordance with 15 U.S.C. §§ 1011-1012.

    (b) Credit for reinsurance shall be allowed a domestic ceding insurer as either an asset or a deduction from liability on account of reinsurance ceded only when the reinsurer meets the requirements of subdivision (1), (2), (3), (4), (5), (6), or (7) of this subsection. Credit shall be allowed under subdivision (1), (2), or (3) of this subsection only with respect to cessions of those kinds or classes of business that the assuming insurer is licensed or otherwise permitted to write or assume in its state of domicile or, in the case of a U.S. branch of an alien assuming insurer, in the state through which it is entered and licensed to transact insurance or reinsurance. Credit shall be allowed under subdivision (3) or (4) of this subsection only if the applicable requirements of subdivision (8) of this subsection have been satisfied.

    (1) Credit shall be allowed when the reinsurance is ceded to an assuming insurer that is licensed to transact insurance or reinsurance in this State.

    (2) Credit shall be allowed when the reinsurance is ceded to an assuming insurer that is accredited by the Commissioner as a reinsurer in this State. An accredited reinsurer is one that:

    (A) files with the Commissioner evidence of its submission to this State's jurisdiction;

    (B) submits to this State's authority to examine its books and records;

    (C) is licensed to transact insurance or reinsurance in at least one state or, in the case of a U.S. branch of an alien assuming insurer, is entered through and licensed to transact insurance or reinsurance in at least one state;

    (D) files with the Commissioner on or before March 1 of each year a copy of its annual statement filed with the insurance department of its state of domicile and files on or before June 1 of each year a copy of its most recent audited financial statement;

    (E) files with the Commissioner its charter, bylaws, and any other material required by the Commissioner;

    (F) pays an initial fee of $500.00 and thereafter an annual fee of $200.00 on or before March 1 of each year; and

    (G) demonstrates to the satisfaction of the Commissioner that it has adequate financial capacity to meet its reinsurance obligations and is otherwise qualified to assume reinsurance from domestic insurers. An assuming insurer is deemed to meet this requirement, provided that at the time of its application it:

    (i) maintains a surplus for policyholders that is not less than $20,000,000.00 and whose accreditation has not been denied by the Commissioner within 90 days of its submission; or

    (ii) maintains a surplus for policyholders in an amount less than $20,000,000.00 and whose accreditation has been approved the Commissioner.

    (H) Credit for reinsurance ceded to a certified reinsurer shall be permitted only for reinsurance contracts entered into or renewed on or after the effective date of the certification of the assuming insurer by the Commissioner.

    (3)(A) Credit shall be allowed when the reinsurance is ceded to an assuming insurer which is domiciled and licensed in, or in the case of a U.S. branch of an alien assuming insurer is entered through, a state that employs standards regarding credit for reinsurance substantially similar to those applicable under this statute and the assuming insurer or U.S. branch of an alien assuming insurer:

    (i) maintains a surplus for policyholders in an amount not less than $20,000,000.00; and

    (ii) submits to the authority of this State to examine its books and records.

    (B) The requirement of subdivision (3)(A)(i) of this subsection does not apply to reinsurance ceded and assumed pursuant to pooling arrangements among insurers in the same holding company system.

    (4)(A) Credit shall be allowed when the reinsurance is ceded to an assuming insurer which maintains a trust fund in a qualified U.S. financial institution, as defined in subdivision (d)(2) of this section, for the payment of the valid claims of its U.S. policyholders and ceding insurers, their assigns and successors in interest. The assuming insurer shall report annually to the Commissioner information required by the Commissioner and substantially the same as that required to be reported on the National Association of Insurance Commissioners' Annual Statement form by licensed insurers to enable the Commissioner to determine the sufficiency of the trust fund. On or before February 28 of each year, the trustees of the trust shall report to the Commissioner in writing setting forth the balance of the trust and listing the trust's investments at the preceding year-end and shall certify the date of termination of the trust, if so planned, or certify that the trust shall not expire prior to the next following December 31. A trust and trust instrument maintained pursuant to this subdivision shall:

    (i) be established in a form and upon such terms approved by the Commissioner;

    (ii) provide that contested claims shall be valid and enforceable upon the final order of any court of competent jurisdiction in the United States;

    (iii) vest legal title to its assets in the trustees of the trust for its U.S. policyholders and ceding insurers, their assigns and successors in interest;

    (iv) be subject to examination as determined by the Commissioner;

    (v) remain in effect for as long as the assuming insurer shall have outstanding obligations due under the reinsurance agreements subject to the trust; and

    (vi) be filed with the Commissioner of every state in which the ceding insurer beneficiaries of the trust are domiciled.

    (B) In the case of a single assuming insurer, the trust shall consist of a trusteed account representing the assuming insurer's liabilities attributable to business written in the United States and, in addition, the assuming insurer shall maintain a trusteed surplus of not less than $20,000,000.00, except at any time after the assuming insurer has permanently discontinued underwriting new business secured by the trust for at least three full years, the Commissioner with principal regulatory oversight of the trust may authorize a reduction in the required trusteed surplus, but only after a finding, based on an assessment of the risk, that the new required surplus level is adequate for the protection of U.S. ceding insurers, policyholders, and claimants in light of reasonably foreseeable adverse loss development. The risk assessment may involve an actuarial review, including an independent analysis of reserves and cash flows, and shall consider all material risk factors, including when applicable the lines of business involved, the stability of the incurred loss estimates, and the effect of the surplus requirements on the assuming insurer's liquidity or solvency. The minimum required trusteed surplus may not be reduced to an amount less than 30 percent of the assuming insurer's liabilities attributable to reinsurance ceded by U.S. ceding insurers covered by the trust.

    (C) In the case of a group including incorporated and individual unincorporated underwriters, the trust shall consist of a trusteed account representing the group's liabilities attributable to business written in the United States and, in addition, the group shall maintain a trusteed surplus of which $100,000,000.00 shall be held jointly for the benefit of U.S. ceding insurers of any member of the group; the incorporated members of the group shall not engage in any business other than underwriting as a member of the group and shall be subject to the same level of solvency regulation and control by the group's domiciliary regulator as are the unincorporated members; and the group shall make available to the Commissioner an annual certification of the solvency of each underwriter by the group's domiciliary regulator and its independent public accountants.

    (D) In the case of a group of incorporated insurers under common administration which complies with the filing requirements contained in subdivision (b)(2) of this section and which has continuously transacted an insurance business outside the United States for at least three years immediately prior to making application for accreditation, and submits to this State's authority to examine its books and records and bears the expense of the examination, and which has aggregate policyholders' surplus of $10,000,000,000.00, the trust shall be in an amount equal to the group's several liabilities attributable to business ceded by U.S. ceding insurers to any member of the group pursuant to reinsurance contracts issued in the name of such group, plus the group shall maintain a joint trusteed surplus of which $100,000,000.00 shall be held jointly for the benefit of U.S. ceding insurers of any member of the group as additional security for any such liabilities, and each member of the group shall make available to the Commissioner an annual certification of the member's solvency by the member's domiciliary regulator and its independent public accountant.

    (5) Credit shall be allowed when the reinsurance is ceded to an assuming insurer that has been certified by the Commissioner as a reinsurer in this State and secures its obligations in accordance with the requirements of this subdivision.

    (A) In order to be eligible for certification, the assuming insurer shall:

    (i) be domiciled and licensed to transact insurance or reinsurance in a qualified jurisdiction, as determined by the Commissioner under subdivision (C) of this subdivision (5);

    (ii) maintain minimum capital and surplus, or its equivalent, in an amount to be determined by the Commissioner by rule;

    (iii) maintain financial strength ratings from two or more rating agencies deemed acceptable by the Commissioner by rule;

    (iv) agree to submit to the jurisdiction of this State, appoint the Commissioner as its agent for service of process in this State, and agree to provide security for 100 percent of the assuming insurer's liabilities attributable to reinsurance ceded by U.S. ceding insurers if it resists enforcement of a final U.S. judgment;

    (v) agree to meet applicable information filing requirements as determined by the Commissioner, both with respect to an initial application for certification and on an ongoing basis; and

    (vi) the assuming insurer must satisfy any other requirements for certification deemed relevant by the Commissioner.

    (B) An Association, including incorporated and individual unincorporated underwriters, may be a certified reinsurer. In order to be eligible for certification, in addition to satisfying the requirements of subdivision (A) of this subdivision (5):

    (i) The Association shall satisfy its minimum capital and surplus requirements through the capital and surplus equivalents, net of liabilities, of the Association and its members, which shall include a joint central fund that may be applied to any unsatisfied obligation of the Association or any of its members, in an amount determined by the Commissioner to provide adequate protection.

    (ii) The incorporated members of the Association shall not be engaged in any business other than underwriting as a member of the Association and shall be subject to the same level of regulation and solvency control by the Association's domiciliary regulator as are the unincorporated members.

    (iii) Within 90 days after its financial statements are due to be filed with the Association's domiciliary regulator, the Association shall provide to the Commissioner an annual certification by the Association's domiciliary regulator of the solvency of each underwriter member; or, if a certification is unavailable, financial statements, prepared by independent public accountants, of each underwriter member of the Association.

    (C) The Commissioner shall create and publish a list of qualified jurisdictions under which an assuming insurer licensed and domiciled in such jurisdiction is eligible to be considered for certification by the Commissioner as a certified reinsurer.

    (i) In order to determine whether the domiciliary jurisdiction of a non-U.S. assuming insurer is eligible to be recognized as a qualified jurisdiction, the Commissioner shall evaluate the appropriateness and effectiveness of the reinsurance supervisory system of the jurisdiction, both initially and on an ongoing basis, and consider the rights, benefits, and extent of reciprocal recognition afforded by the non-U.S. jurisdiction to reinsurers licensed and domiciled in the United States. A qualified jurisdiction shall agree to share information and cooperate with the Commissioner with respect to all certified reinsurers domiciled within that jurisdiction. A jurisdiction may not be recognized as a qualified jurisdiction if the Commissioner has determined that the jurisdiction does not adequately and promptly enforce final U.S. judgments and arbitration awards. Additional factors may be considered in the discretion of the Commissioner.

    (ii) A list of qualified jurisdictions shall be published through the NAIC committee process. The Commissioner shall consider this list in determining qualified jurisdictions. If the Commissioner approves a jurisdiction as qualified that does not appear on the list of qualified jurisdictions, the Commissioner shall provide thoroughly documented justification in accordance with criteria to be developed by rule.

    (iii) U.S. jurisdictions that meet the requirement for accreditation under the NAIC financial standards and accreditation program shall be recognized as qualified jurisdictions.

    (iv) If a certified reinsurer's domiciliary jurisdiction ceases to be a qualified jurisdiction, the Commissioner has the discretion to suspend the reinsurer's certification indefinitely, in lieu of revocation.

    (D) The Commissioner shall assign a rating to each certified reinsurer, giving due consideration to the financial strength ratings that have been assigned by rating agencies deemed acceptable to the Commissioner by rule. The Commissioner shall publish a list of all certified reinsurers and their ratings.

    (E) A certified reinsurer shall secure obligations assumed from U.S. ceding insurers under this subsection at a level consistent with its rating, as specified in rules adopted by the Commissioner.

    (i) In order for a domestic ceding insurer to qualify for full financial statement credit for reinsurance ceded to a certified reinsurer, the certified reinsurer shall maintain security in a form acceptable to the Commissioner and consistent with the provisions of subsection (c) of this section or in a multibeneficiary trust in accordance with subdivision (4) of this subsection, except as otherwise provided in this subdivision.

    (ii) If a certified reinsurer maintains a trust to fully secure its obligations subject to subdivision (4) of this subsection and chooses to secure its obligations incurred as a certified reinsurer in the form of a multibeneficiary trust, the certified reinsurer shall maintain separate trust accounts for its obligations incurred under reinsurance agreements issued or renewed as a certified reinsurer with reduced security as permitted by this subsection or comparable laws of other U.S. jurisdictions and for its obligations subject to subdivision (4) of this subsection. It shall be a condition to the grant of certification under this subdivision (5) that the certified reinsurer shall have bound itself, by the language of the trust and agreement with the Commissioner with principal regulatory oversight of each such trust account, to fund, upon termination of any such trust account, out of the remaining surplus of such trust any deficiency of any other such trust account.

    (iii) The minimum trusteed surplus requirements provided in subdivision (4) of this subsection are not applicable with respect to a multibeneficiary trust maintained by a certified reinsurer for the purpose of securing obligations incurred under this subsection, except that such trust shall maintain a minimum trusteed surplus of $10,000,000.00.

    (iv) With respect to obligations incurred by a certified reinsurer under this subsection, if the security is insufficient, the Commissioner shall reduce the allowable credit by an amount proportionate to the deficiency and has the discretion to impose further reductions in allowable credit upon finding that there is a material risk that the certified reinsurer's obligations will not be paid in full when due.

    (v) For purposes of this subdivision (5), a certified reinsurer whose certification has been terminated for any reason shall be treated as a certified reinsurer required to secure 100 percent of its obligations.

    (I) As used in this subdivision (5), the term "terminated" refers to revocation, suspension, voluntary surrender, and inactive status.

    (II) If the Commissioner continues to assign a higher rating as permitted by other provisions of this section, this requirement does not apply to a certified reinsurer in inactive status or to a reinsurer whose certification has been suspended.

    (F) If an applicant for certification has been certified as a reinsurer in an NAIC accredited jurisdiction, the Commissioner has the discretion to defer to that jurisdiction's certification and has the discretion to defer to the rating assigned by that jurisdiction, and such assuming insurer shall be considered to be a certified reinsurer in this State.

    (G) A certified reinsurer that ceases to assume new business in this State may request to maintain its certification in inactive status in order to continue to qualify for a reduction in security for its in-force business. An inactive certified reinsurer shall continue to comply with all applicable requirements of this subsection, and the Commissioner shall assign a rating that takes into account, if relevant, the reasons why the reinsurer is not assuming new business.

    (6)(A) Credit shall be allowed when the reinsurance is ceded to an assuming insurer meeting each of the conditions set forth below:

    (i) The assuming insurer shall have its head office or be domiciled in, as applicable, and be licensed in a reciprocal jurisdiction. As used in this section, "reciprocal jurisdiction" means a jurisdiction that meets one of the following:

    (I) a non-U.S. jurisdiction that is subject to an in-force covered agreement with the United States, each within its legal authority, or, in the case of a covered agreement between the United States and European Union, is a member state of the European Union. As used in this subsection, a "covered agreement" means an agreement entered into pursuant to Dodd-Frank Wall Street Reform and Consumer Protection Act, 31 U.S.C. §§ 313 and 314, that is currently in effect or in a period of provisional application and addresses the elimination, under specified conditions, of collateral requirements as a condition for entering into any reinsurance agreement with a ceding insurer domiciled in this State or for allowing the ceding insurer to recognize credit for reinsurance;

    (II) a U.S. jurisdiction that meets the requirements for accreditation under the NAIC financial standards and accreditation program; or

    (III) a qualified jurisdiction, as determined by the Commissioner pursuant to subdivision (5)(C) of this subsection, that is not otherwise described in subdivision (6)(A)(i)(I) or (6)(A)(i)(II) of this subsection and that meets certain additional requirements, consistent with the terms and conditions of in-force covered agreements, as specified by the Commissioner in rule.

    (ii) The assuming insurer must have and maintain, on an ongoing basis, minimum capital and surplus, or its equivalent, calculated according to the methodology of its domiciliary jurisdiction, in an amount to be set forth in rule. If the assuming insurer is an association, including incorporated and individual unincorporated underwriters, it must have and maintain, on an ongoing basis, minimum capital and surplus equivalents, net of liabilities, calculated according to the methodology applicable in its domiciliary jurisdiction, and a central fund containing a balance in amounts to be set forth in rule.

    (iii) The assuming insurer must have and maintain, on an ongoing basis, a minimum solvency or capital ratio, as applicable, that will be set forth in rule. If the assuming insurer is an association, including incorporated and individual unincorporated underwriters, it must have and maintain, on an ongoing basis, a minimum solvency or capital ratio in the reciprocal jurisdiction where the assuming insurer has its head office or is domiciled, as applicable, and is also licensed.

    (iv) The assuming insurer must agree and provide adequate assurance to the Commissioner, in a form specified in rule by the Commissioner, of the following:

    (I) The assuming insurer must provide prompt written notice and explanation to the Commissioner if it falls below the minimum requirements set forth in subdivision (6)(A)(ii) or (6)(A)(iii) of this subsection, or if any regulatory action is taken against it for serious noncompliance with applicable law.

    (II) The assuming insurer must consent in writing to the jurisdiction of the courts of this State and to the appointment of the Commissioner as agent for service of process. The Commissioner may require that consent for service of process be provided to the Commissioner and included in each reinsurance agreement. Nothing in this subsection shall limit, or in any way alter, the capacity of parties to a reinsurance agreement to agree to alternative dispute resolution mechanisms, except to the extent such agreements are unenforceable under applicable insolvency or delinquency laws.

    (III) The assuming insurer must consent in writing to pay all final judgments, wherever enforcement is sought, obtained by a ceding insurer or its legal successor, that have been declared enforceable in the jurisdiction where the judgment was obtained.

    (IV) Each reinsurance agreement must include a provision requiring the assuming insurer to provide security in an amount equal to 100 percent of the assuming insurer's liabilities attributable to reinsurance ceded pursuant to that agreement if the assuming insurer resists enforcement of a final judgment that is enforceable under the law of the jurisdiction in which it was obtained or a properly enforceable arbitration award, whether obtained by the ceding insurer or by its legal successor on behalf of its resolution estate.

    (V) The assuming insurer must confirm that it is not presently participating in any solvent scheme of arrangement that involves this State's ceding insurers, and agree to notify the ceding insurer and the Commissioner and to provide security in an amount equal to 100 percent of the assuming insurer's liabilities to the ceding insurer, should the assuming insurer enter into such a solvent scheme of arrangement. Such security shall be in a form consistent with the provisions of subdivision (b)(5) and subsection (c) of this section and as specified by the Commissioner in rule.

    (v) The assuming insurer or its legal successor must provide, if requested by the Commissioner, on behalf of itself and any legal predecessors, certain documentation to the Commissioner, as specified by the Commissioner in rule.

    (vi) The assuming insurer must maintain a practice of prompt payment of claims under reinsurance agreements, pursuant to criteria set forth in rule.

    (vii) The assuming insurer's supervisory authority must confirm to the Commissioner on an annual basis, as of the preceding December 31 or at the annual date otherwise statutorily reported to the reciprocal jurisdiction, that the assuming insurer complies with the requirements set forth in subdivisions (6)(A)(ii) and (6)(A)(iii) of this subsection.

    (viii) Nothing in this subdivision (b)(6)(A) precludes an assuming insurer from providing the Commissioner with information on a voluntary basis.

    (B) The Commissioner shall timely create and publish a list of reciprocal jurisdictions.

    (i) A list of reciprocal jurisdictions is published through the NAIC committee process. The Commissioner's list shall include any reciprocal jurisdiction as defined under subdivisions (6)(A)(i)(I) and (6)(A)(i)(II) of this subsection and shall consider any other reciprocal jurisdiction included on the NAIC list. The Commissioner may approve a jurisdiction that does not appear on the NAIC list of reciprocal jurisdictions in accordance with criteria to be developed in rules adopted by the Commissioner.

    (ii) The Commissioner may remove a jurisdiction from the list of reciprocal jurisdictions upon a determination that the jurisdiction no longer meets the requirements of a reciprocal jurisdiction, in accordance with a process set forth in rules adopted by the Commissioner, except that the Commissioner shall not remove from the list a reciprocal jurisdiction as defined under subdivisions (6)(A)(i)(I) and (6)(A)(i)(II) of this subsection. Upon removal of a reciprocal jurisdiction from this list, credit for reinsurance ceded to an assuming insurer that has its home office or is domiciled in that jurisdiction shall be allowed, if otherwise allowed pursuant to this section.

    (C) The Commissioner shall timely create and publish a list of assuming insurers that have satisfied the conditions set forth in this subsection and to which cessions shall be granted credit in accordance with this subsection. The Commissioner may add an assuming insurer to such list if an NAIC accredited jurisdiction has added such assuming insurer to a list of such assuming insurers or if, upon initial eligibility, the assuming insurer submits the information to the Commissioner as required under subdivision (6)(A)(iv) of this subsection and complies with any additional requirements that the Commissioner may impose by rule, except to the extent that they conflict with an applicable covered agreement.

    (D) If the Commissioner determines that an assuming insurer no longer meets one or more of the requirements under this subsection, the Commissioner may revoke or suspend the eligibility of the assuming insurer for recognition under this subsection in accordance with procedures set forth in rule.

    (i) While an assuming insurer's eligibility is suspended, no reinsurance agreement issued, amended, or renewed after the effective date of the suspension qualifies for credit except to the extent that the assuming insurer's obligations under the contract are secured in accordance with subsection (c) of this section.

    (ii) If an assuming insurer's eligibility is revoked, no credit for reinsurance may be granted after the effective date of the revocation with respect to any reinsurance agreements entered into by the assuming insurer, including reinsurance agreements entered into prior to the date of revocation, except to the extent that the assuming insurer's obligations under the contract are secured in a form acceptable to the Commissioner and consistent with the provisions of subsection (c) of this section.

    (E) If subject to a legal process of rehabilitation, liquidation, or conservation, as applicable, the ceding insurer, or its representative, may seek and, if determined appropriate by the court in which the proceedings are pending, may obtain an order requiring that the assuming insurer post security for all outstanding ceded liabilities.

    (F) Nothing in this subsection shall limit or in any way alter the capacity of parties to a reinsurance agreement to agree on requirements for security or other terms in that reinsurance agreement, except as expressly prohibited by this section or other applicable law or rule.

    (G)(i) Credit may be taken under this subsection only for reinsurance agreements entered into, amended, or renewed on or after January 1, 2021, and only with respect to losses incurred and reserves reported on or after the later of:

    (I) the date on which the assuming insurer has met all eligibility requirements pursuant to subdivision (6)(A) of this subsection; and

    (II) the effective date of the new reinsurance agreement, amendment, or renewal.

    (ii) This subdivision (b)(6)(G) does not alter or impair a ceding insurer's right to take credit for reinsurance, to the extent that credit is not available under this subsection, as long as the reinsurance qualifies for credit under any other applicable provision of this section.

    (iii) Nothing in this subsection shall authorize an assuming insurer to withdraw or reduce the security provided under any reinsurance agreement except as permitted by the terms of the agreement.

    (iv) Nothing in this subsection shall limit, or in any way alter, the capacity of parties to any reinsurance agreement to renegotiate the agreement.

    (7) Credit shall be allowed when the reinsurance is ceded to an assuming insurer not meeting the requirements of subdivision (1), (2), (3), (4), (5), or (6) of this subsection, but only as to the insurance of risks located in jurisdictions where the reinsurance is required by applicable law or regulation of that jurisdiction.

    (8) If the assuming insurer is not licensed or accredited or certified to transact insurance or reinsurance in this State, the credit permitted by subdivisions (3) and (4) of this subsection shall not be allowed unless the assuming insurer agrees in the reinsurance agreements:

    (A) That in the event of the failure of the assuming insurer to perform its obligations under the terms of the reinsurance agreement, the assuming insurer, at the request of the ceding insurer, shall submit to the jurisdiction of any court of competent jurisdiction in any state of the United States, will comply with all requirements necessary to give such court jurisdiction, and will abide by the final decision of such court or of any appellate court in the event of an appeal.

    (B) To designate the Commissioner, the Secretary of State, or a designated attorney as its true and lawful attorney upon whom may be served any lawful process in any action, suit, or proceeding instituted by or on behalf of the ceding company. This provision is not intended to conflict with or override the obligation of the parties to a reinsurance agreement to arbitrate their disputes, if this obligation is created in the agreement.

    (9) If the assuming insurer does not meet the requirements of subdivision (1), (2), (3), or (6) of this subsection, the credit permitted by subdivision (4) or (5) of this subsection shall not be allowed unless the assuming insurer agrees in the trust agreements to the following conditions:

    (A) Notwithstanding any other provisions in the trust instrument to the contrary, if the trust fund is inadequate because it contains an amount less than the amount required by subdivisions (4)(B)-(D) of this subsection or if the grantor of the trust has been declared insolvent or placed into receivership, rehabilitation, liquidation, or similar proceedings under the laws of its state or country of domicile, the trustee shall comply with an order of the Commissioner with regulatory oversight over the trust or with an order of a court of competent jurisdiction directing the trustee to transfer to the Commissioner with regulatory oversight all of the assets of the trust fund.

    (B) The assets shall be distributed by and claims shall be filed with and valued by the Commissioner with regulatory oversight in accordance with the laws of the state in which the trust is domiciled that are applicable to the liquidation of domestic insurance companies.

    (C) If the Commissioner with regulatory oversight determines that the assets of the trust fund or any part thereof are not necessary to satisfy the claims of the U.S. ceding insurers of the grantor of the trust, the assets or part thereof shall be returned by the Commissioner with regulatory oversight to the trustee for distribution in accordance with the trust agreement.

    (D) The grantor shall waive any right otherwise available to it under U.S. law that is inconsistent with this provision.

    (10) If an accredited or certified reinsurer ceases to meet the requirements for accreditation or certification, the Commissioner may suspend or revoke the reinsurer's accreditation or certification.

    (A) The Commissioner must give the reinsurer notice and opportunity for hearing. The Commissioner may suspend or revoke a reinsurer's accreditation or certification without a hearing if:

    (i) the reinsurer waives its right to hearing;

    (ii) the Commissioner's order is based on regulatory action by the reinsurer's domiciliary jurisdiction or the voluntary surrender or termination of the reinsurer's eligibility to transact insurance or reinsurance business in its domiciliary jurisdiction or in the primary certifying state of the reinsurer under subdivision (5)(F) of this subsection; or

    (iii) the Commissioner finds that an emergency requires immediate action and a court of competent jurisdiction has not stayed the Commissioner's action.

    (B) While a reinsurer's accreditation or certification is suspended, no reinsurance contract issued or renewed after the effective date of the suspension qualifies for credit except to the extent that the reinsurer's obligations under the contract are secured in accordance with subsection (c) of this section. If a reinsurer's accreditation or certification is revoked, no credit for reinsurance may be granted after the effective date of the revocation except to the extent that the reinsurer's obligations under the contract are secured in accordance with subdivision (5)(E) of this subsection or subsection (c) of this section.

    (11) Concentration risk.

    (A) A ceding insurer shall take steps to manage its reinsurance recoverables proportionate to its own book of business. A domestic ceding insurer shall notify the Commissioner within 30 days after reinsurance recoverables from any single assuming insurer or group of affiliated assuming insurers exceeds 50 percent of the domestic ceding insurer's last reported surplus to policyholders or after it is determined that reinsurance recoverables from any single assuming insurer or group of affiliated assuming insurers is likely to exceed this limit. The notification shall demonstrate that the exposure is safely managed by the domestic ceding insurer.

    (B) A ceding insurer shall take steps to diversify its reinsurance program. A domestic ceding insurer shall notify the Commissioner within 30 days after ceding to any single assuming insurer or group of affiliated assuming insurers more than 20 percent of the ceding insurer's gross written premium in the prior calendar year or after it has determined that the reinsurance ceded to any single assuming insurer or group of affiliated assuming insurers is likely to exceed this limit. The notification shall demonstrate that the exposure is safely managed by the domestic ceding insurer.

    (c) An asset or a reduction from liability for the reinsurance ceded by a domestic insurer to an assuming insurer not meeting the requirements of subsection (b) of this section shall be allowed in an amount not exceeding the liabilities carried by the ceding insurer. The reduction shall be in the amount of funds held by or on behalf of the ceding insurer, including funds held in trust for the ceding insurer, under a reinsurance contract with such assuming insurer as collateral for the payment of obligations thereunder, if such collateral is held in the United States subject to withdrawal solely by, and under the exclusive control of, the ceding insurer; or, in the case of a trust, held in a qualified U.S. financial institution, as defined in subdivision (d)(2) of this section. This security may be in the form of:

    (1) Cash.

    (2) Securities listed by the Securities Valuation Office of the National Association of Insurance Commissioners and qualifying as admitted assets.

    (3) Clean, irrevocable, unconditional letters of credit, issued or confirmed by a qualified U.S. financial institution as defined in subdivision (d)(1) of this section, which are effective no later than December 31 in respect of the year for which filing is being made and in the possession of the ceding company on or before the filing date of its annual statement. Letters of credit meeting applicable standards of issuer acceptability as of the dates of their issuance or confirmation shall, notwithstanding the issuing or confirming institution's subsequent failure to meet applicable standards of issuer acceptability, continue to be acceptable as security until their expiration, extension, renewal, modification, or amendment, whichever first occurs.

    (4) Any other form of collateral acceptable to the Commissioner.

    (d)(1) For purposes of subdivision (c)(3) of this section, a "qualified U.S. financial institution" means an institution that:

    (A) is organized or, in the case of a U.S. office of a foreign banking organization, licensed under the laws of the United States or any state thereof;

    (B) is regulated, supervised, and examined by federal or state authorities having regulatory authority over banks and trust companies; and

    (C) has been determined by either the Commissioner or the Securities Valuation Office of the National Association of Insurance Commissioners to meet such standards of financial condition and standing as are considered necessary and appropriate to regulate the quality of financial institutions whose letters of credit will be acceptable to the Commissioner.

    (2) A "qualified U.S. financial institution" means, for purposes of those provisions of this section specifying those institutions that are eligible to act as a fiduciary of a trust, an institution that is:

    (A) organized or, in the case of a U.S. branch or agency office of a foreign banking organization, licensed under the laws of the United States or any state thereof and has been granted authority to operate with fiduciary powers; and

    (B) regulated, supervised, and examined by federal or state authorities having regulatory authority over banks and trust companies.

    (e) Notwithstanding the provisions of this subsection to the contrary, the Commissioner shall allow credit for reinsurance ceded and assumed to a pooling arrangement that has the following characteristics:

    (1) the majority of the pooling members are licensed to transact business in this State, or are licensed in a state that is accredited with the National Association of Insurance Commissioners, or are approved by the Commissioner;

    (2) the members of the pool are subject to joint and several liability;

    (3) all members of the pool agree to file with the Commissioner, annually on or before March 1, a copy of the member's annual statement filed with the insurance department of its state of domicile; and

    (4) the manager of the pool files with the Commissioner, annually on or before December 1, a request to be exempted from the provisions of subdivisions (b)(1) through (4) of this section.

    (f) The Commissioner may adopt rules implementing the provisions of this section.

    (g) This section shall apply to all cessions after the effective date of this section under reinsurance agreements that have an inception, anniversary, or renewal date not less than six months after the effective date of this section. (Added 1991, No. 249 (Adj. Sess.), § 13; amended 1993, No. 12, § 6, eff. April 26, 1993; 1993, No. 235 (Adj. Sess.), § 1, eff. June 21, 1994; 1995, No. 180 (Adj. Sess.), § 38(a); 2007, No. 49, § 3; 2011, No. 78 (Adj. Sess.), § 2, eff. April 2, 2012; 2013, No. 121 (Adj. Sess.), § 1, eff. May 9, 2014; 2019, No. 103 (Adj. Sess.), § 12, eff. Jan. 1, 2021.)

  • § 3635. Insolvency of ceding company

    (a) No credit shall be allowed, as an admitted asset or deduction from liability, to any ceding insurer for reinsurance, unless the reinsurance contract provides, in substance, that in the event of the insolvency of the ceding insurer, the reinsurance shall be payable under contract or contracts reinsured by the assuming insurer on the basis of the claims allowed against the ceding insurer in the insolvency proceedings, without diminution because of the insolvency of the ceding insurer, directly to the ceding insurer or to its domiciliary liquidator or receiver except: (1) where the contract specifically provides for payment to the insured or his or her assignee or other persons or entity named in the insured's policy as a payee of such reinsurance in the event of the insolvency of the ceding insurer or (2) where the assuming insurer with the consent of the direct insured or insureds has assumed such policy obligations of the ceding insurer as direct obligations of the assuming insurer to the payees under such policies and in substitution for the obligations of the ceding insurer to such payees.

    (b) The domiciliary liquidator or receiver of an insolvent ceding insurer shall give written notice of the pendency of a claim against such ceding insurer on the contract reinsured within a reasonable time after such claim is filed in the insolvency proceeding. During the pendency of such claim any assuming insurer may investigate such claim and interpose, at its own expense, in the proceeding where such claim is to be adjudicated, any defenses which it deems available to the ceding insurer, its liquidator or receiver. Such expense shall be chargeable, subject to court approval, against the insolvent ceding insurer as part of the expense of liquidation to the extent of a proportionate share of the benefit which may accrue to the ceding insurer solely as a result of the defense undertaken by the assuming insurer. Where two or more assuming insurers are involved in the same claim and a majority in interest elect to interpose defense to such claim, the expense shall be apportioned in accordance with the terms of the reinsurance agreement as though such expense had been incurred by the ceding company. (Added 1985, No. 145 (Adj. Sess.), § 5.)

  • § 3636. Reinsurance contract

    In the event of the rehabilitation, receivership, or liquidation of a ceding insurer, no person shall have any rights against the reinsurer of such ceding insurer which are not specifically set forth in the contract of reinsurance or in a specific agreement between the reinsurer and the person. (Added 1985, No. 145 (Adj. Sess.), § 5.)


  • Subchapter 011: Payments to Nonresidents' Estates
  • § 3641. Claims, rights, title, and interests of nonresidents

    When by the terms of any policy of insurance, annuity contract, or contract supplemental to any policy of insurance or annuity contract, issued by an insurance company organized under the laws of this State, any claim, right, title, or interest therein is vested in a person residing in another state or country, or in the estate of such nonresident person, such claim may be paid to, and such right, title, or interest may be transferred or released by, the administrator, executor, or guardian of such nonresident person or estate appointed in the State or country where the person resides or resided at the time of death, provided no administrator, executor, or guardian of such nonresident person or estate has been appointed in this State at the time of such payment, transfer, or claim. (Added 1967, No. 344 (Adj. Sess.), § 1 (ch. 1, subch. 12, § 1).)

  • § 3642. Liability for payments to nonresidents

    An action shall not be maintained against any such insurance company upon any right of action arising out of an insurance policy, annuity contract, or contract supplemental to any insurance policy or annuity contract, issued by such company, vested in a person residing in another state or country, or in the estate of such nonresident person, if prior to actual notice of the appointment in this State of an administrator, executor, or guardian of the estate or person of such nonresident, such right of action has been discharged or released by the executor, administrator, or guardian of such nonresident person or estate appointed in the state of his or her residence, or by a transferee of such policy, annuity contract, contract supplemental to any policy of insurance, or annuity contract or right of action thereon. (Added 1967, No. 344 (Adj. Sess.), § 1 (ch. 1, subch. 12, § 2).)


  • Subchapter 012: Actions and Penalties
  • § 3661. Cease and desist powers; prosecutions and penalties

    (a) When the Commissioner believes that an insurer or an officer or agent thereof, or any other person, has violated the law, an administrative rule of the Department, or an order of the Commissioner relating to insurance, or has not complied with its requirements, he or she:

    (1) may issue an order to cease and desist such violation or activity. Such an order shall be subject to de novo judicial review in the Washington Superior Court, but such review shall not stay the enforcement of the Commissioner's order while under review, unless the court shall so determine after a preliminary hearing that a stay of enforcement will not unduly injure the interests of the people of the State, in which case a stay of execution may be granted;

    (2) may report each violation with any information he or she has relating thereto to the Attorney General who shall prosecute therefor if he or she deems it advisable. The offender shall be fined not more than $2,000.00 as a result of any such prosecution by the Attorney General; and

    (3) may, after notice and opportunity for hearing, impose a civil administrative penalty of not more than $1,000.00 for each violation, and not more than $10,000.00 for each willful violation.

    (b) The powers vested in the Commissioner by this section shall be in addition to any other powers to enforce penalties, fines, or forfeitures authorized by law with respect to violations of the law relating to insurance, except that the Commissioner shall not impose an administrative penalty under subdivision (a)(3) of this section if the Commissioner may impose another administrative penalty authorized by law for the same violation.

    (c) An employer who makes a false statement or representation that results in a lower workers' compensation premium, after notice and opportunity for hearing before the Commissioner, may be assessed an administrative penalty of not more than $20,000.00 in addition to any other appropriate penalty. In addition, an employer found to have violated this section is prohibited from contracting, directly or indirectly, with the State or any of its subdivisions for up to three years following the date the employer was found to have made a false statement or misrepresentation, as determined by the Commissioner in consultation with the Commissioner of Buildings and General Services or the Secretary of Transportation, as appropriate. Either the Secretary or the Commissioner, as appropriate, shall be consulted in any appeal relating to prohibiting the employer from contracting with the State or its subdivisions.

    (d) Any person who knowingly makes a false statement or representation in an application, petition, certification or verification made in accordance with the provisions of this title, or of 18 V.S.A. chapter 221, or a certification or other filing with the Interstate Insurance Product Regulation Commissioner under chapter 165 of this title, after notice and opportunity for hearing before the Commissioner of Financial Regulation may be assessed an administrative penalty of not more than $5,000.00. The authority granted to the Commissioner by this subsection shall be in addition to any other authority granted to the Commissioner by law. (Added 1967, No. 344 (Adj. Sess.), § 1 (ch. 1, subch. 13, § 1); amended 1983, No. 199 (Adj. Sess.); 2003, No. 105 (Adj. Sess.), § 7; 2009, No. 42, § 9; 2009, No. 54, § 78, eff. June 1, 2009; 2009, No. 142 (Adj. Sess.), § 5a; 2011, No. 78 (Adj. Sess.), § 2, eff. April 2, 2012.)

  • § 3662. Nonpayment of judgment; penalty

    In addition to accrual of interest and costs under section 3665 of this title, if a judgment against an insurance company is not paid within 30 days after demand made upon an agent of such company, and notice thereof given to the Commissioner by the officer holding the execution, the Commissioner may suspend the right of the company to do business in this State until it is paid. If such company, or an agent thereof, after notice of such suspension, shall issue a policy in this State, such company and agent shall each be subject to an administrative penalty of not more than $10,000.00 for each policy. A policy so granted shall be valid against the company. (Added 1967, No. 344 (Adj. Sess.), § 1 (ch. 1, subch. 13, § 2); amended 1987, No. 106, § 1; 1995, No. 167 (Adj. Sess.), § 6.)

  • § 3663. Minimum limitation on actions; void policy provisions

    A policy of fire, life, accident, liability, or burglary insurance, or an indemnity, surety, or fidelity contract or bond issued or delivered in this State by an insurance company doing business herein shall not contain a condition or clause limiting the time of commencement of an action on such policy or contract to a period less than 12 months from the occurrence of the loss, death, accident, or default, nor a condition or clause making an award by appraisers, fixing the amount of loss by the insured or beneficiary in such policy or contract, a condition precedent to bringing or maintaining an action on such policy or contract. Any such conditions or clauses shall be null and void. (Added 1967, No. 344 (Adj. Sess.), § 1 (ch. 1, subch. 13, § 3).)

  • § 3664. Forms; filing proof of loss and other documents, waiver of filing

    Insurance companies, societies, or associations, or insurance adjusters appointed by said companies, societies, or associations shall furnish in form for completion by the claimant, as defined in section 3665a of this title, or beneficiary, as defined in section 3665b of this title, all documents as to proof of loss or other matter required by contract to be submitted to the companies. Failure to furnish said forms within a reasonable time after notice of loss or damage is received by said companies, societies, or associations shall be deemed a waiver of any requirement that proof of loss shall be filed with the insurer on said forms as a condition precedent to the recovery of losses or claims. (Added 1967, No. 344 (Adj. Sess.), § 1 (ch. 1, subch. 13, § 4); amended 2019, No. 103 (Adj. Sess.), § 13.)

  • § 3665. Repealed. 2019, No. 103 (Adj. Sess.), § 14.

  • § 3665a. Timely payment of property and casualty insurance claims; interest

    (a) This section applies to policies of property, casualty, surety, and title insurance, as defined in section 3301 of this title. It does not apply to workers' compensation insurance. As used in this section, "claimant" means any person asserting a right to payment under an insurance policy or contract arising out of the occurrence of the contingency or loss covered by such policy or contract or any person asserting a claim against any other person or the interests insured under an insurance policy or contract, and includes a claimant's designated legal representative and any member of the claimant's immediate family designated in writing by the claimant.

    (b) Unless a different time period is specified in another section of this title, all payments of claims under policies of insurance shall be made within time periods provided by this section:

    (1) For claims under policies of insurance other than surety insurance and title insurance, within 10 business days after the date that settlement of the claim is agreed upon between the insurer, the claimant, and the loss payee, as applicable, and in accordance with rules adopted by the Commissioner.

    (2) For claims under policies of surety and title insurance, within 30 days after the date that settlement of the claim is agreed upon between the insurer, the claimant, and the loss payee, as applicable, and in accordance with rules adopted by the Commissioner.

    (3) If a claim is contested, within 30 days after the entry of a final nonappealable judgment against the insurer; the entry of a binding arbitration decision between the insurer, the claimant, the loss payee, and the Department, as applicable; or the execution of a settlement agreement between the insurer, the claimant, the loss payee, and the Department, as applicable.

    (c) If an insurer fails to pay a claim within the applicable time period set forth in subsection (b) of this section or any other time period provided by statute, it shall thereafter pay interest on the amount of the claim at the judgment rate allowed by law. Interest shall accrue from 30 days after the date the insurer receives a properly executed proof of loss. (Added 2019, No. 103 (Adj. Sess.), § 15.)

  • § 3665b. Timely payment of life insurance claims and annuity death benefits; interest

    (a) This section applies to policies of life insurance and contracts of annuity. As used in this section, a "beneficiary" means any person making a claim against a policy of life insurance or for death benefits provided under a contract of annuity.

    (b) A claim for payment of benefits under a policy of life insurance shall be paid within 30 days after the date that a properly executed proof of loss is received by the insurer. All payments of claims under policies of life insurance shall include interest accrued from the date of death of the insured to the date of payment. The interest rate shall be the rate paid on proceeds left on deposit or six percent, whichever is greater.

    (c) A claim for payment of benefits under a contract of annuity shall be paid within 30 days after the date that a properly executed proof of loss is received by the insurer. Payments of claims for death benefit proceeds under contracts of annuity shall include interest at the rate paid for proceeds left on deposit or six percent, whichever is greater. Interest shall accrue and be payable as follows:

    (1) For variable annuity contracts subject to the Securities and Exchange Commission's rules governing the liquidation of account values at the death of the beneficiary, from the eighth day following the date that a properly executed proof of loss is received by the insurer.

    (2) For all other contracts of annuity, from the date of death of the measuring life, unless the contract specifies that the contract remains in force until the date that a properly executed proof of loss is received by the insurer. For purposes of this section, the individual whose death triggers the death benefit proceeds is the measuring life.

    (d) If a claim is contested, it shall be paid within 30 days after the entry of a final nonappealable judgment against the insurer; the entry of a binding arbitration decision between the insurer, the beneficiary, and the Department, as applicable; or the execution of a settlement agreement between the insurer, the beneficiary, and the Department, as applicable.

    (e) If an insurer fails to pay a claim within the applicable time period set forth in subsection (b), (c), or (d) of this section, it shall thereafter pay interest on the amount of the claim at the judgment rate allowed by law. Interest shall accrue from 30 days after the date the insurer receives a properly executed proof of loss. (Added 2019, No. 103 (Adj. Sess.), § 16.)

  • § 3665c. Damages

    An insurance company, including a society and an association, is responsible for payment of any consequential damages, including all penalties or costs, caused by improper delay in payment or settlement of claims to claimants, loss payees, or beneficiaries under policies of insurance subject to section 3665a or 3665b of this title. Consequential damages for improper delay are not applicable when a policy expressly provides for periodic payments or when a claimant, loss payee, or beneficiary agrees to accept periodic payments, unless an insurer improperly delays making such periodic payments. (Added 2019, No. 103 (Adj. Sess.), § 17.)

  • § 3666. Rules; methods of notice

    Notwithstanding the requirements under sections 3883, 4226, and 4714 of this title, the Commissioner of Financial Regulation shall adopt rules specifying the methods by which a notice to a party required under section 3880, 3881, 4224, 4225, 4712, or 4713 of this title shall be given. (Added 2013, No. 199 (Adj. Sess.), § 68.)


  • Subchapter 012A: Arson; Disclosure of Information
  • § 3671. Disclosure of information

    (a) Upon written request, an insurance company, its agents, adjusters, or brokers, shall furnish to a law enforcement officer, State's Attorney, or the Attorney General any and all information pertaining to a fire loss under investigation, including:

    (1) pertinent insurance policy information relevant to a fire loss under investigation and any application for such a policy;

    (2) policy premium payment records which are available;

    (3) history of previous claims made by the insured;

    (4) material relating to the investigation of the loss, including statements of any person, proof of loss, and any other evidence relevant to the investigation.

    (b) When an insurance company, its agents, adjusters, or brokers have reason to believe that a fire loss in which it has an interest may be of other than accidental cause, then for the purpose of notification and for having that fire loss investigated, the company, its agents, adjusters, or brokers shall notify the State Fire Marshal in writing, and provide him or her with any material developed during the inquiry into the fire loss. (Added 1981, No. 73, eff. May 4, 1981.)

  • § 3672. Immunity

    An insurance company, its agents, adjusters, or brokers shall be immune from civil liability as a result of the furnishing in good faith of information to any law enforcement officer, State's Attorney or the Attorney General in accordance with the provisions of section 3671 of this title. (Added 1981, No. 73, eff. May 4, 1981.)

  • § 3673. Penalty for noncompliance

    In the event that an insurance company, its agents, adjusters, or brokers fail to comply with the provisions of section 3671 of this title, the Commissioner may suspend the right of the company to do business in this State until it does so comply and shall suspend the license of any agent, adjuster, or broker until such time as they comply with the provisions of section 3671. (Added 1981, No. 73, eff. May 4, 1981.)


  • Subchapter 013: Holding Companies and Subsidiaries
  • § 3681. Definitions

    As used in this subchapter:

    (1) "Affiliate" of, or person "affiliated" with, a specific person, means a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the person specified.

    (2) "Commissioner" means the Commissioner of Financial Regulation or his or her deputies, as appropriate.

    (3) "Control," including the terms "controlling," "controlled by," and "under common control with," means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract other than a commercial contract for goods or nonmanagement services, or otherwise, unless the power is the result of an official position with or corporate office held by the person. Control shall be presumed to exist if any person, directly or indirectly, owns, controls, holds with the power to vote, or holds proxies representing, 10 percent or more of the voting securities of any other person. This presumption may be rebutted by a showing made in the manner provided by subsection 3684(l) of this title that control does not exist in fact. The Commissioner may determine, after furnishing all persons in interest notice and opportunity to be heard and making specific findings of fact to support such determination, that control exists in fact, notwithstanding the absence of a presumption to that effect.

    (4) "Groupwide supervisor" or "supervisor" means the regulatory official authorized to engage in conducting and coordinating groupwide supervision activities, as specified by the Commissioner under section 3696 of this subchapter.

    (5) "Insurance holding company system" or "system" means two or more affiliated persons, one or more of which is an insurer.

    (6) "Insurer" means a company qualified and licensed to transact the business of insurance in this State and shall include a health maintenance organization, a nonprofit hospital service corporation, and a nonprofit medical service corporation, except that it shall not include:

    (A) agencies, authorities, or instrumentalities of the United States, its possessions and territories, the Commonwealth of Puerto Rico, the District of Columbia, or a state or political subdivision of a state; or

    (B) fraternal benefit societies.

    (7) "Enterprise risk" means any activity, circumstance, event, or series of events involving one or more affiliates of an insurer that, if not remedied promptly, is likely to have a material adverse effect upon the financial condition or liquidity of the insurer or its insurance holding company system as a whole, including anything that would cause the insurer's risk-based capital to fall into company action level as set forth in section 8303 of this title or would cause the insurer to be in hazardous financial condition under Department Regulation I-93-2, sections 3-4.

    (8) "Internationally active insurance group" or "group" means an insurance holding company system that:

    (A) includes an insurer registered under section 3684 of this subchapter; and

    (B) meets the following criteria:

    (i) premiums written in at least three countries;

    (ii) the percentage of gross premiums written outside the United States is at least 10 percent of the system's total gross written premiums; and

    (iii) based on a three-year rolling average, the total assets of the system are at least $50,000,000,000.00, or the total gross written premiums of the system are at least $10,000,000,000.00.

    (9) "Person" means an individual, a corporation, a partnership, an association, a joint stock company, a trust, an unincorporated organization, any similar entity or any combination of the foregoing acting in concert, but shall not include any securities broker performing no more than the usual and customary broker's function.

    (10) "Security holder" of a specified person means one who owns any security of such person, including common stock, preferred stock, debt obligations, and any other security convertible into or evidencing the right to acquire any of the foregoing.

    (11) "Subsidiary" of a specified person means an affiliate controlled by such person directly, or indirectly through one or more intermediaries.

    (12) "Voting security" shall include any security convertible into or evidencing a right to acquire a voting security. (Added 1971, No. 72, § 2; amended 1989, No. 225 (Adj. Sess.), § 25(b); 1991, No. 249 (Adj. Sess.), § 14; 1995, No. 180 (Adj. Sess.), § 38(a); 1997, No. 159 (Adj. Sess.), § 3, eff. April 29, 1998; 2003, No. 163 (Adj. Sess.), § 40, eff. June 10, 2004; 2011, No. 78 (Adj. Sess.), § 2, eff. April 2, 2012; 2013, No. 29, § 27, eff. May 13, 2013; 2015, No. 15, § 3, eff. May 1, 2015; 2019, No. 103 (Adj. Sess.), § 20.)

  • § 3682. Subsidiaries of insurers

    (a) Any domestic insurer, either by itself or in cooperation with one or more persons, may organize or acquire one or more subsidiaries engaged in the following kinds of business:

    (1) any kind of insurance business authorized by the jurisdiction in which it is incorporated;

    (2) acting as an insurance broker or as an insurance agent for its parent or for any of its parent's insurer subsidiaries;

    (3) investing, reinvesting or trading in securities for its own account, that of its parent, any subsidiary of its parent, or any affiliate or subsidiary;

    (4) management of any investment company subject to or registered pursuant to the Investment Company Act of 1940, as amended, including related sales and services.

    (5) acting as a broker-dealer subject to or registered pursuant to the Securities Exchange Act of 1934, as amended;

    (6) rendering investment advice to government agencies, corporations, or other organizations or groups;

    (7) rendering other services related to the operations of an insurance business including actuarial, loss prevention, safety engineering, data processing, accounting, claims, appraisal, and collection services;

    (8) ownership and management of assets which the parent corporation could itself own or manage;

    (9) acting as administrative agent for a governmental instrumentality which is performing an insurance function;

    (10) financing of insurance premiums, agents, and other forms of consumer financing;

    (11) any other business activity determined by the Commissioner to be reasonably ancillary to an insurance business; and

    (12) owning a corporation or corporations engaged or organized to engage exclusively in one or more of the businesses specified in this section.

    (b) In addition to investments in common stock, preferred stock, debt obligations, and other securities permitted under all other sections of this title, a domestic insurer may also:

    (1) Invest, in common stock, preferred stock, debt obligations, and other securities of one or more subsidiaries, amounts which do not exceed the lesser of five percent of such insurer's assets or 50 percent of such insurer's surplus as regards policyholders, provided that after such investments the insurer's surplus as regards policyholders will be reasonable in relation to the insurer's outstanding liabilities and adequate to its financial needs. In calculating the amount of such investments, investments made under subsection (a) of this section shall be excluded for all insurers, except to the extent provided in subsection (f) of this section, and there shall be included:

    (A) total net monies or other consideration expended and obligations assumed in the acquisition or formation of a subsidiary, including all organizational expenses and contributions to capital and surplus of such subsidiary whether or not represented by the purchase of capital stock or issuance of other securities; and

    (B) all amounts expended in acquiring additional common stock, preferred stock, debt obligations, and other securities and all contributions to the capital or surplus, of a subsidiary subsequent to its acquisition or formation.

    (2) If the insurer's total liabilities, as calculated for National Association of Insurance Commissioners annual statement purposes, are less than 10 percent of assets, invest any amount in common stock, preferred stock, debt obligations, and other securities of one or more subsidiaries, provided that after such investment the insurer's surplus as regards policyholders, considering such investment as if it were a disallowed asset, will be reasonable in relation to the insurer's outstanding liabilities and adequate to its financial needs.

    (3) Invest any amount in common stock, preferred stock, debt obligations and other securities of one or more subsidiaries provided that each such subsidiary agrees to limit its investments in any asset so that such investments will not cause the amount of the total investment of the insurer to exceed any of the investment limitations specified in subdivision (1) of this subsection or in sections 3681 through 3692 of this title applicable to the insurer. For the purpose of this subdivision, "the total investment of the insurer" shall include:

    (A) any direct investment by the insurer in an asset and

    (B) the insurer's proportionate share of any investment in an asset by any subsidiary of the insurer, which shall be calculated by multiplying the amount of the subsidiary's investment by the percentage of the insurer's ownership of such subsidiary.

    (4) With the approval of the Commissioner, invest any amount in common stock, preferred stock, debt obligations, or other securities of one or more subsidiaries, provided that after such investment the insurer's surplus as regards policyholders will be reasonable in relation to the insurer's outstanding liabilities and adequate to its financial needs.

    (5) Invest any amount in the common stock, preferred stock, debt obligations, or other securities of any subsidiary exclusively engaged in holding title to and managing or developing real or personal property, if after considering as a disallowed asset so much of the investment as is represented by subsidiary assets which if held directly by the insurer would be considered as a disallowed asset, the insurer's surplus as regards policyholders will be reasonable in relation to the insurer's outstanding liabilities and adequate to its financial needs, and if following such investment all voting securities of such subsidiary would be owned by the insurer.

    (c) Investments in common stock, preferred stock, debt obligations or other securities of subsidiaries made pursuant to subsection (b) of this section shall not be subject to any of the otherwise applicable restrictions or prohibitions contained in this chapter applicable to such investments of insurers.

    (d) Whether any investment pursuant to subsection (b) of this section meets the applicable requirements thereof is to be determined immediately after such investment is made, taking into account the then outstanding principal balance on all previous investments in debt obligations, and the value of all previous investments in equity securities as of the date they were made.

    (e) If an insurer ceases to control a subsidiary, it shall dispose of any investment therein made pursuant to this section within three years from the time of the cessation of control or within such further time as the Commissioner may prescribe, unless at any time after such investment shall have been made, such investment shall have met the requirements for investment under any other section of this title, and the insurer has notified the Commissioner thereof.

    (f) Nothing in this section shall modify or negate any contractual obligation undertaken by a mutual insurance holding company reorganizing under chapter 101, subchapter 3A of this title. (Added 1971, No. 72, § 2; amended 1999, No. 84 (Adj. Sess.), § 9, eff. April 19, 2000.)

  • § 3683. Acquisition of control of or merger with domestic insurer

    (a) Filing requirements.

    (1) No person other than the issuer shall make a tender offer for or a request or invitation for tenders of, or enter into any agreement to exchange securities for, seek to acquire, or acquire, in the open market or otherwise, any voting security of a domestic insurer if, after the consummation thereof, such person would, directly or indirectly (or by conversion or by exercise of any right to acquire) be in control of such insurer, and no person shall enter into an agreement to merge with or otherwise to acquire control of a domestic insurer unless, at the time any such offer, request, or invitation is made or any such agreement is entered into, or prior to the acquisition of such securities if no offer or agreement is involved, such person has filed with the Commissioner and has sent to such insurer, and such insurer has sent to its shareholders, a statement containing the information required by this section and such offer, request, invitation, agreement, or acquisition has been approved by the Commissioner in the manner hereinafter prescribed.

    (2) For purposes of this subsection, any controlling person of a domestic insurer seeking to divest its controlling interest in the domestic insurer in any manner shall file with the Commissioner, with a copy to the insurer, confidential notice of its proposed divestiture at least 30 days prior to the cessation of control. The Commissioner shall determine those instances in which the party or parties seeking to divest or to acquire a controlling interest in an insurer will be required to file for and obtain approval of the transaction. The information shall remain confidential and not subject to public inspection and copying under the Public Records Act until the conclusion of the transaction unless the Commissioner, in his or her discretion, determines that confidential treatment will interfere with enforcement of this section. If the statement referred to in subdivision (1) of this subsection is otherwise filed, this subdivision shall not apply.

    (3) With respect to a transaction subject to this section, the acquiring person must also file a preacquisition notification with the Commissioner, which shall contain the information set forth in subdivision 3683a(c)(1). A failure to file the notification may be subject to penalties specified in subsection 3683a(e) of this chapter.

    (4) For purposes of this section, a domestic insurer shall include any person controlling a domestic insurer unless the person, as determined by the Commissioner, is either directly or through its affiliates primarily engaged in business other than the business of insurance. For the purposes of this section, "person" shall not include any securities broker holding, in the usual and customary broker's function, less than 20 percent of the voting securities of an insurance company or of any person which controls an insurance company.

    (b) Content of statement. The statement to be filed with the Commissioner hereunder shall be made under oath or affirmation and shall contain the following information:

    (1) The name and address of each person by whom or on whose behalf the merger or other acquisition of control referred to in subsection (a) of this section is to be effected (hereinafter called "acquiring party"), and:

    (A) If such person is an individual, his or her principal occupation and all offices and positions held during the past five years, and any conviction of crimes other than minor traffic violations during the past 10 years.

    (B) If such person is not an individual, a report of the nature of its business operations during the past five years or for such lesser period as such person and any predecessors thereof shall have been in existence; an informative description of the business intended to be done by such person and such person's subsidiaries; and a list of all individuals who are or who have been selected to become directors or executive officers of such person, or who perform or will perform functions appropriate to such positions. Such list shall include for each such individual the information required by subdivision (A) of this subdivision (1).

    (C) Whether such person is a depository institution or an affiliate of a depository institution.

    (2) The source, nature, and amount of the consideration used or to be used in effecting the merger or other acquisition of control, a description of any transaction wherein funds were or are to be obtained for any such purpose, and the identity of persons furnishing such consideration; provided, however, that where a source of such consideration is a loan made in the lender's ordinary course of business, the identity of the lender shall remain confidential, if the person filing such statement so requests.

    (3) Fully audited financial information as to the earnings and financial condition of each acquiring party for the preceding five fiscal years of each such acquiring party (or for such lesser period as such acquiring party and any predecessors thereof shall have been in existence), and similar unaudited information as of a date not earlier than 90 days prior to the filing of the statement.

    (4) Any plans or proposals which each acquiring party may have to liquidate such insurer, to sell its assets or merge or consolidate it with any person, or to make any other material change in its business or corporate structure or management.

    (5) The number of shares of any security referred to in subsection (a) of this section which each acquiring party proposes to acquire, and the terms of the offer, request, invitation, agreement, or acquisition referred to in subsection (a) of this section, and a statement as to the method by which the fairness of the proposal was arrived at.

    (6) The amount of each class of any security referred to in subsection (a) of this section which is beneficially owned or concerning which there is a right to acquire beneficial ownership by each acquiring party.

    (7) A full description of any contracts, arrangements, or understandings with respect to any security referred to in subsection (a) of this section in which any acquiring party is involved, including transfer of any of the securities, joint ventures, loan or option arrangements, puts or calls, guarantees of loans, guarantees against loss or guarantees of profits, division of losses or profits, or the giving or withholding of proxies. Such description shall identify the persons with whom such contracts, arrangements or understandings have been entered into.

    (8) A description of the purchase of any security referred to in subsection (a) of this section during the 12 calendar months preceding the filing of the statement, by any acquiring party, including the dates of purchase, names of the purchasers, and consideration paid or agreed to be paid therefor.

    (9) A description of any recommendations to purchase any security referred to in subsection (a) of this section made during the 12 calendar months preceding the filing of the statement, by any acquiring party, or by anyone based upon interviews or at the suggestion of such acquiring party.

    (10) Copies of all tender offers for, requests or invitations for tenders of, exchange offers for, and agreements to acquire or exchange any securities referred to in subsection (a) of this section, and (if distributed) of additional soliciting material relating thereto.

    (11) The terms of any agreement, contract or understanding made with any broker-dealer as to solicitation of securities referred to in subsection (a) of this section for tender, and the amount of any fees, commissions, or other compensation to be paid to broker-dealers with regard thereto.

    (12) An agreement by the person required to file the statement referred to in subsection (a) of this section that it will provide the annual report specified in subsection 3684(m) of this chapter, for so long as control exists.

    (13) An acknowledgment by the person required to file the statement referred to in subsection (a) of this section that the person and all subsidiaries within its control in the insurance holding company system will provide information to the Commissioner upon request as necessary to evaluate enterprise risk to the insurer.

    (14) Such additional information as the Commissioner may by rule prescribe as necessary or appropriate for the protection of policyholders and security holders of the insurer or in the public interest.

    (c) Filing by certain entities. If the person required to file the statement referred to in subsection (a) of this section is a partnership, limited partnership, syndicate, or other group, the Commissioner may require that the information called for by subdivisions (b)(1) through (12) of this section shall be given with respect to each partner of such partnership or limited partnership, each member of such syndicate or group, and each person who controls such partner or member. If any such partner, member or person is a corporation or the person required to file the statement referred to in subsection (a) of this section is a corporation, the Commissioner may require that the information called for by subdivisions (b)(1) through (14) of this section shall be given with respect to such corporation, each officer and director of such corporation, and each person who is directly or indirectly the beneficial owner of more than 10 percent of the outstanding voting securities of such corporation.

    (d) Material change to filing. If any material change occurs in the facts set forth in the statement filed with the Commissioner and sent to such insurer pursuant to this section, an amendment setting forth such change, together with copies of all documents and other material relevant to such change, shall be filed with the Commissioner and sent to such insurer within two business days after the person learns of such change. Such insurer shall send such amendment to its shareholders.

    (e) Alternative filing materials. If any offer, request, invitation, agreement, or acquisition referred to in subsection (a) of this section is proposed to be made by means of a registration statement under the Securities Act of 1933 or in circumstances requiring the disclosure of similar information under the Securities Exchange Act of 1934, or under a state law requiring similar registration or disclosure, the person required to file the statement referred to in subsection (a) may utilize such documents in furnishing the information called for by that statement.

    (f) Approval by Commissioner; hearings.

    (1) The Commissioner shall hold a public hearing on any merger or other acquisition of control referred to in subsection (a) of this section if the Commissioner determines that the statement filed as required by this section does not demonstrate compliance with the standards referred to in subsection (b) of this section or if the Commissioner determines that such acquisition of control is likely to be hazardous or prejudicial to the insurance buying public, or at the request of the acquiring party. Holding a public hearing is otherwise optional at the discretion of the Commissioner. In the event the Commissioner determines that a public hearing is not required, the Commissioner shall require that notice of the transaction be published on the website maintained by the Department of Financial Regulation and in two daily newspapers of general jurisdiction in Vermont, as determined by the Commissioner. The notice shall describe the proposed transaction and state that members of the public and interested parties may file written comments on the proposed transaction with the Commissioner. The Commissioner shall consider all written comments received within 14 days after initial publication of the notice and may subsequently hold a public hearing in response to any comments received. The Commissioner shall approve any merger or other acquisition of control referred to in subsection (a) of this section unless he or she finds that:

    (A) after the change of control the domestic insurer referred to in subsection (a) of this section would not be able to satisfy the requirements for the issuance of a license to write the line or lines of insurance for which it is presently licensed;

    (B) the effect of the merger or other acquisition of control would be substantially to lessen competition in insurance in this State or tend to create a monopoly. In applying the competitive standard in this subdivision:

    (i) the informational requirements of subdivision 3683a(c)(1) and the standards of subdivision 3683a(d)(2) of this chapter shall apply;

    (ii) the merger or other acquisition shall not be disapproved if the Commissioner finds that any of the situations meeting the criteria provided by subdivision 3683a(d)(3) of this chapter exist; and

    (iii) the Commissioner may condition the approval of the merger or other acquisition on the removal of the basis of disapproval within a specified period of time;

    (C) the financial condition of any acquiring party is such as might jeopardize the financial stability of the insurer, or prejudice the interest of its policyholders;

    (D) the terms of the offer, request, invitation, agreement, or acquisition referred to in subsection (a) of this section are unfair and unreasonable to the security holders of the insurer;

    (E) the plans or proposals that the acquiring party has to liquidate the insurer, sell its assets or consolidate or merge it with any person, or to make any other material change in its business or corporate structure or management are unfair and unreasonable to policyholders of the insurer and not in the public interest;

    (F) the competence, experience, and integrity of those persons who would control the operation of the insurer are such that it would not be in the interest of policyholders of the insurer and of the public to permit the merger or other acquisition of control; or

    (G) the acquisition is likely to be hazardous or prejudicial to the insurance-buying public.

    (2) The public hearing referred to in subdivision (1) of this subsection (f), if required, shall be held within 60 days after the statement required by subsection (a) of this section is filed, and at least 20 days' notice thereof shall be given by the Commissioner to the person filing the statement. Not less than seven days' notice of such public hearing shall be given by the person filing the statement to the insurer and to such other persons as may be designated by the Commissioner. The insurer shall give such notice to its security holders. The Commissioner shall make a determination within 30 days after the conclusion of such hearing or, if a public hearing is not required, within 30 days after the comment period deadline; provided, however, that, if the insurer is or will be an affiliate of a depository institution or any affiliate thereof, the Commissioner shall issue a determination within the 60-day period preceding the effective date of the acquisition or change or continuation of control of an insurer. At such hearing, the person filing the statement, the insurer, any person to whom notice of hearing was sent, and any other person whose interests may be affected thereby shall have the right to present evidence, examine, and cross-examine witnesses and offer oral and written arguments and in connection therewith shall be entitled to conduct discovery proceedings in the same manner as is presently allowed in the Superior Court of this State. All discovery proceedings shall be concluded not later than three days prior to the commencement of the public hearing.

    (3) If the proposed acquisition of control will require the approval of more than one commissioner, the public hearing may be held on a consolidated basis upon request of the person filing the statement referred to in subsection (a) of this section. Such person shall file the statement referred to in subsection (a) of this section with the NAIC within five days of making the request for a public hearing. A commissioner may opt out of a consolidated hearing and shall provide notice to the applicant of the opt-out within 10 days of the receipt of the statement referred to in subsection (a) of this section. A hearing conducted on a consolidated basis shall be public and shall be held within the United States before the commissioners of the states in which the insurers are domiciled. Such commissioners shall hear and receive evidence. A commissioner may attend such hearing in person or by telecommunication.

    (4) In connection with a change of control of a domestic insurer, any determination by the Commissioner that the person acquiring control of the insurer shall be required to maintain or restore the capital of the insurer to the level required by the laws and rules of this State shall be made not later than 60 days after the date of notification of the change in control submitted pursuant to subdivision (a)(1) of this section.

    (5) The Commissioner may retain at the acquiring person's expense any attorneys, actuaries, accountants, and other experts not otherwise a part of the Commissioner's staff as may be reasonably necessary to assist the Commissioner in reviewing the proposed acquisition of control.

    (g) Mailings to shareholders; payment of expenses. All statements, amendments, or other material filed pursuant to subsection (a) or (b) of this section, and all notices of public hearings held pursuant to subsection (d) of this section, shall be mailed by the insurer to its shareholders within five business days after the insurer has received such statements, amendments, other material, or notices. The expenses of mailing shall be borne by the person making the filing. As security for the payment of such expenses, such person shall file with the Commissioner an acceptable bond or other deposit in an amount to be determined by the Commissioner.

    (h) Exemptions. The provisions of this section shall not apply to:

    (1) [Repealed.]

    (2) Any transaction which is subject to the provisions of subchapter 3 of this chapter dealing with the merger or consolidation of two or more insurers.

    (3) Any offer, request, invitation, agreement, or acquisition which the Commissioner by order shall exempt therefrom as:

    (A) not having been made or entered into for the purpose and not having the effect of changing or influencing the control of a domestic insurer; or

    (B) as otherwise not comprehended within the purposes of this section.

    (4) The formation of a mutual holding company and reorganization of a mutual insurance company pursuant to section 3441 of this title or a merger pursuant to section 3442 of this title.

    (i) Violations. The following shall be violations of this section:

    (1) The failure to file any statement, amendment, or other material required to be filed pursuant to subsection (a) or (b) of this section; or

    (2) The effectuation or any attempt to effectuate an acquisition of control of, or merger with, a domestic insurer unless the Commissioner has given his or her approval thereto.

    (j) Jurisdiction; consent to service of process. The courts of this State are hereby vested with jurisdiction over every person not resident, domiciled, or authorized to do business in this State who files a statement with the Commissioner under this section, and over all actions involving such person arising out of violations of this section, and each such person shall be deemed to have performed acts equivalent to and constituting an appointment of the Commissioner by such a person to be his or her true and lawful attorney upon whom may be served all lawful process in any action, suit or proceeding arising out of violations of this section. Copies of all such lawful process shall be served on the Commissioner and transmitted by registered or certified mail by the Commissioner to such person at his or her last known address.

    (k) Additional capital requirements. As a condition for approval under this section, the Commissioner may require the person that is acquiring control of an insurer domiciled in this State to maintain or restore capital in compliance with and under the time frame established under the provisions of 15 U.S.C. § 6701(c)(2)(B). (Added 1971, No. 72, § 2; amended 1973, No. 193 (Adj. Sess.), § 3 eff. April 9, 1974; 1991, No. 101, § 12; 1991, No. 249 (Adj. Sess.), § 15; 1993, No. 12, § 9, eff. April 26, 1993; 1995, No. 167 (Adj. Sess.), § 29b; 2001, No. 71, §§ 8-10, eff. June 16, 2001; 2013, No. 29, § 28, eff. May 13, 2013; 2019, No. 103 (Adj. Sess.), § 19.)

  • § 3683a. Acquisitions involving insurers not otherwise covered

    (a) Definitions. For the purposes of this section:

    (1) "Acquisition" means any agreement, arrangement, or activity the consummation of which results in a person acquiring directly or indirectly the control of another person and includes the acquisition of voting securities and assets, bulk reinsurance, and mergers.

    (2) "Highly concentrated market" is a market in which the share of the four largest insurers is 75 percent or more of the market.

    (3) "Insurer" means a company licensed to do business in this State and includes any company or group of companies under common management, ownership, or control.

    (4) "Involved insurer" includes an insurer which either acquires or is acquired, is affiliated with an acquirer or acquired, or is the result of a merger.

    (5) "Market" means the relevant product and geographical markets. In determining the relevant product and geographical markets, the Commissioner shall give due consideration to, among other things, the definitions or guidelines, if any, adopted by the NAIC and to information, if any, submitted by parties to the acquisition. In the absence of sufficient information to the contrary, the relevant product market is assumed to be the direct written insurance premium for a line of business, such line being that used in the annual statement required to be filed by insurers doing business in this State, and the relevant geographical market is assumed to be this State.

    (6) "Significant trend toward increased concentration" means the aggregate market share of any grouping of the largest insurers in the market, from the two largest to the eight largest, has increased by seven percent or more of the market over a period of time extending from any base year five to 10 years prior to the acquisition up to the time of the acquisition.

    (b) Covered acquisitions. Except as provided in this subsection, this section applies to any acquisition in which there is a change in control of an insurer licensed to do business in this State, but not domiciled in this State. This section shall not apply to the following:

    (1) A purchase of securities solely for investment purposes so long as the securities are not used by voting or otherwise to cause or attempt to cause the substantial lessening of competition in any insurance market in this State. If a purchase of securities results in a presumption of control under subdivision 3681(3) of this chapter, it is not solely for investment purposes unless the commissioner of the insurer's state of domicile accepts a disclaimer of control or affirmatively finds that control does not exist and the disclaimer action or affirmative finding is communicated by the domiciliary commissioner to the Commissioner of this State.

    (2) The acquisition of a person by another person when both persons are neither directly nor through affiliates primarily engaged in the business of insurance, if preacquisition notification is filed with the Commissioner in accordance with subdivision (c)(1) of this section 30 days prior to the proposed effective date of the acquisition or if the acquisition would otherwise be excluded from this section by any other provision of this subsection.

    (3) The acquisition of already affiliated persons.

    (4) An acquisition if, as an immediate result of the acquisition:

    (A) in no market would the combined market share of the involved insurers exceed five percent of the total market;

    (B) there would be no increase in any market share; or

    (C) in no market would the combined market share of the involved insurers exceed 12 percent of the total market and the market share increase by more than two percent of the total market. For purposes of this subdivision, "market" means direct written insurance premium in this State for a line of business as contained in the annual statement required to be filed by insurers licensed to do business in this State.

    (5) An acquisition for which a preacquisition notification would be required under this section due solely to the resulting effect on the ocean marine insurance line of business.

    (6) An acquisition of an insurer whose domiciliary commissioner affirmatively finds that the insurer is in failing condition; there is a lack of feasible alternatives to improving such condition; the public benefits of improving the insurer's condition through the acquisition exceed the public benefits that would arise from not lessening competition; and the findings are communicated by the domiciliary commissioner to the Commissioner of this State.

    (c) Preacquisition notification; waiting period. An insurer involved in an acquisition covered by subsection (b) of this section shall file a preacquisition notification with the Commissioner so that the Commissioner may determine whether the proposed acquisition, if consummated, would violate the competitive standard established under subsection (d) of this section. The Commissioner shall give confidential treatment to information submitted under this subsection in the same manner as provided in section 3687 of this chapter.

    (1) The preacquisition notification shall be in such form and contain such information as prescribed by the NAIC relating to those markets which cause the acquisition to be covered under provisions of this section. The Commissioner may require such additional material and information as deemed necessary to carry out the purposes of this section. The required information may include an opinion of an economist as to the competitive impact of the acquisition in this State accompanied by a summary of the education and experience of such person indicating his or her ability to render an informed opinion.

    (2) The waiting period required shall begin on the date the Commissioner receives a preacquisition notification and shall end on the earlier of the 30th day after the date of receipt or termination of the waiting period by the Commissioner. Prior to the end of the waiting period, the Commissioner on a one-time basis may require the submission of additional needed information relevant to the proposed acquisition, in which event the waiting period shall end on the earlier of the 30th day after the Commissioner receives the additional information or termination of the waiting period by the Commissioner.

    (d) Competitive standard.

    (1) The Commissioner may enter an order under subdivision (e)(1) of this section with respect to an acquisition if there is substantial evidence that the effect of the acquisition may be to lessen substantially competition in any line of insurance in this State or may tend to create a monopoly.

    (2) In determining whether a proposed acquisition would violate the competitive standard of subdivision (1) of this subsection, the Commissioner shall consider the following:

    (A) Any acquisition covered under subsection (b) of this section involving two insurers competing in the same market is prima facie evidence of violation of the competitive standard if:

    (i) The market is highly concentrated and the involved insurers possess the following shares of the market:

    (I) insurer A a share of four percent and insurer B a share of four percent or more;

    (II) insurer A a share of 10 percent and insurer B a share of two percent or more; or

    (III) insurer A a share of 15 percent and insurer B a share of one percent or more.

    (ii) The market is not highly concentrated and the involved insurers possess the following shares of the market:

    (I) insurer A a share of five percent and insurer B a share of five percent or more;

    (II) insurer A a share of 10 percent and insurer B a share of four percent or more;

    (III) insurer A a share of 15 percent and insurer B a share of three percent or more; or

    (IV) insurer A a share of 19 percent and insurer B a share of one percent or more.

    (B) If more than two insurers competing in the same market are involved in any acquisition covered under subsection (b) of this section, then exceeding the total of the two figures set forth for insurer A and insurer B established under subdivision (A)(i) or (ii) of this subdivision (2) is prima facie evidence of violation of the competitive standard. For purposes of this subdivision (2), the insurer with the largest share of the market shall be considered to be insurer A.

    (C) Any acquisition covered under subsection (b) of this section involving two or more insurers competing in the same market is prima facie evidence of violation of the competitive standard in subdivision (1) of this subsection if:

    (i) there is a significant trend toward increased concentration in the market;

    (ii) one of the insurers involved is one of the insurers in a grouping of large insurers showing the requisite increase in the market share; and

    (iii) another involved insurer's market is two percent or more.

    (3) If an acquisition is not prima facie violative of the competitive standard under subdivisions (A) through (C) of subdivision (2) of this subsection, the Commissioner may establish the requisite anticompetitive effect based upon other substantial evidence. If an acquisition is prima facie violative of the competitive standard under subdivisions (A) through (C) of subdivision (2), a party may establish the absence of the requisite anticompetitive effect based upon other substantial evidence. Relevant factors in making a determination under this subdivision include the following: market shares, volatility of ranking of market leaders, number of competitors, concentration, trend of concentration in the industry, and ease of entry and exit into the market.

    (4) The burden of showing prima facie evidence of violation of the competitive standard rests upon the Commissioner.

    (5) Percentages not provided in subdivisions (A) and (B) of subdivision (2) of this subsection are interpolated proportionately to the percentages that are provided.

    (6) An order may not be entered under subdivision (e)(1) of this section if:

    (A) the acquisition will yield substantial economies of scale or economies in resource utilization that cannot be feasibly achieved in any other way and the public benefits which would arise from such economies exceed the public benefits which would arise from not lessening competition; or

    (B) the acquisition will substantially increase the availability of insurance and the public benefits of the increase exceed the public benefits which would arise from not lessening competition.

    (e) Orders and penalties.

    (1) If an acquisition violates the competitive standard of subsection (d) of this section or if an involved insurer fails to file adequate information in compliance with subsection (c) of this section, the Commissioner may enter an order:

    (A) requiring an involved insurer to cease and desist from doing business in this State with respect to the line or lines of insurance involved in the violation; or

    (B) denying the application of an acquired or acquiring insurer for a license to do business in this State.

    (2) Such an order shall not be entered unless there is a hearing, notice of the hearing is issued prior to the end of the waiting period and not less than 15 days prior to the hearing, and the hearing is concluded and the order is issued no later than 60 days after the date of the filing of the preacquisition notification with the Commissioner.

    (3) Every order shall be accompanied by a written decision of the Commissioner setting forth findings of fact and conclusions of law. An order under this subdivision shall not apply if the acquisition is not consummated.

    (4) Any person who violates a cease and desist order of the Commissioner under subdivision (1) of this subsection and while the order is in effect may, after notice and hearing and upon order of the Commissioner, be subject to a monetary penalty of not more than $10,000.00 for every day of violation or suspension or revocation of the person's license, in the discretion of the Commissioner.

    (5) Any insurer or other person who fails to make any filing required by this section and who also fails to demonstrate a good faith effort to comply with any filing requirement shall be subject to a fine of not more than $50,000.00.

    (f) Subsections 3689(b) and (c) of this title (regarding voting securities) and section 3691 of this title (regarding receivership) do not apply to acquisitions covered under subsection (b) of this section. (Added 2013, No. 29, § 29, eff. May 13, 2013.)

  • § 3684. Registration of insurers

    (a) Registration. Every insurer which is authorized to do business in this State and which is a member of an insurance holding company system shall register with the Commissioner, except a foreign insurer subject to disclosure requirements and standards adopted by statute or regulation in the jurisdiction of its domicile which are substantially similar to those contained in this section and section 3685 of this title. Any insurer which is subject to registration under this section shall register within 60 days after the effective date of this subchapter or 15 days after it becomes subject to registration, whichever is later, and annually thereafter by March 15 for the previous year ending December 31, unless the Commissioner for good cause shown extends the time for registration, and then within such extended time. The Commissioner may require any authorized insurer which is a member of a holding company system which is not subject to registration under this section to furnish a copy of the registration statement or other information filed by such insurance company with the insurance regulatory authority of its domiciliary jurisdiction.

    (b) Information and form required. Every insurer subject to registration shall file a registration statement on a form provided by the Commissioner, which shall contain current information about:

    (1) The capital structure, general financial condition, ownership, and management of the insurer and any person controlling the insurer.

    (2) The identity and relationship of every member of the insurance holding company system.

    (3) The following agreements in force, relationships subsisting, and transactions currently outstanding between such insurer and its affiliates:

    (A) loans, other investments, or purchases, sales or exchanges of securities of the affiliates by the insurer or of the insurer by its affiliates;

    (B) purchases, sales, or exchanges of assets;

    (C) transactions not in the ordinary course of business;

    (D) guarantees or undertakings for the benefit of an affiliate which result in an actual contingent exposure of the insurer's assets to liability; other than insurance contracts entered into in the ordinary course of the insurer's business;

    (E) all management and service contracts and all cost sharing arrangements;

    (F) all reinsurance agreements;

    (G) dividends and other distributions to shareholders; and

    (H) consolidated tax allocation agreements.

    (4) Any pledge of the insurer's stock, including stock of any subsidiary or controlling affiliate, for a loan made to any member of the insurance holding company system.

    (5) If requested by the Commissioner, financial statements of or within an insurance holding company system, including all affiliates. Financial statements may include annual audited financial statements filed with the U.S. Securities and Exchange Commission (SEC) pursuant to the Securities Act of 1933, as may be amended, or the Securities Exchange Act of 1934, as may be amended. An insurer required to file financial statements under this subdivision may satisfy the request by providing the Commissioner with the most recently filed parent corporation financial statements that have been filed with the SEC.

    (6) Other matters concerning transactions between registered insurers and any affiliates as may be included from time to time in any registration forms adopted or approved by the Commissioner.

    (7) Statements that the insurer's board of directors oversees corporate governance and internal controls and that the insurer's officers or senior management have approved, implemented, and continue to maintain and monitor corporate governance and internal control procedures.

    (8) Any other information required by the Commissioner by rule.

    (c) Summary of changes to registration statement. All registration statements shall contain a summary outlining all items in the current registration statement representing changes from the prior registration statement.

    (d) Materiality. No information need be disclosed on the registration statement filed pursuant to subsection (b) of this section if such information is not material for the purposes of this section. Unless the Commissioner by rule or order provides otherwise, sales, purchases, exchanges, loans or extensions of credit, or investments involving one-half of one percent or less of an insurer's admitted assets as of the 31st day of December next preceding shall not be deemed material for purposes of this section.

    (e) Reporting of dividends to shareholders. Subject to subsection 3685(d) of this chapter, each registered insurer shall report to the Commissioner all dividends and other distributions to shareholders within 15 business days following the declaration thereof.

    (f) Information of insurers. Any person within an insurance holding company system subject to registration shall be required to provide complete and accurate information to an insurer where the information is reasonably necessary to enable the insurer to comply with the provisions of this section.

    (g) Amendments to registration statements. Each registered insurer shall keep current the information required to be disclosed in its registration statement by reporting all material changes or additions on amendment forms provided by the Commissioner within 15 days after the end of the month in which it learns of each such change or addition, provided, however, that subject to subsection 3685(c) of this title each registered insurer shall so report all dividends and other distributions to shareholders within two business days following the declaration thereto.

    (h) Termination of registration. The Commissioner shall terminate the registration of any insurer which demonstrates that it no longer is a member of an insurance holding company system.

    (i) Consolidated filing. The Commissioner may require or allow two or more affiliated insurers subject to registration hereunder to file a consolidated registration statement or consolidated reports amending their consolidated registration statement or their individual registration statements.

    (j) Alternative registration. The Commissioner may allow an insurer which is authorized to do business in this State and which is part of an insurance holding company system to register on behalf of any affiliated insurer which is required to register under subsection (a) of this section and to file all information and material required to be filed under this section.

    (k) Exemptions. The provisions of this section shall not apply to any insurer, information, or transaction if and to the extent that the Commissioner by rule or order shall exempt the same from the provisions of this section.

    (l) Disclaimer. Any person may file with the Commissioner a disclaimer of affiliation with any authorized insurer, or such a disclaimer may be filed by such insurer or any member of an insurance holding company system. The disclaimer shall fully disclose all material relationships and bases for affiliation between such person and such insurer as well as the basis for disclaiming such affiliation. After a disclaimer has been filed, the insurer shall be relieved of any duty to register or report under this section which may arise out of the insurer's relationship with such person unless and until the Commissioner disallows such a disclaimer. The Commissioner shall disallow such a disclaimer only after furnishing all parties in interest with notice and opportunity to be heard and after making specific findings of fact to support such disallowance.

    (m) Enterprise risk filing. The ultimate controlling person of every insurer subject to registration shall also file an annual enterprise risk report. The report shall identify, to the best of the ultimate controlling person's knowledge and belief, the material risks within the insurance holding company system that could pose enterprise risk to the insurer. The report shall be filed with the lead state commissioner of the insurance holding company system as determined by the procedures within the Financial Analysis Handbook adopted by the National Association of Insurance Commissioners.

    (n) Violations. The failure to file a registration statement or any amendment thereto required by this section within the time specified for such filing shall be a violation of this section. (Added 1971, No. 72, § 2; amended 1991, No. 101, § 13; 1993, No. 235 (Adj. Sess.), §§ 2, 3, eff. June 21, 1994; 2013, No. 29, § 30, eff. May 13, 2013.)

  • § 3685. Standards and management of an insurer within an insurance holding company system

    (a) Transactions within an insurance holding company system to which an insurer subject to registration is a party shall be subject to the following standards:

    (1) the terms shall be fair and reasonable;

    (2) agreements for cost sharing services and management shall include such provisions as required by rule adopted by the Commissioner;

    (3) charges or fees for services performed shall be reasonable;

    (4) expenses incurred and payment received shall be allocated to the insurer in conformity with customary insurance accounting practices consistently applied;

    (5) the books, accounts, and records of each party to all such transactions shall be so maintained as to clearly and accurately disclose the precise nature and details of the transactions, including such accounting information as is necessary to support the reasonableness of the charges or fees to the respective parties; and

    (6) the insurer's surplus as regards policyholders following any dividends or distributions to shareholder affiliates shall be reasonable in relation to the insurer's outstanding liabilities and adequate to its financial needs.

    (b) Adequacy of surplus. For purposes of this subchapter, in determining whether an insurer's surplus as regards policyholders is reasonable in relation to the insurer's outstanding liabilities and adequate to its financial needs, the following factors, among others, shall be considered:

    (1) The size of the insurer as measured by its assets, capital and surplus, reserves, premium writings, insurance in force, and other appropriate criteria.

    (2) The extent to which the insurer's business is diversified among the several lines of insurance.

    (3) The number and size of risks insured in each line of business.

    (4) The extent of the geographical dispersion of the insurer's insured risks.

    (5) The nature and extent of the insurer's reinsurance program.

    (6) The quality, diversification, and liquidity of the insurer's investment portfolio.

    (7) The recent past and projected future trend in the size of the insurer's surplus as regards policyholders.

    (8) The surplus as regards policyholders maintained by other comparable insurers.

    (9) The adequacy of the insurer's reserves.

    (10) The quality and liquidity of investments in subsidiaries made pursuant to section 3682 of this title. The Commissioner may treat any such investment as a disallowed asset for purposes of determining the adequacy of surplus as regards policyholders whenever in his or her judgment such investment so warrants.

    (c) Dividends and other distributions. No insurer subject to registration under section 3684 of this title shall pay any extraordinary dividend or make any other extraordinary distribution to its shareholders until:

    (1) 30 days after the Commissioner has received notice of the declaration thereof and has not within such period disapproved such payment; or

    (2) the Commissioner shall have approved such payment within such 30-day period.

    (d) Limitation on dividends.

    (1) For purposes of this section, an extraordinary dividend or distribution includes any dividend or distribution of cash or other property whose fair market value together with that of other dividends or distributions made within the preceding 12 months exceeds the lesser of:

    (A) 10 percent of such insurer's surplus as regards policyholders as of the 31st day of December next preceding; or

    (B) the net gains from operations of such insurer, if such insurer is a life insurer, or the net income, if such insurer is not a life insurer, not including realized capital gains, for the 12-month period ending the 31st day of December next preceding, but shall not include pro rata distributions of any class of the insurer's own securities.

    (2) In determining whether a dividend or distribution is extraordinary, an insurer other than a life insurer may carry forward net income from the previous two calendar years that has not already been paid out as dividends. This carry-forward shall be computed by taking the net income from the second and third preceding calendar years, not including realized capital gains, less dividends paid in the second and immediate preceding calendar years. In determining whether a dividend or distribution is extraordinary, a life insurer may exclude dividends or distributions paid only from unassigned surplus that do not exceed the greater of subdivision (1)(A) or (B) of this subsection, provided that a life insurer relying on this provision shall notify the Commissioner of such dividend or distribution within five business days following declaration and at least 10 days, commencing from the date of receipt by the Commissioner, prior to the payment thereof.

    (e) Conditional dividends. Notwithstanding any other provision of law, an insurer may declare an extraordinary dividend or distribution which is conditional upon the Commissioner's approval thereof, and such a declaration shall confer no rights upon shareholders until the Commissioner has:

    (1) approved the payment of such dividend or distribution; or

    (2) not disapproved such payment within the 30-day period referred to in subsection (c) of this section.

    (f) The following transactions involving a domestic insurer and any person in its holding company system, including amendments or modifications of affiliate agreements previously filed under this section, which are subject to any materiality standards contained in subdivisions (1) through (7) of this subsection, may not be entered into unless the insurer has notified the Commissioner in writing of its intention to enter into such transaction at least 30 days prior thereto, or such shorter period as the Commissioner may permit, and the Commissioner has not disapproved it within such period. The notice for amendments or modifications shall include the reasons for the change and the financial impact on the domestic insurer. Informal notice shall be reported within 30 days after a termination of a previously filed agreement to the Commissioner for determination of the type of filing required, if any. Nothing herein contained shall be deemed to authorize or permit any transactions which, in the case of an insurer not a member of the same holding company system, would be otherwise contrary to law.

    (1) Sales, purchases, exchanges, loans, or extensions of credit, guarantees, or investments provided such transactions are equal to or exceed:

    (A) with respect to nonlife insurers, the lesser of three percent of the insurer's admitted assets or 25 percent of surplus as regards policyholders as of the 31st day of December next preceding;

    (B) with respect to life insurers, three percent of the insurer's admitted assets; each as of the 31st day of December next preceding.

    (2) Loans or extensions of credit to any person who is not an affiliate, where the insurer makes such loans or extensions of credit with the agreement or understanding that the proceeds of such transactions, in whole or in substantial part, are to be used to make loans or extensions of credit to, to purchase assets of, or to make investments in any affiliate of the insurer making such loans or extensions of credit provided such transactions are equal to or exceed:

    (A) with respect to nonlife insurers, the lesser of three percent of the insurer's admitted assets or 25 percent of surplus as regards policyholders as of the 31st day of December next preceding;

    (B) with respect to life insurers, three percent of the insurer's admitted assets; each as of the 31st day of December next preceding.

    (3) Reinsurance agreements or modifications thereto, including:

    (A) all reinsurance pooling agreements;

    (B) agreements in which the reinsurance premium or a change in the insurer's liabilities or the projected reinsurance premium or a change in the insurer's liabilities in any of the next three years equals or exceeds five percent of the insurer's surplus as regards policyholders, as of the 31st day of December next preceding, including those agreements which may require as consideration the transfer of assets from an insurer to a nonaffiliate, if an agreement or understanding exists between the insurer and nonaffiliate that any portion of such assets will be transferred to one or more affiliates of the insurer.

    (4) Any material transactions, specified by regulation, which the Commissioner determines may adversely affect the interests of the insurer's policyholders.

    (5) All management agreements, service contracts, and all cost-sharing arrangements.

    (6) Guarantees when made by a domestic insurer; provided, however, that a guarantee which is quantifiable as to amount is not subject to the notice requirements of this subsection unless it exceeds the lesser of one-half of one percent of the insurer's admitted assets or 10 percent of surplus as regards policyholders as of the 31st day of December next preceding. All guarantees which are not quantifiable as to amount are subject to the notice requirements of this subdivision.

    (7) Direct or indirect acquisitions or investments in a person that controls the insurer or an affiliate of the insurer in an amount which, together with its present holdings in such investments, exceeds two and one-half percent of the insurer's surplus to policyholders. Direct or indirect acquisitions or investments in subsidiaries acquired pursuant to section 3682 of this chapter or authorized under any other section of this chapter or in nonsubsidiary insurance affiliates that are subject to the provisions of this chapter are exempt from this requirement.

    (g) A domestic insurer may not enter into transactions which are part of a plan or series of like transactions with persons within the holding company system if the purpose of those separate transactions is to avoid the statutory threshold amount and thus avoid the review that would occur otherwise. If the Commissioner determines that such separate transactions were entered into over any 12-month period for such purpose, he or she may exercise his or her authority under this title.

    (h) The Commissioner, in reviewing transactions pursuant to subsection (f) of this section, shall consider whether the transactions comply with the standards set forth in subsection (a) of this section and whether they may adversely affect the interests of policyholders.

    (i) The Commissioner shall be notified within 30 days of any investment of the domestic insurer in any one corporation if the total investment in such corporation by the insurance holding company system exceeds ten percent of such corporation's voting securities.

    (j) Management of domestic insurers subject to registration.

    (1) Notwithstanding the control of a domestic insurer by any person, the officers and directors of the insurer shall not thereby be relieved of any obligation or liability to which they would otherwise be subject by law, and the insurer shall be managed so as to assure its separate operating identity consistent with this section.

    (2) Nothing in this section shall preclude a domestic insurer from having or sharing a common management or cooperative or joint use of personnel, property, or services with one or more other persons under arrangements meeting the standards of subsection (a) of this section.

    (3) Not less than one-third of the directors of a domestic insurer, and not less than one-third of the members of each committee of the board of directors of any domestic insurer shall be persons who are not officers or employees of the insurer or of any entity controlling, controlled by, or under common control with the insurer and who are not beneficial owners of a controlling interest in the voting stock of the insurer or entity. At least one such person must be included in any quorum for the transaction of business at any meeting of the board of directors or any committee thereof.

    (4) The board of directors of a domestic insurer shall establish one or more committees composed of a majority of directors who are not officers or employees of the insurer or of any entity controlling, controlled by, or under common control with the insurer and who are not beneficial owners of a controlling interest in the voting stock of the insurer or any such entity. The committee or committees shall have responsibility for nominating candidates for director for election by shareholders or policyholders, evaluating the performance of officers deemed to be principal officers of the insurer, and recommending to the board of directors the selection and compensation of the principal officers. For purposes of this subsection, principal officers shall mean the chief executive officer, the president, and any chief operating officer.

    (5) The provisions of subdivisions (3) and (4) of this subsection shall not apply to a domestic insurer if the person controlling the insurer, such as an insurer, a mutual insurance holding company, or a publicly held corporation, has a board of directors and committees thereof that meet the requirements of subdivisions (3) and (4) of this subsection with respect to such controlling entity.

    (6) An insurer may make application to the Commissioner for a waiver from the requirements of this subsection if the insurer's annual direct written and assumed premium, excluding premiums reinsured with the Federal Crop Insurance Corporation and Federal Flood Program, is less than $300,000,000.00. An insurer may also make application to the Commissioner for a waiver from the requirements of this subsection based upon unique circumstances. The Commissioner may consider various factors, including the type of business entity, volume of business written, availability of qualified board members, or the ownership or organizational structure of the entity. (Added 1971, No. 72, § 2; amended 1991, No. 101, §§ 14-16; 1991, No. 249 (Adj. Sess.), § 16; 1993, No. 12, § 10, eff. April 26, 1993; 2013, No. 29, § 31, eff. May 13, 2013; 2015, No. 70 (Adj. Sess.), § 1, eff. April 8, 2016.)

  • § 3686. Examination

    (a) Power of Commissioner. Subject to the limitation contained in this section and in addition to the powers which the Commissioner has under subchapter 7 of this chapter relating to the examination of insurers, the Commissioner shall also have the power to examine any insurer registered under section 3684 of this chapter and its affiliates to ascertain the financial condition of the insurer, including the enterprise risk to the insurer by the ultimate controlling party or by any entity or combination of entities within the insurance holding company system or by the insurance holding company system on a consolidated basis.

    (b) Access to books and records.

    (1) The Commissioner may order any insurer registered under section 3684 of this chapter to produce such records, books, or papers in the possession of the insurer or its affiliates as are reasonably necessary to determine compliance with this chapter.

    (2) To determine compliance with this chapter, the Commissioner may order any insurer registered under section 3684 of this chapter to produce information not in the possession of the insurer if the insurer can obtain access to such information pursuant to contractual relationships, statutory obligations, or other method. In the event the insurer cannot obtain the information requested by the Commissioner, the insurer shall provide the Commissioner a detailed explanation of the reason that the insurer cannot obtain the information and the identity of the holder of information. Whenever it appears to the Commissioner that the detailed explanation is without merit, the Commissioner may require, after notice and hearing, the insurer to pay a penalty of up to $1,000.00 for each day's delay or may suspend or revoke the insurer's license.

    (c) Purpose and limitation of examination. The Commissioner shall exercise his or her power under subsections (a) and (b) of this section only if the examination of the insurer under subchapter 7 of this chapter is inadequate or the interests of the policyholders of such insurer may be adversely affected.

    (d) Use of consultants. The Commissioner may retain at the registered insurer's expense such attorneys, actuaries, accountants, and other experts not otherwise a part of the Commissioner's staff as shall be reasonably necessary to assist in the conduct of the examination under subsection (a) of this section. Any persons so retained shall be under the direction and control of the Commissioner and shall act in a purely advisory capacity.

    (e) Expenses. Each registered insurer producing for examination records, books, and papers pursuant to subsection (a) of this section shall be liable for and shall pay the expense of such examination in accordance with section 3563 of this title.

    (f) Compelling production. In the event the insurer fails to comply with an order, the Commissioner shall have the power to examine the affiliates to obtain the information. The Commissioner also shall have the power to issue subpoenas, to administer oaths, and to examine under oath any person for purposes of determining compliance with this section. Upon the failure or refusal of any person to obey a subpoena, the Commissioner may petition a court of competent jurisdiction, and upon proper showing, the court may enter an order compelling the witness to appear and testify or produce documentary evidence. Failure to obey the court order shall be punishable as contempt of court. Every person shall be obliged to attend as a witness at the place specified in the subpoena, when subpoenaed, anywhere within the State. He or she shall be entitled to the same fees and mileage, if claimed, as a witness in the Superior Court of this State, which fees, mileage, and actual expense, if any, necessarily incurred in securing the attendance of witnesses and their testimony shall be itemized and charged against and be paid by the company being examined. (Added 1971, No. 72, § 2; amended 2013, No. 29, § 32, eff. May 13, 2013.)

  • § 3687. Confidential treatment

    (a) Documents, materials, or other information in the possession or control of the Department that are obtained by or disclosed to the Commissioner or any other person in the course of an examination or investigation made pursuant to section 3686 of this title and all information reported pursuant to subdivisions 3683(b)(12) and (13), section 3684, and section 3685 of this title shall be given confidential treatment, shall not be subject to subpoena, shall not be subject to public inspection and copying under the Public Records Act, shall not be subject to discovery or admissible in evidence in any private civil action, and shall not be made public by the Commissioner or any other person. However, the Commissioner is authorized to use the documents, materials, or other information in the furtherance of any regulatory or legal action brought as a part of the Commissioner's official duties. The Commissioner shall not otherwise make the documents, materials, or other information public without the prior written consent of the insurer to which it pertains unless the Commissioner, after giving the insurer and its affiliates who would be affected thereby notice and opportunity to be heard, determines that the interests of policyholders, shareholders, or the public will be served by the publication thereof, in which event he or she may publish all or any part thereof in such manner as he or she may deem appropriate.

    (b) Neither the Commissioner nor any person who received documents, materials, or other information while acting under the authority of the Commissioner or with whom such documents, materials, or other information are shared pursuant to this chapter shall be permitted or required to testify in any private civil action concerning any confidential documents, materials, or information subject to subsection (a) of this section.

    (c) In order to assist in the performance of the Commissioner's duties, the Commissioner:

    (1) may share documents, materials, or other information, including the confidential and privileged documents, materials, or information subject to subsection (a) of this section, with other state, federal, and international regulatory agencies, with the NAIC and its affiliates and subsidiaries, and with state, federal, and international law enforcement authorities, including members of any supervisory college described in section 3695 of this title, provided that the recipient agrees in writing to maintain the confidentiality and privileged status of the document, material, or other information and has verified in writing the legal authority to maintain confidentiality;

    (2) notwithstanding subdivision (1) of this subsection, may only share confidential and privileged documents, material, or information reported pursuant to subsection 3684(m) of this chapter with commissioners of states having statutes or regulations substantially similar to subsection (a) of this section and who have agreed in writing not to disclose such information;

    (3) may receive documents, materials, or information, including otherwise confidential and privileged documents, materials, or information, from the NAIC and its affiliates and subsidiaries and from regulatory and law enforcement officials of other foreign or domestic jurisdictions and shall maintain as confidential or privileged any document, material, or information received with notice or the understanding that it is confidential or privileged under the laws of the jurisdiction that is the source of the document, material, or information; and

    (4) shall enter into written agreements with the NAIC governing sharing and use of information provided under this chapter consistent with this subsection that shall:

    (A) specify procedures and protocols regarding the confidentiality and security of information shared with the NAIC and its affiliates and subsidiaries pursuant to this section, including procedures and protocols for sharing by the NAIC with other state, federal, or international regulators;

    (B) specify that ownership of information shared with the NAIC and its affiliates and subsidiaries pursuant to this section remains with the Commissioner and the NAIC's use of the information is subject to the direction of the Commissioner;

    (C) require prompt notice be given to an insurer whose confidential information in the possession of the NAIC under this section is subject to a request or subpoena to the NAIC for disclosure or production; and

    (D) require the NAIC and its affiliates and subsidiaries to consent to intervention by an insurer in any judicial or administrative action in which the NAIC and its affiliates and subsidiaries may be required to disclose confidential information about the insurer shared with the NAIC and its affiliates and subsidiaries pursuant to this section.

    (d) The sharing of information by the Commissioner pursuant to this section shall not constitute a delegation of regulatory authority or rulemaking, and the Commissioner is solely responsible for the administration, execution, and enforcement of the provisions of this section.

    (e) No waiver of any applicable privilege or claim of confidentiality in the documents, materials, or information shall occur as a result of disclosure to the Commissioner under this section or as a result of sharing as authorized in subsection (c) of this section.

    (f) Documents, materials, or other information in the possession or control of the NAIC pursuant to this section shall be confidential by law and privileged, shall not be subject to public inspection and copying under the Public Records Act, shall not be subject to subpoena, shall not be subject to discovery or admissible in evidence in any private civil action, and shall not be made public by the Commissioner or any other person. (Added 1971, No. 72, § 2; amended 2013, No. 29, § 33, eff. May 13, 2013.)

  • § 3688. Rules and regulations

    The Commissioner may, upon notice and opportunity for all interested persons to be heard, issue such rules, regulations, and orders as shall be necessary to carry out the provisions of this subchapter. (Added 1971, No. 72, § 2.)

  • § 3689. Injunctions; prohibitions against voting securities; sequestration of voting securities

    (a) Injunctions. Whenever it appears to the Commissioner that any insurer or any director, officer, employee, or agent thereof has committed or is about to commit a violation of this subchapter or of any rule, regulation, or order issued by the Commissioner hereunder, the Commissioner may apply to the Superior Court for the county in which the principal office of the insurer is located or if such insurer has no such office in this State then to the Superior Court for Washington County for an order enjoining such insurer or such director, officer, employee, or agent thereof from violating or continuing to violate this subchapter or any such rule, regulation or order, and for such other equitable relief as the nature of the case and the interests of the insurer's policyholders, creditors, and shareholders or the public may require.

    (b) Voting of securities, when prohibited. No security which is the subject of any agreement regarding acquisition, or which is acquired or to be acquired, in contravention of the provisions of this subchapter or of any rule, regulation or order issued by the Commissioner hereunder may be voted at any shareholders' meeting, or may be counted for quorum purposes, and any action of shareholders requiring the affirmative vote of a percentage of shares may be taken as though such securities were not issued and outstanding; but no action taken at any such meeting shall be invalidated by the voting of such securities, unless the action would materially affect control of the insurer or unless the courts of this State have so ordered. If an insurer or the Commissioner has reason to believe that any security of the insurer has been or is about to be acquired in contravention of the provisions of this subchapter or of any rule, regulation or order issued by the Commissioner hereunder the insurer or the Commissioner may apply to the Superior Court for the county in which the insurer has its principal place of business or to the Superior Court for Washington County to enjoin any offer, request, invitation, agreement or acquisition made in contravention of section 3685 of this title or any rule, regulation, or order issued by the Commissioner thereunder to enjoin the voting of any security so acquired, to void any vote of such security already cast at any meeting of shareholders, and for such other equitable relief as the nature of the case and the interests of the insurer's policyholders, creditors and shareholders or the public may require.

    (c) Sequestration of voting securities. In any case where a person has acquired or is proposing to acquire any voting securities in violation of this subchapter or any rule, regulation, or order issued by the Commissioner hereunder, the Superior Court for the county in which the insurer has its principal place of business or the Superior Court of Washington County may, on such notice as the court deems appropriate, upon the application of the insurer or the Commissioner, seize or sequester any voting securities of the insurer owned directly or indirectly by such person, and issue such orders with respect thereto as may be appropriate to effectuate the provisions of this subchapter. Notwithstanding any other provisions of law, for the purposes of this subchapter the situs of the ownership of the securities of domestic insurers shall be deemed to be in this State. (Added 1971, No. 72, § 2; amended 1973, No. 193 (Adj. Sess.), § 3, eff. April 9, 1974.)

  • § 3690. Sanctions

    (a) Any insurer failing, without just cause, to file any registration statement as required in this subchapter shall be required, after notice and hearing, to pay a penalty of not more than $1,000.00 for each day's delay, to be recovered by the Commissioner of Financial Regulation and the penalty so recovered shall be paid into the General Revenue Fund of this State. The maximum penalty under this section is $150,000.00. The Commissioner may reduce the penalty if the insurer demonstrates to the Commissioner that the imposition of the penalty would constitute a financial hardship to the insurer.

    (b) Every director or officer of an insurance holding company system who knowingly violates, participates in, or assents to, or who knowingly shall permit any of the officers or agents of the insurer to engage in transactions or make investments which have not been properly reported or submitted pursuant to subsection 3684(a), 3685(c), or 3685(f) of this title, or which violate this subchapter, shall pay, in their individual capacity, an administrative penalty of not more than $5,000.00 per violation, after notice and hearing before the Commissioner. In determining the amount of the penalty, the Commissioner shall take into account the appropriateness of the penalty with respect to the gravity of the violation, the history of previous violations, and such other matters as justice may require.

    (c) Whenever it appears to the Commissioner that any insurer subject to this subchapter or any director, officer, employee, or agent thereof has engaged in any transaction or entered into a contract which is subject to section 3685 of this subchapter and which would not have been approved had such approval been requested, the Commissioner may order the insurer to cease and desist immediately any further activity under that transaction or contract. After notice and hearing, the Commissioner may also order the insurer to void any such contracts and restore the status quo if such action is in the best interest of the policyholders, creditors, or the public.

    (d) Any person who willfully violates any section of this subchapter shall be fined not more than $25,000.00 or imprisoned not more than three years, or both.

    (e) Any insurer, officer, director, or employee of an insurance holding company system who willfully subscribes to, makes, or causes to be made any false statement, report, or filing under this subchapter shall be imprisoned for not more than three years or fined not more than $25,000.00, or both. Any fines imposed shall be paid by the officer, director, or employee in his or her individual capacity.

    (f) Whenever it appears to the Commissioner that any person has committed a violation of section 3681 of this chapter which prevents the full understanding of the enterprise risk to the insurer by affiliates or by the insurance holding company system, the violation may serve as an independent basis for disapproving dividends or distributions and for placing the insurer under an order of supervision under section 7041 of this title. (Added 1971, No. 72, § 2; amended 1991, No. 249 (Adj. Sess.), § 17; 1995, No. 180 (Adj. Sess.), § 38(a); 2011, No. 78 (Adj. Sess.), § 2, eff. April 2, 2012; 2013, No. 29, § 34, eff. May 13, 2013.)

  • § 3691. Receivership

    Whenever it appears to the Commissioner that any person has committed a violation of this subchapter which so impairs the financial condition of a domestic insurer as to threaten insolvency or make the further transaction of business by it hazardous to its policyholders, creditors, shareholders, or the public, then the Commissioner may proceed as provided in chapter 145 of this title. (Added 1971, No. 72, § 2; amended 1993, No. 12, § 7, eff. April 26, 1993.)

  • § 3692. Revocation, suspension, or nonrenewal of insurer's license

    Whenever it appears to the Commissioner that any person has committed a violation of this subchapter which makes the continued operation of an insurer contrary to the interests of policyholders or the public, the Commissioner may, after giving notice and an opportunity to be heard, determine to suspend, revoke, or refuse to renew such insurer's license or authority to do business in this State for such period as he or she finds is required for the protection of policyholders or the public. Any such determination shall be accompanied by specific findings of fact and conclusions of law. (Added 1971, No. 72, § 2.)

  • § 3693. Judicial review

    (a) Any person aggrieved by any act, determination, rule, regulation, or order or any other action of the Commissioner pursuant to this subchapter may appeal therefrom to the Superior Court. The Court shall conduct its review without a jury and by trial de novo, except that if all parties, including the Commissioner, so stipulate, the review shall be confined to the record. Portions of the record may be introduced by stipulation into evidence in a trial de novo as to those parties so stipulating.

    (b) The filing of an appeal pursuant to this section shall stay the application of any such rule, regulation, order or other action of the Commissioner to the appealing party unless the Court, after giving such party notice and an opportunity to be heard, determines that such a stay would be detrimental to the interests of policyholders, shareholders, creditors, or the public.

    (c) Any person aggrieved by any failure of the Commissioner to act or make a determination required by this subchapter may file a complaint in the Superior Court for an order directing the Commissioner to act or make such determination forthwith. (Added 1971, No. 72, § 2; amended 1973, No. 193 (Adj. Sess.), § 3, eff. April 9, 1974.)

  • § 3694. Recovery

    (a) If an order for liquidation or rehabilitation of a domestic insurer has been entered, the receiver appointed under such order shall have a right to recover on behalf of the insurer where the distribution or payment pursuant to subdivision (1) or (2) of this subsection is made at any time during the one year preceding the petition for liquidation, conservation, or rehabilitation, as the case may be, subject to the limitations of subsections (b), (c) and (d) of this section:

    (1) from any parent corporation or holding company or person or affiliate who otherwise controlled the insurer, the amount of distributions (other than distributions of shares of the same class of stock) paid by the insurer on its capital stock; or

    (2) any payment in the form of a bonus, termination settlement or extraordinary lump sum salary adjustment made by the insurer or its subsidiaries to a director, officer, or employee.

    (b) No such distribution shall be recoverable if the parent or affiliate shows that when paid such distribution was lawful and reasonable, and that the insurer did not know and could not reasonably have known that such distribution might adversely affect the ability of the insurer to fulfill its contractual obligations.

    (c) Any person who was a parent corporation or holding company or a person who otherwise controlled the insurer or affiliate at the time such distributions were paid shall be liable up to the amount of distributions or payments under subsection (a) of this section received by such person. Any person who otherwise controlled the insurer at the time such distributions were declared shall be liable up to the amount of distributions he or she would have received if they had been paid immediately. If two or more persons are liable with respect to the same distributions, they shall be jointly and severally liable.

    (d) The maximum amount recoverable under this section shall be the amount needed in excess of all other available assets of the impaired or insolvent insurer to pay the contractual obligations of the impaired or insolvent insurer and to reimburse any guaranty funds.

    (e) To the extent that any person liable under subsection (c) of this section is insolvent or otherwise fails to pay claims due from it pursuant to such subsection, its parent corporation or holding company or person who otherwise controlled it at the time the distribution was paid, shall be jointly and severally liable for any resulting deficiency in the amount recovered from the person liable under subsection (c) of this section. (Added 1991, No. 101, § 17.)

  • § 3695. Supervisory colleges

    (a) Power of Commissioner. With respect to any insurer registered under section 3684 of this title and in accordance with subsection (c) of this section, the Commissioner shall also have the power to participate in a supervisory college for any domestic insurer that is part of an insurance holding company system with international operations in order to determine compliance by the insurer with this chapter. The powers of the Commissioner with respect to supervisory colleges include the following:

    (1) initiating the establishment of a supervisory college;

    (2) clarifying the membership and participation of other supervisors in the supervisory college;

    (3) clarifying the functions of the supervisory college and the role of other regulators, including the establishment of a group-wide supervisor;

    (4) coordinating the ongoing activities of the supervisory college, including planning meetings, supervisory activities, and processes for information sharing; and

    (5) establishing a crisis management plan.

    (b) Expenses. Each registered insurer subject to this section shall be liable for and shall pay the reasonable expenses of the Commissioner's participation in a supervisory college in accordance with subsection (c) of this section, including reasonable travel expenses. For purposes of this section, a supervisory college may be convened as either a temporary or permanent forum for communication and cooperation between the regulators charged with the supervision of the insurer or its affiliates, and the Commissioner may establish a regular assessment on the insurer for the payment of these expenses.

    (c) Supervisory college. In order to assess the business strategy, financial position, legal and regulatory position, risk exposure, risk management, and governance processes and as part of the examination of individual insurers in accordance with section 3686 of this chapter, the Commissioner may participate in a supervisory college with other regulators charged with supervision of the insurer or its affiliates, including other state, federal, and international regulatory agencies. The Commissioner may enter into agreements in accordance with subsection 3687(c) of this chapter providing the basis for cooperation between the Commissioner and the other regulatory agencies and the activities of the supervisory college. Nothing in this section shall delegate to the supervisory college the authority of the Commissioner to regulate or supervise the insurer or its affiliates within its jurisdiction. (Added 2013, No. 29, § 35, eff. May 13, 2013, eff. May 13, 2013.)

  • § 3696. Groupwide supervisor; internationally active insurance group

    (a)(1) The Commissioner is authorized to act as the groupwide supervisor for any internationally active insurance group. The Commissioner, however, may acknowledge another regulatory official as the supervisor, provided the group:

    (A) does not have substantial insurance operations in the United States;

    (B) has substantial insurance operations in the United States, but not in Vermont; or

    (C) has substantial insurance operations in the United States and in Vermont, but the Commissioner has determined, pursuant to the factors in subsections (b) and (g) of this section, that such other regulatory official is the appropriate supervisor.

    (2) An insurance holding company system that does not otherwise qualify as an internationally active insurance group under subdivision 3681(8) of this subchapter may request that the Commissioner make a determination or acknowledgment as to a supervisor pursuant to this section.

    (b)(1) In cooperation with other state, federal, and international regulatory agencies, the Commissioner shall identify a single groupwide supervisor for a group. The Commissioner may determine that he or she is the appropriate supervisor for a group if the group conducts substantial insurance operations in Vermont, or the Commissioner may acknowledge that a regulatory official from another jurisdiction is the appropriate supervisor for such group. The Commissioner shall consider the following factors when making a determination or acknowledgment under this subsection:

    (A) the place of domicile of the insurers within the group that hold the largest share of the group's written premiums, assets, or liabilities;

    (B) the place of domicile of the top-tiered insurers in the insurance holding company system of the group;

    (C) the location of the executive offices or largest operational offices of the group;

    (D) whether another regulatory official is acting or is seeking to act as the supervisor under a regulatory system the Commissioner determines to be:

    (i) substantially similar to the system of regulation provided under Vermont law; or

    (ii) otherwise sufficient in terms of providing for supervision, enterprise risk analysis, and cooperation with other regulatory officials; and

    (E) whether another regulatory official acting or seeking to act as the supervisor provides the Commissioner with reasonably reciprocal recognition and cooperation.

    (2) A commissioner identified under this subsection as the groupwide supervisor may determine that it is appropriate to acknowledge another supervisor to serve as the groupwide supervisor. The acknowledgment of the supervisor shall be made after consideration of the factors listed in subdivisions (A) through (E) of this subdivision, and shall be made in cooperation with and subject to the acknowledgment of other regulatory officials involved with supervision of the members of the group, and in consultation with the group itself.

    (c) Notwithstanding any other provision of law to the contrary, when another regulatory official is acting as the groupwide supervisor of an internationally active insurance group, the Commissioner shall acknowledge such official as the supervisor. However, the Commissioner shall make a determination or acknowledgment as to the appropriate supervisor for such group pursuant to subsection (b) of this section in the event of a material change in the group that results in:

    (1) the group's insurers domiciled in Vermont holding the largest share of the group's premiums, assets, or liabilities; or

    (2) Vermont's becoming the place of domicile of the top-tiered insurers in the insurance holding company system of the group.

    (d) Pursuant to section 3686 of this subchapter, the Commissioner is authorized to collect from any insurer registered under section 3684 of this subchapter all information necessary to determine whether the Commissioner shall act as the groupwide supervisor of an internationally active insurance group or, instead, acknowledge another regulatory official to act as supervisor.

    (e) Prior to issuing a determination that a group is subject to supervision by the Commissioner, the Commissioner shall notify the insurer registered pursuant to section 3684 of this subchapter of the pending determination, including the ultimate controlling person within the group. The group shall have not less than 30 days to provide the Commissioner with any additional information it deems relevant to the determination. The Commissioner shall publish on its website the identity of internationally active insurance groups subject to supervision by him or her.

    (f) If the Commissioner is the supervisor for a group, the Commissioner is authorized to engage in any of the following groupwide supervision activities:

    (1) Assess the enterprise risks within the group to ensure that:

    (A) the material financial condition and liquidity risks to the members of group engaged in the business of insurance are identified by management; and

    (B) reasonable and effective mitigation measures are in place.

    (2) Request, from any member of a group subject to the Commissioner's supervision, information necessary and appropriate to assess enterprise risk, including information about the members of the group regarding:

    (A) governance, risk assessment, and management;

    (B) capital adequacy; and

    (C) material intercompany transactions.

    (3) Coordinate and, through the authority of the regulatory officials of the jurisdictions where members of the group are domiciled, compel development and implementation of reasonable measures designed to ensure that the group is able to timely recognize and mitigate enterprise risks to members of the group engaged in the business of insurance.

    (4) Communicate with other state, federal, and international regulatory agencies of members within group and share relevant information, subject to the confidentiality provisions of section 3687 of this subchapter, through supervisory colleges as provided in section 3695 of this subchapter or otherwise.

    (5) Enter into agreements with or obtain documentation from any insurer registered under section 3684 of this subchapter, any member of the group, and any other state, federal, and international regulatory agencies of members of the group, providing the basis for or otherwise clarifying the Commissioner's role as groupwide supervisor, including provisions for resolving disputes with other regulatory officials. Such agreements or documentation shall not serve as evidence in any proceeding that any insurer or person within an insurance holding company system not domiciled or incorporated in Vermont is doing business in Vermont or is otherwise subject to Vermont jurisdiction.

    (6) Engage in other groupwide supervision activities, consistent with this subsection, as deemed necessary by the Commissioner.

    (g) If the Commissioner acknowledges another regulatory official from a jurisdiction not accredited by the NAIC as the groupwide supervisor, the Commissioner is authorized to reasonably cooperate, through supervisory colleagues or otherwise, with groupwide supervision undertaken by the supervisor, provided:

    (1) The Commissioner's cooperation is in compliance with Vermont law.

    (2) The regulatory official acknowledged as the supervisor also recognizes and cooperates with the Commissioner's activities as a groupwide supervisor for other internationally active insurance groups where applicable. When such recognition and cooperation is not reasonably reciprocal, the Commissioner is authorized to refuse recognition and cooperation.

    (h) The Commissioner is authorized to enter into agreements with or obtain documentation from any insurer registered under section 3684 of this subchapter, any affiliate of the insurer, and other state, federal, and international regulatory agencies for members of the internationally active insurance group that provide the basis for or otherwise clarify a regulatory official's role as groupwide supervisor.

    (i) The Commissioner may adopt rules necessary for the administration of this section.

    (j) A registered insurer subject to this section is liable for and shall pay the reasonable expenses of the Commissioner's participation in the administration of this section, including the engagement of attorneys, actuaries, and any other professionals, as well as all reasonable travel expenses. (Added 2015, No. 15, § 4, eff. May 1, 2015.)