-
Subchapter 001: GENERAL PROVISIONS
§ 6001. Definitions
As used in this chapter, unless the context requires otherwise:
(1) “Affiliated company” means any company in the same corporate system as a parent, an
industrial insured, or a member organization by virtue of common ownership, control,
operation, or management.
(2) “Agency captive insurance company” means a captive insurance company that is owned
or directly or indirectly controlled by one or more insurance agencies or brokerages
licensed under the laws of any state and that only insures risks of policies that
are placed by or through such agency or agencies, or brokerage or brokerages, as applicable.
(3) “Association” means any legal association of individuals, corporations, limited liability
companies, partnerships, associations, or other entities, the member organizations
of which or which does itself, whether or not in conjunction with some or all of the
member organizations:
(A) own, control, or hold with power to vote all of the outstanding voting securities
of an association captive insurance company incorporated as a stock insurer; or
(B) have complete voting control over an association captive insurance company incorporated
as a mutual insurer; or
(C) constitute all of the subscribers of an association captive insurance company formed
as a reciprocal insurer; or
(D) have complete voting control over an association captive insurance company formed
as a limited liability company.
(4) “Association captive insurance company” means any company that insures risks of the
member organizations of the association and that also may insure the risks of affiliated
companies of the member organizations and the risks of the association itself.
(5) “Captive insurance company” means any pure captive insurance company, association
captive insurance company, sponsored captive insurance company, industrial insured
captive insurance company, agency captive insurance company, risk retention group,
affiliated reinsurance company, or special purpose financial insurance company formed
or licensed under the provisions of this chapter. For purposes of this chapter, a
branch captive insurance company shall be a pure captive insurance company with respect
to operations in this State, unless otherwise permitted by the Commissioner.
(6) “Commissioner” means the Commissioner of Financial Regulation.
(7) “Controlled unaffiliated business” means any person:
(A) that is not in the corporate system of a parent and its affiliated companies in the
case of a pure captive insurance company, or that is not in the corporate system of
an industrial insured and its affiliated companies in the case of an industrial insured
captive insurance company;
(B) that has an existing contractual relationship with a parent or one of its affiliated
companies in the case of a pure captive insurance company, or with an industrial insured
or one of its affiliated companies in the case of an industrial insured captive insurance
company; and
(C) whose risks are managed by a pure captive insurance company or an industrial insured
captive insurance company, as applicable, in accordance with section 6019 of this title.
(8) “Excess workers’ compensation insurance” means, in the case of an employer that has
insured or self-insured its workers’ compensation risks in accordance with applicable
State or federal law, insurance in excess of a specified per-incident or aggregate
limit established by the Commissioner.
(9) “Industrial insured” means an insured:
(A) 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;
(B) whose aggregate annual premiums for insurance on all risks total at least $25,000.00;
and
(C) who has at least 25 full-time employees.
(10) “Industrial insured captive insurance company” means any company that insures risks
of the industrial insureds that comprise the industrial insured group, and that may
insure the risks of the affiliated companies of the industrial insureds and the risks
of the controlled unaffiliated business of an industrial insured or its affiliated
companies.
(11) “Industrial insured group” means any group of industrial insureds that collectively:
(A) own, control, or hold with power to vote all of the outstanding voting securities
of an industrial insured captive insurance company incorporated as a stock insurer;
(B) have complete voting control over an industrial insured captive insurance company
incorporated as a mutual insurer; or
(C) constitute all of the subscribers of an industrial insured captive insurance company
formed as a reciprocal insurer; or
(D) have complete voting control over an industrial insured captive insurance company
formed as a limited liability company.
(12) “Member organization” means any individual, corporation, limited liability company,
partnership, association, or other entity that belongs to an association.
(13) “Mutual corporation” means a corporation organized without stockholders and includes
a nonprofit corporation with members.
(14) “Parent” means a corporation, limited liability company, partnership, other entity,
or individual, that directly or indirectly owns, controls, or holds with power to
vote more than 50 percent of the outstanding voting:
(A) securities of a pure captive insurance company organized as a stock corporation; or
(B) membership interests of a pure captive insurance company organized as a nonprofit
corporation; or
(C) membership interests of a pure captive insurance company organized as a limited liability
company.
(15) “Pure captive insurance company” means any company that insures risks of its parent
and affiliated companies or controlled unaffiliated business.
(16) “Risk retention group” means a captive insurance company organized under the laws
of this State pursuant to the Liability Risk Retention Act of 1986, 15 U.S.C. § 3901 et seq., as amended, as a stock or mutual corporation, a reciprocal or other limited
liability entity. (Added 1981, No. 28; amended 1981, No. 145 (Adj. Sess.); 1985, No. 170 (Adj. Sess.), § 3, eff. May 7, 1986; 1987, No. 168 (Adj. Sess.), § 1, eff. May 3, 1988; 1989, No. 225 (Adj. Sess.), § 25; 1991, No. 101, § 18; 1993, No. 40, § 1, eff. June 3, 1993; 1995, No. 180 (Adj. Sess.), § 38; 1997, No. 49, §§ 7, 8, eff. June 26, 1997; 1999, No. 38, § 4, eff. May 20, 1999; 2001, No. 71, § 11, eff. June 16, 2001; 2003, No. 55, § 7; 2005, No. 122 (Adj. Sess.), § 3; 2007, No. 49, §§ 8, 14; 2011, No. 78 (Adj. Sess.), § 2, eff. April 2, 2012; 2017, No. 12, § 3, eff. May 1, 2017; 2017, No. 134 (Adj. Sess.), § 9.)
§ 6002. Licensing; authority
(a) Any captive insurance company, when permitted by its articles of association, charter,
or other organizational document, may apply to the Commissioner for a license to conduct
insurance business comprised in section 3301 of this title and may grant annuity contracts
as defined in section 3717 of this title and may accept or transfer risk by means of a parametric contract; provided, however,
that:
(1) No pure captive insurance company may insure any risks other than those of its parent
and affiliated companies or controlled unaffiliated business.
(2) No agency captive insurance company may do any insurance business in this State unless:
(A) an insurance agency or brokerage that owns or controls the agency captive insurance
company remains in regulatory good standing in all states in which it is licensed;
(B) it insures only the risks of the commercial policies that are placed by or through
an insurance agency or brokerage that owns or directly or indirectly controls the
agency captive insurance company and, if required by the Commissioner in the Commissioner’s
discretion, it provides the Commissioner the form of such commercial policies;
(C) it discloses to the original policyholder or policyholders, in a form or manner approved
by the Commissioner, that the agency captive insurance company as a result of its
affiliation with an insurance agency or brokerage may enter into a reinsurance or
other risk-sharing agreement with the agency or brokerage; and
(D) if required by the Commissioner in the Commissioner’s discretion, the business written
by an agency captive insurance company is:
(i) Fronted by an insurance company licensed under the laws of any state.
(ii) Reinsured by a reinsurer authorized or approved by the State of Vermont.
(iii) Secured by a trust fund in the United States for the benefit of policyholders and
claimants or funded by an irrevocable letter of credit or other arrangement that is
acceptable to the Commissioner. The Commissioner may require the agency captive insurance
company to increase the funding of any security arrangement established under this
subdivision. If the form of security is a letter of credit, the letter of credit shall
be issued or confirmed by a bank approved by the Commissioner. A trust maintained
pursuant to this subdivision shall be established in a form and upon terms approved
by the Commissioner.
(3) No association captive insurance company may insure any risks other than those of
its association, those of the member organizations of its association, and those of
a member organization’s affiliated companies.
(4) No industrial insured captive insurance company may insure any risks other than those
of the industrial insureds that comprise the industrial insured group, those of their
affiliated companies, and those of the controlled unaffiliated business of an industrial
insured or its affiliated companies.
(5) No risk retention group may insure any risks other than those of its members and owners.
(6) No captive insurance company may provide personal motor vehicle or homeowner’s insurance
coverage or any component thereof.
(7) No captive insurance company may accept or cede reinsurance except as provided in
section 6011 of this title.
(8) Any captive insurance company may provide excess workers’ compensation insurance to
its parent and affiliated companies, unless prohibited by the federal law or laws
of the state having jurisdiction over the transaction. Any captive insurance company,
unless prohibited by federal law, may reinsure workers’ compensation of a qualified
self-insured plan of its parent and affiliated companies.
(9) Any captive insurance company that insures risks described in subdivisions 3301(a)(1)
and (2) of this title shall comply with all applicable State and federal laws.
(10) Any captive insurance company that transfers risk by means of a parametric contract
shall comply with all applicable State and federal laws and regulations.
(b) No captive insurance company shall do any insurance business in this State unless:
(1) it first obtains from the Commissioner a license authorizing it to do insurance business
in this State;
(2) its board of directors or committee of managers or, in the case of a reciprocal insurer,
its subscribers’ advisory committee holds at least one meeting each year in this State;
(3) it maintains its principal place of business in this State; and
(4) it appoints a registered agent to accept service of process and to otherwise act on
its behalf in this State, provided that whenever such registered agent cannot with
reasonable diligence be found at the registered office of the captive insurance company,
the Commissioner shall be an agent of such captive insurance company upon whom any
process, notice, or demand may be served.
(c)(1) Before receiving a license, a captive insurance company shall:
(A) File with the Commissioner a copy of its organizational documents and any other statements
or documents required by the Commissioner.
(B) Submit to the Commissioner for approval a description of the coverages, deductibles,
coverage limits, and rates, together with such additional information as the Commissioner
may reasonably require. In the event of any subsequent material change in any item
in such description, the captive insurance company shall submit to the Commissioner
for approval an appropriate revision and shall not offer any additional kinds of insurance
until a revision of such description is approved by the Commissioner. The captive
insurance company shall inform the Commissioner of any material change in rates within
30 days following the adoption of such change.
(2) Each applicant captive insurance company shall also file with the Commissioner evidence
of the following:
(A) the amount and liquidity of its assets relative to the risks to be assumed;
(B) the adequacy of the expertise, experience, and character of the person or persons
who will manage it;
(C) the overall soundness of its plan of operation;
(D) the adequacy of the loss prevention programs of its insureds;
(E) its beneficial ownership, sponsorship, or membership; and
(F) such other factors deemed relevant by the Commissioner in ascertaining whether the
proposed captive insurance company will be able to meet its policy obligations.
(3) Information submitted pursuant to this subsection, including any subsequent updates,
amendments, or revisions of or to such information, shall be and remain confidential,
and may not be made public by the Commissioner or an employee or agent of the Commissioner
without the written consent of the company, except that:
(A) The Commissioner may, in the Commissioner’s discretion, disclose or publish or authorize
the disclosure or publication of any such record or report or any part thereof in
the furtherance of legal or regulatory proceedings brought as a part of the Commissioner’s
official duties. The Commissioner may, in the Commissioner’s discretion, disclose
or publish or authorize the disclosure or publication of any such record or report
or any part thereof to criminal law enforcement authorities for use in the exercise
of such authority’s duties in such manner as the Commissioner may deem proper.
(B) The Commissioner may, in the Commissioner’s discretion, disclose such information
to a public officer having jurisdiction over the regulation of insurance and with
other state, federal, or international agencies, provided that:
(i) such public official shall agree in writing to maintain the confidentiality of such
information; and
(ii) the laws of the state or foreign government in which such public official serves require
such information to be and to remain confidential.
(C) Neither the Commissioner nor any person who received documents pursuant to this subsection,
material, or 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, material, or information.
(D) Nothing in this subsection (c) shall excuse the applicant from making any required
disclosure under this chapter.
(d) Each captive insurance company shall pay to the Commissioner a nonrefundable fee of
$500.00 and each special purpose financial insurance company shall pay to the Commissioner
a nonrefundable fee of $5,000.00 for examining, investigating, and processing its
application for license, and for issuing same, and the Commissioner is authorized
to retain legal, financial, and examination services from outside the Department,
the reasonable cost of which may be charged against the applicant. The provisions
of section 3576 of this title shall apply to examinations, investigations, and processing conducted under the authority
of this section. In addition, each captive insurance company shall pay a license renewal
fee for each year thereafter of $500.00, and each special purpose financial insurance
company shall pay to the Commissioner a nonrefundable fee of $5,000.00.
(e) If the Commissioner is satisfied that the documents and statements that such captive
insurance company has filed comply with the provisions of this chapter, and that such
captive insurance company has been duly organized, the Commissioner may grant a license
authorizing it to do insurance business in this State until April 1 thereafter, which
license may be renewed. (Added 1981, No. 28; amended 1987, No. 47, § 2, eff. May 13, 1987; 1987, No. 168 (Adj. Sess.), § 2, eff. May 3, 1988; 1993, No. 40, § 2, eff. June 3, 1993; 1993, No. 235 (Adj. Sess.), § 9c, eff. June 21, 1994; 1997, No. 49, § 9, eff. June 26, 1997; 1999, No. 38, § 5, eff. May 20, 1999; 1999, No. 84 (Adj. Sess.), § 10, eff. April 19, 2000; 2003, No. 55, § 7; 2003, No. 105 (Adj. Sess.), § 18, eff. May 4, 2004; 2007, No. 49, § 9; 2009, No. 134 (Adj. Sess.), § 25; 2013, No. 29, § 47, eff. May 13, 2013; 2017, No. 12, § 4, eff. May 1, 2017; 2017, No. 90 (Adj. Sess.), § 1, eff. March 8, 2018; 2019, No. 110 (Adj. Sess.), § 1, eff. June 15, 2020; 2021, No. 25, § 21, eff. May 12, 2021; 2021, No. 139 (Adj. Sess.), § 18, eff. May 27, 2022; 2023, No. 12, § 6, eff. May 8, 2023; 2023, No. 110 (Adj. Sess.), §§ 3, 8, eff. July 1, 2024; 2025, No. 23, § 5, eff. July 1, 2025.)
§ 6003. Names of companies
No captive insurance company shall adopt a name that is the same, deceptively similar,
or likely to be confused with or mistaken for any other existing business name registered
in the State of Vermont. (Added 1981, No. 28.)
§ 6004. Minimum capital and surplus; letter of credit
(a) Prior to issuing any policies of insurance or entering into any contracts of reinsurance,
each captive insurance company shall possess and thereafter maintain unimpaired paid-in
capital and surplus of:
(1) in the case of a pure captive insurance company, not less than $250,000.00;
(2) in the case of an association captive insurance company, not less than $500,000.00;
(3) in the case of an industrial insured captive insurance company, not less than $500,000.00;
(4) in the case of an agency captive insurance company, not less than $250,000.00;
(5) in the case of a risk retention group, not less than $1,000,000.00; and
(6) in the case of a sponsored captive insurance company, not less than $100,000.00.
(b) The Commissioner may prescribe additional capital and surplus based upon the type,
volume, and nature of insurance business transacted.
(c) Capital and surplus may be in the form of cash, marketable securities, a trust approved
by the Commissioner and of which the Commissioner is the sole beneficiary, or an irrevocable
letter of credit issued by a bank approved by the Commissioner. 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.
(d) Within 30 days after commencing business, each captive insurance company shall file
with the Commissioner a statement under oath of its president and secretary or, in
the case of a captive insurance company formed as a limited liability company or as
a reciprocal insurer, of two individuals authorized by the governing board certifying
that the captive insurance company possessed the requisite unimpaired, paid-in capital
and surplus prior to commencing business. (Added 1981, No. 28; amended 1993, No. 40, § 3, eff. June 3, 1993; 1993, No. 235 (Adj. Sess.), § 9d; 1999, No. 38, § 6, eff. May 20, 1999; 2003, No. 55, § 7; 2007, No. 178 (Adj. Sess.), § 5; 2009, No. 137 (Adj. Sess.), § 18, eff. May 29, 2010; 2011, No. 78 (Adj. Sess.), § 37, eff. April 2, 2012; 2015, No. 20, § 2, eff. May 7, 2015; 2017, No. 12, § 5, eff. May 1, 2017; 2019, No. 110 (Adj. Sess.), § 3, eff. June 15, 2020; 2021, No. 25, § 22, eff. May 12, 2021; 2023, No. 110 (Adj. Sess.), § 4, eff. July 1, 2024; 2025, No. 23, § 6, eff. July 1, 2025.)
§ 6005. Dividends
No captive insurance company may pay a dividend out of, or other distribution with
respect to, capital or surplus without the prior approval of the Commissioner. Approval
of an ongoing plan for the payment of dividends or other distributions shall be conditioned
upon the retention, at the time of each payment, of capital or surplus in excess of
amounts specified by, or determined in accordance with formulas approved by, the Commissioner.
Notwithstanding the provisions of 11B V.S.A. chapter 13, a captive insurance company or incorporated protected cell organized under the provisions
of Title 11B may make such distributions as are in conformity with its purposes and
approved by the Commissioner. (Added 1981, No. 28; amended 1993, No. 40, § 4, eff. June 3, 1993; 1993, No. 235 (Adj. Sess.), § 9e; 1997, No. 49, § 10, eff. June 26, 1997; 1999, No. 38, § 7, eff. May 20, 1999; 2003, No. 55, § 7; 2019, No. 3, § 1, eff. April 18, 2019.)
§ 6006. Formation of captive insurance companies in this State
(a) Subject to the approval of the Commissioner, a captive insurance company may be formed
as any type of entity permissible under Vermont law.
(b)-(c) [Repealed.]
(d) A captive insurance company incorporated or organized in this State shall have one
or more incorporators or one or more organizers, at least one of which shall be a
resident of this State.
(e)(1) Before any required formation documents are transmitted to the Secretary of State,
the incorporators or organizers shall petition the Commissioner to issue a certificate
setting forth the Commissioner’s finding that the establishment and maintenance of
the proposed entity will promote the general good of the State. In arriving at such
a finding, the Commissioner shall consider:
(A) the character, reputation, financial standing, and purposes of the incorporators or
organizers;
(B) the character, reputation, financial responsibility, insurance experience, and business
qualifications of the officers and directors or members of the governing board; and
(C) such other aspects the Commissioner deems advisable.
(2) The formation documents, the certificate, and the organization fee shall be transmitted
to the Secretary of State, who shall record both the formation documents and the certificate.
(f) The capital stock of a captive insurance company incorporated as a stock insurer may
be authorized with no par value.
(g) In the case of a captive insurance company:
(1) formed as a corporation, at least one of the members of the board of directors shall
be a resident of this State;
(2) formed as a reciprocal insurer, at least one of the members of the subscribers’ advisory
committee shall be a resident of this State;
(3) formed as a limited liability company, at least one of the managers shall be a resident
of this State.
(h) Other than captive insurance companies formed as limited liability companies under
11 V.S.A. chapter 25 or as nonprofit corporations under Title 11B, captive insurance
companies formed as corporations under the provisions of this chapter shall have the
privileges and be subject to the provisions of Title 11A as well as the applicable
provisions contained in this chapter. In the event of conflict between the provisions
of said general corporation law and the provisions of this chapter, the latter shall
control.
(i) Captive insurance companies formed under the provisions of this chapter:
(1) As limited liability companies shall have the privileges and be subject to the provisions
of 11 V.S.A. chapter 25 as well as the applicable provisions contained in this chapter.
In the event of a conflict between the provisions of 11 V.S.A. chapter 25 and the
provisions of this chapter, the latter shall control.
(2) As nonprofit corporations shall have the privileges and be subject to the provisions
of Title 11B as well as the applicable provisions contained in this chapter. In the
event of conflict between the provisions of Title 11B and the provisions of this chapter,
the latter shall control.
(3) As mutual insurers shall have the privileges and be subject to the provisions of sections
3303 and 3311 of this title as well as the applicable provisions contained in this chapter. In the event of a
conflict between the provisions of sections 3303 and 3311 of this title and the provisions of this chapter, the latter shall control.
(j) The provisions of chapter 101, subchapters 3 and 3A of this title, pertaining to mergers,
consolidations, conversions, mutualizations, redomestications, and mutual holding
companies, shall apply in determining the procedures to be followed by captive insurance
companies in carrying out any of the transactions described therein, except that:
(1) If the shareholders, members, or policyholders of the captive insurance company have
unanimously approved of the merger, the procedures set forth in section 6006a of this title shall apply.
(2) The Commissioner may, upon request of an insurer party to a merger authorized under
this subsection, waive the requirement of subdivision 3424(6) of this title.
(3) The Commissioner may waive the requirements for public notice and hearing or, in accordance
with rules that the Commissioner may adopt addressing categories of transactions,
modify the requirements for public notice and hearing. If a notice of public hearing
is required, but no one requests a hearing ten days before the day set for the hearing,
then the Commissioner may cancel the hearing.
(4) The provisions of subsections 3423(f) and (h) of this title shall not apply, and the
Commissioner may waive or modify the requirement of subdivision 3423(b)(4) of this title, with respect to market value of a converted company as necessary or desirable to
reflect applicable restrictions on ownership of companies formed under this chapter.
(5) An alien insurer may be a party to a merger authorized under this subsection, provided
that the requirements for a merger between a captive insurance company and a foreign
insurer under section 3431 of this title shall apply to a merger between a captive insurance company and an alien insurer
under this subsection. Such alien insurer shall be treated as a foreign insurer under
section 3431 and such other jurisdictions shall be the equivalent of a state for purposes
of section 3431.
(6) The Commissioner may issue a certificate of general good to permit the formation of
a captive insurance company that is established for the purpose of consolidating or
merging with or assuming existing insurance or reinsurance business from an existing
licensed captive insurance company. The Commissioner may, upon request of such newly
formed captive insurance company, waive or modify the requirements of subdivisions
6002(c)(1)(B) and (2) of this title.
(7) The Commissioner may waive or modify application of the provisions of chapter 132
and chapter 101, subchapters 3 and 3A of this title and the provisions of Titles 11,
11A, and 11B in order to permit mergers of a non-insurer subsidiary of a captive insurance
company with and into the captive insurance company or another of its subsidiaries
without approval of the shareholders, members, or subscribers of such captive insurance
company and without making available to the shareholders, members, or subscribers
dissenters’ rights otherwise made available in such a merger; provided, however, that
the board of directors, managers, or subscribers’ advisory committee of each of the
merging entities shall approve such merger. The Commissioner may condition any such
waiver or modification upon a good faith effort by the captive insurance company to
provide notice of the merger to its shareholders, members, or subscribers.
(k) Captive insurance companies formed as reciprocal insurers under the provisions of
this chapter shall have the privileges and be subject to the provisions of chapter
132 of this title in addition to the applicable provisions of this chapter. In the
event of a conflict between the provisions of chapter 132 and the provisions of this
chapter, the latter shall control. However, in approving assessments levied upon subscribers
of a captive insurance company formed as a reciprocal insurer, the Commissioner may
exempt the company from any provision of sections 4850 (assessments), 4851 (time limit
for assessments), and 4852 (aggregate of liability) of chapter 132. To the extent
a reciprocal insurer is made subject to other provisions of this title pursuant to
chapter 132, such provisions shall not be applicable to a reciprocal insurer formed
under this chapter unless such provisions are expressly made applicable to captive
insurance companies under this chapter. The Commissioner may exempt a company’s attorney-in-fact
from the provisions of section 4840 (attorney’s bond) of chapter 132 if:
(1) the reciprocal insurer is formed as an association captive;
(2) each member of the reciprocal insurer qualifies as “industrial insured” pursuant to
subdivision 6001(9) of this subchapter; or
(3) the reciprocal insurer is an incorporated protected cell of a sponsored captive insurance
company.
(l) The articles of incorporation or bylaws of a captive insurance company formed as a
corporation may authorize a quorum of its board of directors to consist of no fewer
than one-third of the fixed or prescribed number of directors determined under 11A V.S.A. § 8.24(a) or under 11B V.S.A. § 8.24.
(m) The subscribers’ agreement or other organizing document of a captive insurance company
formed as a reciprocal insurer may authorize a quorum of its subscribers’ advisory
committee to consist of no fewer than one-third of the number of its members.
(n) With the Commissioner’s approval, a captive insurance company organized as a stock
insurer may convert to a nonprofit corporation with one or more members by filing
with the Secretary of State an irrevocable election for such conversion, provided
that:
(1) the irrevocable election shall certify that, at the time of the company’s original
organization and at all times thereafter, the company conducted its business in a
manner not inconsistent with a nonprofit purpose; and
(2) at the time of the filing of its irrevocable election, the company shall file with
both the Commissioner and the Secretary of State amended and restated articles of
incorporation consistent with the provisions of this chapter and with Title 11B, duly
authorized by the corporation.
(o) The following provisions of Title 11B shall not apply to captive insurance companies
that are nonprofit corporations:
(1) subsection 2.02(c) (relating to the signing of articles of incorporation by directors);
and
(2) section 11.02, in the case of any merger in which a captive insurance company merges
with and into a captive insurance company organized as a nonprofit corporation under
Title 11B where the latter is the surviving corporation.
(p) In the case of a captive insurance company formed as a limited liability company,
a reciprocal insurance company, or mutual insurance company, any proxy executed by
the members, subscribers, and policyholders of each shall be valid if executed and
transmitted in compliance with 11A V.S.A. § 7.22.
(q) With the Commissioner’s prior written approval, a captive insurance company may establish
one or more separate accounts and may allocate to them amounts to provide for the
insurance of risks of certain of its parents, affiliates, or members, as the case
may be, subject to the following:
(1) The income, gains, and losses, realized or unrealized, from assets allocated to a
separate account shall be credited to or charged against the account, without regard
to other income, gains, or losses of the captive insurance company.
(2) Amounts allocated to a separate account in the exercise of the power granted by this
subsection are owned by the captive insurer, and the captive insurer may not be nor
hold itself out to be a trustee with respect to such amounts.
(3) Unless otherwise approved by the Commissioner, assets allocated to a separate account
shall be valued in accordance with the rules otherwise applicable to the captive insurer’s
assets.
(4) If and to the extent so provided under the applicable contracts, that portion of the
assets of any such separate account equal to the reserves and other contract liabilities
with respect to such account shall not be chargeable with liabilities arising out
of any other business the captive insurer may conduct.
(5) No sale, exchange, or other transfer of assets may be made by such captive insurer
between any of its separate accounts or between any other investment account and one
or more of its separate accounts unless, in the case of a transfer into a separate
account, such transfer is made solely to establish the account or to support the operation
of the contracts with respect to the separate account to which the transfer is made
and unless such transfer, whether into or from a separate account is made by a transfer
of cash or by a transfer of securities having a readily determinable market value,
provided that such transfer of securities is approved by the Commissioner. The Commissioner
may approve other transfers among such accounts if, in his or her opinion, such transfers
would be equitable.
(6) To the extent such captive insurer deems it necessary to comply with any applicable
federal or State laws, such captive insurer, with respect to any separate account,
including any separate account that is a management investment company or a unit investment
trust, may provide for persons having an interest therein appropriate voting and other
rights and special procedures for the conduct of the business of such account, including
special rights and procedures relating to investment policy, investment advisory services,
selection of independent public accountants, and the selection of a committee, the
members of which need not be otherwise affiliated with such company, to manage the
business of such account. (Added 1981, No. 28; 1989, No. 72, § 1; amended 1989, No. 72, § 1; 1991, No. 41, § 5; 1993, No. 85, § 3(d), eff. Jan. 1, 1994; 1995, No. 179 (Adj. Sess.), § 1d, eff. Jan. 1, 1997; 1997, No. 49, § 11, eff. June 26, 1997; 1997, No. 100 (Adj. Sess.), § 2, eff. April 16, 1998; 1999, No. 38, § 8, eff. May 20, 1999; 1999, No. 86 (Adj. Sess.), § 8, eff. April 27, 2000; 2003, No. 55, § 7; 2003, No. 105 (Adj. Sess.), § 19, eff. May 4, 2004; 2005, No. 36, §§ 11, 12, 13, eff. June 1, 2005; 2007, No. 178 (Adj. Sess.), § 10; 2009, No. 42, § 30a; 2009, No. 137 (Adj. Sess.), §§ 19, 20, eff. May 29, 2010; 2013, No. 29, § 48, eff. May 13, 2013; 2013, No. 103 (Adj. Sess.), § 5, eff. April 14, 2014; 2015, No. 20, § 1, eff. May 7, 2015; 2017, No. 12, § 6, eff. May 1, 2017; 2019, No. 3, § 2, eff. April 18, 2019; 2019, No. 110 (Adj. Sess.), § 3A, eff. June 15, 2020; 2021, No. 25, § 26, eff. May 12, 2021; 2025, No. 23, § 7, eff. July 1, 2025.)
§ 6006a. Mergers
(a) Any captive insurance company meeting the qualifications set forth in subdivision
6006(j)(1) of this title may merge with any other insurer, whether licensed in this
State or elsewhere, 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 ownership interests, if applicable, in other
than the surviving insurer into ownership interests or other consideration, 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;
and
(E) any 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 each insurer entitled to vote in respect thereof
at a designated meeting thereof, or via unanimous written consent of such shareholders,
members, or policyholders in lieu of a meeting. Notice of the meeting shall be given
as provided in the bylaws, charter, or articles of association, or other governance
document, as the case may be, of each insurer and shall specifically reflect the agreement
as a matter to be considered at the meeting.
(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 unanimously adopted
by the shareholders, members, or policyholders, as the case may be.
(4) Following the adoption of the agreement by any insurer, 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 insurer.
(B) The articles of merger shall be signed on behalf of each insurer by a duly authorized
officer or, in the case of an insurer formed as a limited liability company or as
a reciprocal insurer, by an individual authorized by the governing board, 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 the Commissioner 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 the Commissioner approves the articles
of merger, the Commissioner shall issue a certificate of approval of merger.
(5) The insurer shall file the articles of merger, accompanied by the agreement of merger
and the certificate of approval of merger, with the Secretary of State and pay all
fees as required by law. If the Secretary of State finds that they conform to law,
the Secretary shall issue a certificate of merger and return it to the surviving insurer
or its representatives. The merger shall take effect upon the filing of articles of
merger with the Secretary of State, unless a later effective date is specified therein.
(6) The surviving insurer shall file a copy of the certificate of merger from the Secretary
of State with the Commissioner.
(b) When such merger has been effected as provided in this section:
(1) The several insurers parties to the agreement of merger shall be a single captive
insurance company that shall be 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.
(2) The separate existence of all of the insurers parties to the agreement of merger,
except the surviving captive insurance company, shall cease.
(3) The single captive insurance company shall have all of the rights, privileges, immunities,
and powers and shall be subject to all of the duties and liabilities of a captive
insurance company organized under this chapter.
(4) The single captive insurance company shall 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; 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 shall be taken and deemed to be transferred to and vested in such
single captive insurance company 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 such
insurers shall not revert or be in any way impaired by reason of the merger.
(5) The single captive insurance company shall be responsible and liable for all the liabilities
and obligations of each of the insurers so merged in the same manner and to the same
extent as if the single insurer had itself incurred the same or contracted therefor,
and any claim existing or action or proceeding pending by or against any of the insurers
may be prosecuted to judgment as if the merger had not taken place. Neither the rights
of creditors nor any liens upon the property of any insurers shall be impaired by
the merger, but such liens shall be limited to the property upon which they were liens
immediately prior to the time of the merger unless otherwise provided in the agreement
of merger.
(6) The articles of association or other governing document of the surviving captive insurance
company shall be supplanted and superseded to the extent, if any, that any provision
or provisions of the articles are restated in the agreement of merger as provided
in subsection (a) of this section, and such articles of association or other governing
document shall be deemed to be thereby and to that extent amended.
(c)(1) In the case of a merger between a domestic and a foreign or alien insurer, the articles
of merger shall be regarded as executed by the proper officers of said foreign or
alien 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 or alien insurer as may be required by the laws of the
state where the same is incorporated, and upon execution, the articles of merger shall
be submitted to the insurance commissioner or other officer at the head of the insurance
department of the jurisdiction where such foreign or alien insurer is domiciled. No
merger shall take effect until it has been approved by the insurance official of the
jurisdiction where the foreign or alien insurer is domiciled nor until a certificate
of his or her approval has been filed with the Commissioner, provided that such submission
to and approval by the proper official of the other jurisdiction shall not be required
unless the same are required by the laws of the foreign or alien jurisdiction. Provided,
further, that the domestic captive insurance company involved in the merger shall
not through anything contained in this section be relieved of any of the procedural
requirements enumerated elsewhere in this section.
(2) A merger between a domestic and a foreign or alien captive insurance company shall
not take effect unless and until the surviving captive insurance company, if such
is a foreign or alien insurer, files with the Commissioner a power of attorney appointing
the Commissioner the attorney for service of the foreign or alien insurer, upon whom
all lawful process against the insurers may be served. Said power of attorney shall
be irrevocable if the foreign or alien insurer has outstanding in this State any contract
of insurance, or other obligation whatsoever, and shall by its terms so provide. Service
upon the Commissioner shall be deemed sufficient service upon the insurer. (Added 2021, No. 25, § 27, eff. May 12, 2021; amended 2021, No. 139 (Adj. Sess.), § 19, eff. May 27, 2022; 2025, No. 23, § 8, eff. July 1, 2025.)
§ 6006b. Redomestication
(a) Any foreign or alien insurer that qualifies for licensure as a captive insurance company
in this State may redomesticate to this State by complying with all of the requirements
of law relative to the organization and licensing of a captive insurance company 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 and a filing fee per section 3440 of this title. An insurer becoming a domestic captive insurance company through this redomestication
process shall pay to the Commissioner such fees as would otherwise be payable by a
captive insurance company organizing and becoming licensed or transacting business
in this State. The Commissioner may issue a conditional license prior to the effective
date of the redomestication in order to facilitate the transaction and provide notice
of approval of the transaction to the outgoing jurisdiction. The 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. No insurer redomesticating into this State as a captive
insurance company need merge, consolidate, transfer assets, or otherwise engage in
any other reorganization, other than as specified in this section.
(b) Upon the approval of and compliance with such conditions as may be imposed by the
Commissioner, any captive insurance company may 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 captive insurance company, and its corporate or other
legal existence in this State shall cease upon the filing of articles of redomestication
with the Secretary of State, or upon such later date if a delayed effective date is
specified in the articles of redomestication, accompanied by a certificate of approval
of redomestication issued by the Commissioner and proof of acceptance of the insurer
by the Secretary of State or analogous officer of the jurisdiction to which the captive
insurance company is redomesticating, and upon payment to the Secretary of State of
a filing fee per section 3438 of this title. Said articles of redomestication shall contain, at a minimum, the following information:
(1) the name, organizational form, date of formation, and jurisdiction of formation of
the redomesticating entity;
(2) the jurisdiction to which the redomesticating entity will be transferring its domicile
and its name following the redomestication date;
(3) the registered office and agent of the redomesticating entity following the redomestication
date; and
(4) a statement that the redomestication has been approved by the appropriate vote of
the shareholders or other owners of the redomesticating entity.
(c) Upon redomestication in accordance with this section, the foreign or alien insurer
shall become a captive insurance company 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 captive
insurance company shall possess all rights that obtained prior to the redomestication
to the extent permitted by the laws of this State and shall 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 allows, in his or her discretion, that are in existence
at the time any insurer transfers its corporate domicile to this or any other state
or jurisdiction by redomestication pursuant to this section shall continue in full
force and effect upon such transfer. All outstanding policies of any transferring
insurer shall remain in full force and effect. (Added 2021, No. 25, § 28, eff. May 12, 2021.)
§ 6007. Reports and statements
(a) Captive insurance companies shall not be required to make any annual report except
as provided in this chapter.
(b) Prior to March 1 of each year, and prior to March 15 of each year in the case of pure
captive insurance companies, association captive insurance companies, sponsored captive
insurance companies, industrial insured captive insurance companies, or agency captive
insurance companies, each captive insurance company shall submit to the Commissioner
a report of its financial condition, verified by oath of two of its executive officers
or, in the case of a captive insurance company formed as a limited liability company
or as a reciprocal insurer, of two individuals authorized by the governing board.
Each captive insurance company shall report using generally accepted accounting principles,
statutory accounting principles, or international financial reporting standards unless
the Commissioner requires, approves, or accepts the use of any other comprehensive
basis of accounting, in each case with any appropriate 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. As used in this section, statutory
accounting principles shall mean the accounting principles codified in the NAIC Accounting
Practices and Procedures Manual. Upon application for admission, a captive insurance
company shall select, with explanation, an accounting method for reporting. Any change
in a captive insurance company’s accounting method shall require prior approval. Except
as otherwise provided, each risk retention group shall file its report in the form
required by subsection 3561(a) of this title, and each risk retention group shall
comply with the requirements set forth in section 3569 of this title. The Commissioner
shall by rule propose the forms in which pure captive insurance companies, association
captive insurance companies, sponsored captive insurance companies, and industrial
insured captive insurance companies shall report. Subdivision 6002(c)(3) of this title
shall apply to each report filed pursuant to this section, except that such subdivision
shall not apply to reports filed by risk retention groups.
(c) Any pure captive insurance company, association captive insurance company, sponsored
captive insurance company, industrial insured captive insurance company, or agency
captive insurance company may make written application for filing the required report
on a fiscal year-end. If an alternative reporting date is granted:
(1) the annual report is due 75 days after the fiscal year-end; and
(2) in order to provide sufficient detail to support the premium tax return, the captive
insurance company shall file prior to March 15 of each year for each calendar year-end,
the premium schedule of the “Vermont Captive Insurance Company Annual Report.” (Added 1981, No. 28; amended 1991, No. 101, § 19; 1993, No. 40, § 5, eff. June 3, 1993; 1993, No. 235 (Adj. Sess.), § 9f, eff. June 21, 1994; 1997, No. 49, § 12, eff. June 26, 1997; 1997, No. 100 (Adj. Sess.), § 3, eff. April 16, 1998; 1999, No. 38, § 9, eff. May 20, 1999; 2001, No. 71, § 12, eff. June 16, 2001; 2003, No. 55, § 7; 2007, No. 49, § 10; 2009, No. 42, § 17, eff. May 27, 2009; 2009, No. 137 (Adj. Sess.), § 21, eff. May 29, 2010; 2011, No. 78 (Adj. Sess.), § 38, eff. April 2, 2012; 2015, No. 74 (Adj. Sess.), § 1, eff. April 13, 2016; 2017, No. 12, § 1, eff. May 1, 2017; 2017, No. 90 (Adj. Sess.), § 2, eff. March 8, 2018; 2021, No. 25, § 23, eff. May 12, 2021; 2021, No. 139 (Adj. Sess.), § 13, eff. May 27, 2022; 2023, No. 110 (Adj. Sess.), § 17, eff. July 1, 2024; 2025, No. 23, § 9, eff. July 1, 2025.)
§ 6008. Examinations and investigations
(a) Whenever the Commissioner determines it to be prudent, but not less frequently than
once every five years, the Commissioner shall personally, or by some competent person
appointed by the Commissioner, inspect and examine each captive insurance company
to ascertain its financial condition, its ability to fulfill its obligations, and
whether it has complied with the provisions of this chapter. The expenses and charges
of the examination shall be paid to the State by the company or companies examined.
(b) The provisions of section 3576 of this title shall apply to examinations conducted under this section.
(c) Subdivision 6002(c)(3) of this title shall apply to all examination reports, preliminary examination reports or results,
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. (Added 1981, No. 28; amended 1983, No. 195 (Adj. Sess.), § 5(b); 1993, No. 235 (Adj. Sess.), § 9g, eff. June 21, 1994; 1997, No. 49, § 13, eff. June 26, 1997; 1999, No. 38, § 10, eff. May 20, 1999; 2003, No. 55, § 7; 2003, No. 105 (Adj. Sess.), § 8; 2019, No. 3, § 3, eff. April 18, 2019; 2023, No. 110 (Adj. Sess.), § 9, eff. July 1, 2024.)
§ 6009. Grounds and procedures for suspension or revocation of license
(a) The license of a captive insurance company may be suspended or revoked by the Commissioner
for any of the following reasons:
(1) insolvency or impairment of capital or surplus;
(2) failure to meet the requirements of section 6004 of this title;
(3) refusal or failure to submit an annual report, as required by this chapter, or any
other report or statement required by law or by lawful order of the Commissioner;
(4) failure to comply with the provisions of its own charter, bylaws, or other organizational
document;
(5) failure to submit to or pay the cost of examination or any legal obligation relative
thereto, as required by this chapter;
(6) use of methods that, although not otherwise specifically prohibited by law, nevertheless
render its operation detrimental or its condition unsound with respect to the public
or to its policyholders; or
(7) failure otherwise to comply with the laws of this State.
(b) If the Commissioner finds, upon examination, hearing, or other evidence, that any
captive insurance company has violated any provision of subsection (a) of this section,
the Commissioner may suspend or revoke such company’s license if the Commissioner
deems it in the best interests of the public and the policyholders of such captive
insurance company, notwithstanding any other provision of this title. (Added 1981, No. 28; amended 1997, No. 49, § 14, eff. June 26, 1997; 1999, No. 38, § 11, eff. May 20, 1999; 2003, No. 55, § 7.)
§ 6010. Legal investments
(a)(1) Except as may be otherwise authorized by the Commissioner, agency captive insurance
companies, association captive insurance companies, sponsored captive insurance companies,
protected cells in sponsored captive insurance companies, and risk retention groups
shall:
(A) comply with the investment requirements contained in sections 3461 through 3472 of this title, as applicable; or
(B) submit for approval by the Commissioner the investment policy of the company. In reviewing
the investment policy, the Commissioner shall consider diversification as to both
type and issue; limits on the aggregate investment that may be made in any category
of investment; limits on the aggregate investment in any one business, issuer, or
risk; liquidity; and matching of assets and liabilities. The Commissioner shall determine
whether the investment policy provides for the reasonable preservation, administration,
and management of assets with respect to the risks associated with the company’s transactions
and whether the investment policy supports the approved business plan. Subdivision 6002(c)(3) of this title shall apply to all information submitted pursuant to this subsection.
(2) The Commissioner may require any company subject to this subsection to limit or withdraw
from certain investments or discontinue certain investment practices if the Commissioner
determines that such investments or practices of the company might be hazardous to
the policyholders or the general public.
(3) Section 3463a of this title shall apply to agency captive insurance companies, association captive insurance
companies, and risk retention groups except to the extent it is inconsistent with
approved accounting standards in use by the company. Notwithstanding any other provision
of this title to the contrary, the Commissioner may approve the use of alternative,
reliable methods of valuation and rating.
(b) No pure captive insurance company or industrial insured captive insurance company
shall be subject to any restrictions on allowable investments, including those limitations
contained in sections 3461-3472 of this title; provided, however, that the Commissioner may prohibit or limit any investment that
threatens the solvency or liquidity of any such company.
(c) No pure captive insurance company may make a loan to or an investment in its parent
company or affiliates without prior written approval of the Commissioner, and any
such loan or investment must be evidenced by documentation approved by the Commissioner.
Loans of minimum capital and surplus funds required by section 6004 of this title are prohibited. (Added 1981, No. 28; amended 1991, No. 101, § 20; 1993, No. 40, § 6, eff. June 3, 1993; 1993, No. 235 (Adj. Sess.), § 9h, eff. June 21, 1994; 1999, No. 38, § 12, eff. May 20, 1999; 2001, No. 71, § 13, eff. June 16, 2001; 2003, No. 55, § 7; 2005, No. 36, § 14, eff. June 1, 2005; 2017, No. 12, § 7, eff. May 1, 2017; 2019, No. 3, § 4, eff. April 18, 2019; 2019, No. 110 (Adj. Sess.), § 7, eff. June 15, 2020.)
§ 6011. Reinsurance
(a) Any captive insurance company may provide reinsurance of policies approved by the
Commissioner comprised in section 3301 of this title, on risks of its parent, affiliated
companies, and controlled unaffiliated business ceded by any other insurer, and may
provide reinsurance of annuity contracts as defined in section 3717 of this title
that are granted by any other insurer.
(b) Any captive insurance company may take credit for the reinsurance of risks or portions
of risks ceded to reinsurers complying with the provisions of subsections 3634a(a)
through (e) of this title. Prior approval of the Commissioner shall be required for
ceding or taking credit for the reinsurance of risks or portions of risks ceded to
reinsurers not complying with subsections 3634a(a) through (e) of this title.
(c) In addition to reinsurers authorized under the provisions of section 3634a of this title, a captive insurance company may take credit for the reinsurance of risks or portions
of risks ceded to a pool, exchange, or association acting as a reinsurer that has
been authorized by the Commissioner. The Commissioner may require any other documents,
financial information, or other evidence that such a pool, exchange, or association
will be able to provide adequate security for its financial obligations. The Commissioner
may deny authorization or impose any limitations on the activities of a reinsurance
pool, exchange, or association that, in the Commissioner’s judgment, are necessary
and proper to provide adequate security for the ceding captive insurance company and
for the protection and consequent benefit of the public at large.
(d) For all purposes of this chapter, insurance by a captive insurance company of any
workers’ compensation qualified self-insured plan of its parent and affiliates shall
be deemed to be reinsurance. (Added 1981, No. 28; 1985, No. 170 (Adj. Sess.), § 1, eff. May 7, 1986; amended 1987, No. 168 (Adj. Sess.), § 3, eff. May 3, 1988; 1991, No. 249 (Adj. Sess.), § 24; 93, No. 40, §§ 7, 8, eff. June 3, 1993; 1999, No. 38, § 13, eff. May 20, 1999; 2003, No. 55, § 7; 2005, No. 122 (Adj. Sess.), § 4; 2023, No. 32, § 1, eff. July 1, 2023; 2023, No. 110 (Adj. Sess.), § 6, eff. July 1, 2024; 2025, No. 23, § 10, eff. July 1, 2025.)
§ 6012. Rating organizations; memberships
No captive insurance company shall be required to join a rating organization. (Added 1981, No. 28.)
§ 6013. Exemption from compulsory associations
No captive insurance company shall be permitted to join or contribute financially
to any plan, pool, association, or guaranty or insolvency fund in this State, nor
shall any such captive insurance company, or any insured or affiliate thereof, receive
any benefit from any such plan, pool, association, or guaranty or insolvency fund
for claims arising out of the operations of such captive insurance company. (Added 1981, No. 28; amended 1997, No. 49, § 15, eff. June 26, 1997; 2003, No. 55, § 7.)
§ 6014. Tax on premiums collected
(a) Each captive insurance company shall pay to the Commissioner of Taxes on or before
March 15 of each year a tax at the rate of 38-hundredths of one percent on the first
20 million dollars and 285-thousandths of one percent on the next 20 million dollars
and 19-hundredths of one percent on the next 20 million dollars and 72-thousandths
of one percent on each dollar thereafter on the direct premiums collected or contracted
for on policies or contracts of insurance written by the captive insurance company
during the year ending December 31 next preceding, after deducting from the direct
premiums subject to the tax the amounts paid to policyholders as return premiums which
shall include dividends on unabsorbed premiums or premium deposits returned or credited
to policyholders; provided, however, that no tax shall be due or payable as to considerations
received for annuity contracts.
(b) Each captive insurance company shall pay to the Commissioner of Taxes on or before
March 15 of each year a tax at the rate of 214-thousandths of one percent on the first
20 million dollars of assumed reinsurance premium, and 143-thousandths of one percent
on the next 20 million dollars and 48-thousandths of one percent on the next 20 million
dollars and 24-thousandths of one percent on each dollar thereafter. However, no reinsurance
tax applies to premiums for risks or portions of risks that are subject to taxation
on a direct basis pursuant to subsection (a) of this section. No reinsurance premium
tax shall be payable in connection with the receipt of assets in exchange for the
assumption of loss reserves and other liabilities of another insurer under common
ownership and control if such transaction is part of a plan to discontinue the operations
of such other insurer, and if the intent of the parties to such transaction is to
renew or maintain such business with the captive insurance company. No reinsurance
premium tax shall be payable in connection with the receipt of assets in exchange
for the assumption of loss reserves and other liabilities of a captive insurance company’s
parent or affiliates if the intent of such exchange is to renew or maintain such business
with the captive insurance company.
(c)(1) The annual minimum aggregate tax to be paid by a captive insurance company calculated
under subsections (a) and (b) of this section shall be $7,500.00. The annual maximum
aggregate tax to be paid by a captive insurance company calculated under subsections
(a) and (b) of this section shall be $200,000.00.
(2) The annual minimum aggregate tax to be paid by a sponsored captive insurance company
shall be $7,500.00 and shall apply to the sponsored captive insurance company as a
whole and not to each protected cell; such cells shall not be subject to the minimum
tax.
(3) The annual maximum tax to be paid by a protected cell shall be as calculated under
subdivision (1) of this subsection. The annual maximum tax to be remitted by a sponsored
captive insurance company shall be the aggregate of the tax liabilities of each protected
cell.
(d) A captive insurance company failing to make returns as required by 32 V.S.A. chapter
211 or failing to pay within the time required all taxes assessed by this section
shall be subject to the provisions of 32 V.S.A. § 3202.
(e) Subject to the provisions of subsection (c) of this section, two or more captive insurance
companies under common ownership and control shall be taxed as though they were a
single captive insurance company.
(f) As used in this section:
(1) “Common ownership and control” shall mean ownership and control of two or more captive
insurance companies by the same person or group of persons.
(2) “Ownership and control” shall mean:
(A) in the case of a stock corporation, the direct or indirect ownership of 80 percent
or more of the outstanding voting stock of the corporation;
(B) in the case of a mutual or nonprofit corporation, the direct or indirect ownership
of 80 percent or more of the surplus and the voting power of such corporation;
(C) in the case of a limited liability company, the direct or indirect ownership of 80
percent or more of the membership interests in the limited liability company;
(D) in the case of a sponsored captive insurance company, for purposes of this section
a protected cell shall be treated as a separate captive insurance company owned and
controlled by the protected cell’s participant, but only if:
(i) the participant is the only participant with respect to such protected cell; and
(ii) the participant is the sponsor or is affiliated with the sponsor of the sponsored
captive insurance company through common ownership and control.
(g) The tax provided for in this section shall constitute all taxes collectible under
the laws of this State from any captive insurance company, and no other occupation
tax or other taxes shall be levied or collected from any captive insurance company
by the State or any county, city, or municipality within this State, except meals
and rooms taxes, sales and use taxes, and ad valorem taxes on real and personal property
used in the production of income.
(h) Annually, 13 percent of the premium tax revenues collected pursuant to this section
shall be transferred to the Department of Financial Regulation for the regulation
of captive insurance companies under this chapter.
(i) [Repealed.]
(j) The tax provided for in this section shall be calculated on an annual basis, notwithstanding
policies or contracts of insurance or contracts of reinsurance issued on a multiyear
basis. In the case of multiyear policies or contracts, the premium shall be prorated
for purposes of determining the tax under this section.
(k) A captive insurance company first licensed under this chapter on or after January
1, 2017 shall receive a nonrefundable credit of $5,000.00 applied against the aggregate
taxes owed for the first two taxable years for which the company has liability under
this section. (Added 1981, No. 28; amended 1985, No. 170 (Adj. Sess.), § 2, eff. May 7, 1986; 1987, No. 47, § 3, eff. May 13, 1987; 1989, No. 72, § 2; 1989, No. 225 (Adj. Sess.), § 25(a); 1993, No. 89, §§ 15-17; 1993, No. 152 (Adj. Sess.), § 1, eff. May 16, 1994; 1995, No. 180 (Adj. Sess.), § 38(a); 1999, No. 38, § 14, eff. May 20, 1999; 1999, No. 49, § 218; 1999, No. 84 (Adj. Sess.), § 11, eff. April 19, 2000; 2001, No. 71, § 13a, eff. June 16, 2001; 2003, No. 55, § 7, eff. June 4, 2003, see effective date notes set out below; 2007, No. 49, §§ 11, 15; 2009, No. 42, §§ 18, 21, eff. May 27, 2009; 2009, No. 42, § 20; 2011, No. 21, § 20; 2011, No. 78 (Adj. Sess.), § 2, eff. April 2, 2012; 2013, No. 29, § 49, eff. May 13, 2013; 2017, No. 73, § 30; 2017, No. 90 (Adj. Sess.), § 3, eff. March 8, 2018; 2023, No. 12, § 2, eff. July 1, 2023.)
§ 6015. Rules and regulations
The Commissioner may adopt and from time to time amend such rules relating to captive
insurance companies as are necessary to enable the Commissioner to carry out the provisions
of this chapter. (Added 1981, No. 28; amended 2003, No. 55, § 7.)
§ 6016. Laws applicable
No provisions of this title, other than those contained in this chapter or contained
in specific references contained in this chapter, shall apply to captive insurance
companies. Risk retention groups shall have the privileges and be subject to the provisions
of chapter 142 of this title in addition to the applicable provisions of this chapter. (Added 1981, No. 28; amended 2003, No. 55, § 7.)
§ 6017. Captive Insurance Regulatory and Supervision Fund
(a)(1) There is hereby created a fund to be known as the Captive Insurance Regulatory and
Supervision Fund for the purpose of providing the financial means for the Commissioner
of Financial Regulation to administer this chapter, chapter 142, and chapter 142A
of this title and for reasonable expenses incurred in promoting the captive insurance
industry in Vermont. The transfer of 13 percent of the premium tax under subsection 6014(h) of this title and all fees and assessments received by the Department pursuant to the administration
of these chapters shall be credited to this Fund. Of this amount, not more than three
percent of the premium tax under section 6014 may be expended by the Agency of Commerce
and Community Development, with approval of the Secretary of Administration, for promotional
expenses. All fines and administrative penalties, however, shall be deposited directly
into the General Fund.
(2) All payments from the Captive Insurance Regulatory and Supervision Fund for the maintenance
of staff and associated expenses, including contractual services as necessary, shall
be disbursed from the State Treasury only upon warrants issued by the Commissioner
of Finance and Management, after receipt of proper documentation regarding services
rendered and expenses incurred.
(b) At the end of each fiscal year, the balance in the Captive Insurance Regulatory and
Supervision Fund shall be transferred to the General Fund.
(c) The Commissioner of Finance and Management may anticipate receipts to the Captive
Insurance Regulatory and Supervision Fund and issue warrants based thereon. (Added 1987, No. 47, § 4, eff. May 13, 1987; amended 1989, No. 72, § 3; 1989, No. 225 (Adj. Sess.), § 25; 1995, No. 180 (Adj. Sess.), § 38; 1995, No. 190 (Adj. Sess.), § 1; 1999, No. 49, § 219; 2003, No. 55, § 7; 2003, No. 80 (Adj. Sess.), § 76, eff. March 8, 2004; 2009, No. 42, § 22; 2011, No. 78 (Adj. Sess.), § 2, eff. April 2, 2012; 2013, No. 179 (Adj. Sess.), § E.801; 2023, No. 110 (Adj. Sess.), § 5, eff. July 1, 2024.)
§ 6018. Delinquency
Except as otherwise provided in this chapter, the terms and conditions set forth in
chapter 145 of this title shall apply in full to captive insurance companies formed
or licensed under this chapter; however, the assets of a separate account established
under subsection 6006(q) of this chapter shall not be used to pay any expenses or
claims other than those attributable to such separate account. (Added 1987, No. 168 (Adj. Sess.), § 4, eff. May 3, 1988; amended 1993, No. 40, § 9, eff. June 3, 1993; 1999, No. 38, § 15, eff. May 20, 1999; 2003, No. 55, § 7; 2007, No. 49, § 12; 2013, No. 103 (Adj. Sess.), § 6, eff. April 14, 2014; 2019, No. 110 (Adj. Sess.), § 9, eff. June 15, 2020.)
§ 6019. Rules for controlled unaffiliated business
The Commissioner may adopt rules establishing standards to ensure that a parent or
its affiliated company, or an industrial insured or its affiliated company, is able
to exercise control of the risk management function of any controlled unaffiliated
business to be insured by a pure captive insurance company or an industrial insured
captive insurance company, respectively; provided, however, that, until such time
as rules under this section are adopted, the Commissioner may approve the coverage
of such risks by a pure captive insurance company or an industrial insured captive
insurance company. (Added 1997, No. 49, § 16, eff. June 26, 1997; amended 2003, No. 55, § 7; 2007, No. 49, § 13.)
§ 6020. Conversion to or merger with reciprocal insurer
(a) An association captive insurance company, risk retention group, industrial insured
captive insurance company formed as a stock or mutual corporation, or other insurer
approved by the Commissioner may be converted to or merged with and into a reciprocal
insurer in accordance with a plan therefore and the provisions of this section.
(b) Any plan for such conversion or merger shall provide a fair and equitable plan for
purchasing, retiring, or otherwise extinguishing the interests of the stockholders
and policyholders of a stock insurer, and the members and policyholders of a mutual
insurer, including a fair and equitable provision for the rights and remedies of dissenting
stockholders, members, or policyholders.
(c) In the case of a conversion authorized under subsection (a) of this section:
(1) such conversion shall be accomplished under such reasonable plan and procedure as
may be approved by the Commissioner; provided, however, that the Commissioner shall
not approve any such plan of conversion unless such plan:
(A) satisfies the provisions of subsection (b) of this section;
(B) provides for a hearing, of which notice is given or to be given to the captive insurance
company, its directors, officers, and policyholders, and, in the case of a stock insurer,
its stockholders, and in the case of a mutual insurer, its members, all of which persons
shall be entitled to attend and appear at such hearing; provided, however, that if
notice of a hearing is given and no director, officer, policyholder, member, or stockholder
requests a hearing, the Commissioner may cancel such hearing;
(C) provides a fair and equitable plan for the conversion of stockholder, member, or policyholder
interests into subscriber interests in the resulting reciprocal insurer, substantially
proportionate to the corresponding interests in the stock or mutual insurer; provided,
however, that this requirement shall not preclude the resulting reciprocal insurer
from applying underwriting criteria that could affect ongoing ownership interests;
and
(D) is approved:
(i) in the case of a stock insurer, by a majority of the shares entitled to vote represented
in person or by proxy at a duly called regular or special meeting at which a quorum
is present; and
(ii) in the case of a mutual insurer, by a majority of the voting interests of policyholders
represented in person or by proxy at a duly called regular or special meeting thereof
at which a quorum is present;
(2) the Commissioner shall approve such plan of conversion if the Commissioner finds that
the conversion will promote the general good of the State in conformity with those
standards set forth in subdivision 6006(d)(2) of this title;
(3) if the Commissioner approves the plan, the Commissioner shall amend the converting
insurer’s certificate of authority to reflect conversion to a reciprocal insurer and
issue such amended certificate of authority to the company’s attorney-in-fact;
(4) upon the issuance of an amended certificate of authority of a reciprocal insurer by
the Commissioner, the conversion shall be effective; and
(5) upon the effectiveness of such conversion the corporate existence of the converting
insurer shall cease and the resulting reciprocal insurer shall notify the Secretary
of State of such conversion.
(d) A merger authorized under subsection (a) of this section shall be accomplished substantially
in accordance with the procedures set forth in sections 3424, 3426, and 3431 of this title, except that, solely for purposes of such merger:
(1) the plan of merger shall satisfy the provisions of subsection (b) of this section;
(2) the subscribers’ advisory committee of a reciprocal insurer shall be equivalent to
the board of directors of a stock or mutual insurance company;
(3) the subscribers of a reciprocal insurer shall be the equivalent of the policyholders
of a mutual insurance company;
(4) if a subscribers’ advisory committee does not have a president or secretary, the officers
of such committee having substantially equivalent duties shall be deemed the president
or secretary of such committee;
(5) the Commissioner may, upon request of an insurer party to a merger authorized under
subsection (a) of this section, waive the requirement of subdivision 3424(6) of this title;
(6) subdivision 3424(7) of this title shall not apply to such merger;
(7) the Commissioner shall approve the articles of merger if the Commissioner finds that
the merger will promote the general good of the State in conformity with those standards
set forth in subdivision 6006(d)(2) of this title. If the Commissioner approves the articles of merger, the Commissioner shall indorse
the Commissioner’s approval thereon and the surviving insurer shall present the same
to the Secretary of State at the Secretary of State’s office;
(8) notwithstanding section 6004 of this title, the Commissioner may permit the formation, without surplus, of a captive insurance
company organized as a reciprocal insurer, into which an existing captive insurance
company may be merged for the purpose of facilitating a transaction under this section;
provided, however, that there shall be no more than one authorized insurance company
surviving such merger; and
(9) an alien insurer may be a party to a merger authorized under subsection (a) of this
section; provided, that the requirements for a merger between a domestic and a foreign
insurer under section 3431 of this title shall apply to a merger between a domestic and an alien insurer under this subsection.
Such alien insurer shall be treated as a foreign insurer under section 3431 and such
other jurisdictions shall be the equivalent of a state for purposes of section 3431.
(e) A conversion or merger under this section shall have all of the effects set forth
in subdivisions 3430(3), (4), and (5) of this title, to the extent such effects are
not inconsistent with the provisions of this chapter. (Added 1997, No. 100 (Adj. Sess.), § 1, eff. April 16, 1998; amended 1999, No. 38, § 16, eff. May 20, 1999; 2003, No. 55, § 7; 2009, No. 137 (Adj. Sess.), § 22, eff. May 29, 2010.)
§§ 6021-6023. Recodified. 2003, No. 55, § 8, eff. June 30, 2003.
§ 6024. Dormant captive insurance companies
(a) As used in this section, unless the context requires otherwise, “dormant captive insurance
company” means a captive insurance company that has:
(1) ceased transacting the business of insurance, including the issuance of insurance
policies; and
(2) no remaining liabilities associated with insurance business transactions or insurance
policies issued prior to the filing of its application for a certificate of dormancy
under this section.
(b) A captive insurance company domiciled in Vermont that meets the criteria of subsection
(a) of this section may apply to the Commissioner for a certificate of dormancy. The
certificate of dormancy shall be subject to renewal every five years and shall be
forfeited if not renewed within such time.
(c) A dormant captive insurance company that has been issued a certificate of dormancy
shall:
(1) possess and thereafter maintain unimpaired, paid-in capital and surplus of not less
than $25,000.00; provided, however, that if the dormant captive insurance company
had never capitalized, it shall not be required to add capital upon entering dormancy;
(2) prior to March 15 of each year, submit to the Commissioner a report of its financial
condition, verified by oath of two of its executive officers or, in the case of a
captive insurance company formed as a limited liability company or as a reciprocal
insurer, of two individuals authorized by its governing board, in a form as may be
prescribed by the Commissioner; and
(3) pay a license renewal fee of $500.00.
(d) A dormant captive insurance company shall not be subject to or liable for the payment
of any tax under section 6014 of this chapter.
(e) A dormant captive insurance company shall apply to the Commissioner for approval to
surrender its certificate of dormancy and resume conducting the business of insurance
prior to issuing any insurance policies.
(f) A certificate of dormancy shall be revoked if a dormant captive insurance company
no longer meets the criteria of subsection (a) of this section.
(g) The Commissioner may establish guidelines and procedures as necessary to carry out
the provisions of this section. (Added 2013, No. 103 (Adj. Sess.), § 1, eff. April 14, 2014; amended 2015, No. 74 (Adj. Sess.), § 2, eff. April 13, 2016; 2017, No. 12, § 8, eff. May 1, 2017; 2019, No. 110 (Adj. Sess.), § 2, eff. June 15, 2020; 2025, No. 23, § 11, eff. July 1, 2025.)
-
Subchapter 002: SPONSORED CAPTIVE INSURANCE COMPANIES
§ 6031. Formation
(a) One or more sponsors may form a sponsored captive insurance company under this chapter.
In addition to the general provisions of this chapter, the provisions of this subchapter
shall apply to sponsored captive insurance companies.
(b) Subject to the approval of the Commissioner, a sponsored captive insurance company
may be formed as any type of entity permissible under Vermont law. (Added 2003, No. 55, § 9; amended 2005, No. 122 (Adj. Sess.), § 5; 2009, No. 137 (Adj. Sess.), § 23, eff. May 29, 2010; 2019, No. 3, § 5, eff. April 18, 2019.)
§ 6032. Definitions
As used in this subchapter:
(1) “General account” means all assets and liabilities of the sponsored captive insurance
company not attributable to a protected cell.
(2) “Incorporated protected cell” means a protected cell that, subject to the approval
of the Commissioner, is formed as any type of entity permissible under Vermont law,
separate from the sponsored captive insurance company of which it is a part.
(3) “Participant” means an entity as defined in section 6036 of this title, and any affiliates thereof, that are insured by a sponsored captive insurance company,
where the losses of the participant are limited through a participant contract to
such participant’s pro rata share of the assets of one or more protected cells identified
in such participant contract.
(4) “Participant contract” means a contract by which a sponsored captive insurance company
insures the risks of a participant and limits the losses of each such participant
to its pro rata share of the assets of one or more protected cells identified in such
participant contract.
(5) “Protected cell” means a separate account established by a sponsored captive insurance
company formed or licensed under the provisions of this chapter, in which assets are
maintained for one or more participants in accordance with the terms of one or more
participant contracts to fund the liability of the sponsored captive insurance company
assumed on behalf of such participants as set forth in such participant contracts,
and shall include an “incorporated protected cell” as defined in this section.
(6) “Sponsor” means any entity that meets the requirements of section 6035 of this title and is approved by the Commissioner to provide all or part of the capital and surplus
required by applicable law and to organize and operate a sponsored captive insurance
company.
(7) “Sponsored captive insurance company” means any captive insurance company:
(A) in which the minimum capital and surplus required by applicable law is provided by
one or more sponsors;
(B) that is formed or licensed under the provisions of this chapter;
(C) that insures the risks only of its participants or, subject to Commissioner approval,
other parties unaffiliated with a participant as defined in subsection 6036(d) of this title, through separate participant contracts; and
(D) that funds its liability to each participant through one or more protected cells and
segregates the assets of each protected cell from the assets of other protected cells
and from the assets of the sponsored captive insurance company’s general account.
(8) “Controlled unaffiliated entity” means any person or entity:
(A) that is not in the corporate system of a participant and its affiliated companies;
(B) that has an existing contractual relationship with a participant or one of its affiliated
companies; and
(C) whose risks are managed by a participant, as applicable, in accordance with section 6019 of this title. (Added 2003, No. 55, § 9; amended 2011, No. 21, § 21; 2011, No. 78 (Adj. Sess.), § 35, eff. April 2, 2012; 2013, No. 103 (Adj. Sess.), § 7, eff. April 14, 2014; 2015, No. 20, § 3, eff. May 7, 2015; 2019, No. 3, § 6, eff. April 18, 2019; 2021, No. 139 (Adj. Sess.), § 15, eff. May 27, 2022; 2023, No. 110 (Adj. Sess.), § 1, eff. July 1, 2024.)
§ 6033. Supplemental application materials
In addition to the information required by subdivisions 6002(c)(1) and (2) of this
title, and subject to the confidentiality provisions of subdivision 6002(c)(3) of this title, each applicant-sponsored captive insurance company shall file with the Commissioner
the following:
(1) materials demonstrating how the applicant will account for the loss and expense experience
of each protected cell at a level of detail found to be sufficient by the Commissioner
and how it will report such experience to the Commissioner;
(2) a statement acknowledging that all financial records of the sponsored captive insurance
company, including records pertaining to any protected cells, shall be made available
for inspection or examination by the Commissioner or the Commissioner’s designated
agent;
(3) all contracts or sample contracts between the sponsored captive insurance company
and any participants; and
(4) evidence that expenses shall be allocated to each protected cell in a fair and equitable
manner. (Added 2003, No. 55, § 9; amended 2023, No. 110 (Adj. Sess.), § 12, eff. July 1, 2024.)
§ 6034. Protected cells
A sponsored captive insurance company formed or licensed under the provisions of this
chapter may establish and maintain one or more protected cells to insure risks of
one or more participants or, subject to Commissioner approval, other parties unaffiliated
with a participant, subject to the following conditions:
(1) The shareholders of a sponsored captive insurance company shall be limited to its
participants and sponsors, provided that a sponsored captive insurance company may
issue nonvoting securities to other persons on terms approved by the Commissioner.
(2) Each protected cell shall be accounted for separately on the books and records of
the sponsored captive insurance company to reflect the financial condition and results
of operations of such protected cell, net income or loss, dividends or other distributions
to participants, and such other factors as may be provided in the participant contract
or required by the Commissioner.
(3) The assets of a protected cell shall not be chargeable with liabilities arising out
of any other insurance business the sponsored captive insurance company may conduct.
(4) No sale, exchange, or other transfer of assets may be made by such sponsored captive
insurance company between or among any of its protected cells without the consent
of such protected cells.
(5) No sale, exchange, transfer of assets, dividend, or distribution may be made from
a protected cell to a sponsor or participant without the Commissioner’s approval and
in no event shall such approval be given if the sale, exchange, transfer, dividend,
or distribution would result in insolvency or impairment with respect to a protected
cell.
(6) All attributions of assets and liabilities to the protected cells and the general
account shall be in accordance with the plan of operation approved by the Commissioner.
No other attribution of assets or liabilities may be made by a sponsored captive insurance
company between its general account and any protected cell or between any protected
cells. The sponsored captive insurance company shall attribute all insurance obligations,
assets, and liabilities relating to a reinsurance contract entered into with respect
to a protected cell to such protected cell. The performance under such reinsurance
contract and any tax benefits, losses, refunds, or credits allocated pursuant to a
tax allocation agreement to which the sponsored captive insurance company is a party,
including any payments made by or due to be made to the sponsored captive insurance
company pursuant to the terms of such agreement, shall reflect the insurance obligations,
assets, and liabilities relating to the reinsurance contract that are attributed to
such protected cell.
(7) Each sponsored captive insurance company shall notify the Commissioner in writing
within 10 business days of any protected cell that is insolvent or otherwise unable
to meet its claim or expense obligations.
(8) No participant contract shall take effect without the Commissioner’s prior written
approval, and the addition of each new protected cell and withdrawal of any participant
or termination of any existing protected cell shall constitute a change in the business
plan requiring the Commissioner’s prior written approval.
(9) If required by the Commissioner, in his or her discretion, the business written by
a sponsored captive, with respect to each cell, shall be:
(A) Fronted by an insurance company licensed under the laws of any state.
(B) Reinsured by a reinsurer authorized or approved by the State of Vermont.
(C) Secured by a trust fund in the United States for the benefit of policyholders and
claimants or funded by an irrevocable letter of credit or other arrangement that is
acceptable to the Commissioner. The Commissioner may require the sponsored captive
to increase the funding of any security arrangement established under this subdivision.
If the form of security is a letter of credit, the letter of credit must be issued
or confirmed by a bank approved by the Commissioner. A trust maintained pursuant to
this subdivision shall be established in a form and upon such terms approved by the
Commissioner. (Added 1999, No. 38, § 17, eff. May 20, 1999; amended 1999, No. 80 (Adj. Sess.), § 1, eff. April 11, 2000; 2003, No. 55, § 9; 2009, No. 42, § 23, eff. May 27, 2009; 2011, No. 21, § 22; 2015, No. 20, § 4, eff. May 7, 2015; 2019, No. 110 (Adj. Sess.), § 4, eff. June 15, 2020; 2021, No. 139 (Adj. Sess.), § 16, eff. May 27, 2022.)
§ 6034a. Incorporated protected cells
(a) A protected cell of a sponsored captive insurance company may be formed as an incorporated
protected cell as defined in subdivision 6032(2) of this title.
(b) Subject to the prior written approval of the sponsored captive insurance company and
of the Commissioner, an incorporated protected cell shall be entitled to enter into
contracts and undertake obligations in its own name and for its own account. In the
case of a contract or obligation to which the sponsored captive insurance company
is not a party, either in its own name and for its own account or on behalf of a protected
cell, the counterparty to the contract or obligation shall have no right or recourse
against the sponsored captive insurance company and its assets other than against
assets properly attributable to the incorporated protected cell that is a party to
the contract or obligation.
(c) The articles of incorporation or articles of organization of an incorporated protected
cell shall refer to the sponsored captive insurance company for which it is a protected
cell and shall state that the protected cell is incorporated or organized for the
limited purposes authorized by the sponsored captive insurance company’s license.
A copy of the prior written approval of the Commissioner to add the incorporated protected
cell, required by subdivision 6034(8) of this title, shall be attached to and filed
with the articles of incorporation or the articles of organization.
(d)(1) An incorporated protected cell formed or established prior to May 8, 2023 shall have
its own distinct name or designation, which shall include the words “Incorporated
Cell” or the abbreviation “IC” or, in the alternative, such incorporated protected
cell may instead choose to have its own distinct name or designation consistent with
the naming conventions in subdivisions (2)(A)–(C) of this subsection, as applicable.
The provisions of 11A V.S.A. chapter 4 and 11B V.S.A. chapter 4 shall not apply to
the naming of incorporated protected cells.
(2) An incorporated protected cell formed or established on or after May 8, 2023 shall
have its own distinct name or designation as follows:
(A) If the incorporated protected cell is formed or established as a corporation, mutual
corporation, or nonprofit corporation, its name or designation shall include the words
“Incorporated Cell” or the abbreviation “IC.” The provisions of 11A V.S.A. chapter 4 and 11B V.S.A. chapter 4 shall not apply to the naming of such incorporated protected cell.
(B) If the incorporated protected cell is formed or established as a limited liability
company, its name or designation shall include the word “Cell.” In addition, 11 V.S.A. § 4005 shall apply to the naming of such incorporated protected cell.
(C) If the incorporated protected cell is formed or established as a reciprocal insurer,
its name or designation shall include the word “Cell.” In addition, subdivision 4834(1) of this title shall apply to the naming of such incorporated protected cell.
(e) It is the intent of the General Assembly under this section to provide sponsored captive
insurance companies, including those licensed as special purpose financial insurance
companies under subchapter 4 of this chapter, with the option to establish one or
more protected cells as a separate corporation, mutual corporation, nonprofit corporation,
limited liability company, or reciprocal insurer. This section shall not be construed
to limit any rights or protections applicable to protected cells not established as
corporations, mutual corporations, nonprofit corporations, limited liability companies,
or reciprocal insurers. (Added 2011, No. 21, § 23; amended 2011, No. 78 (Adj. Sess.), § 36, eff. April 2, 2012; 2013, No. 29, § 50, eff. May 13, 2013; 2013, No. 103 (Adj. Sess.), § 8, eff. April 14, 2014; 2015, No. 20, § 5, eff. May 7, 2015; 2017, No. 12, § 9, eff. May 1, 2017; 2019, No. 110 (Adj. Sess.), § 10, eff. June 15, 2020; 2023, No. 12, § 3, eff. May 8, 2023.)
§ 6034b. Separate accounts of protected cells
With the Commissioner’s prior written approval, a protected cell of a sponsored captive
insurance company may establish one or more separate accounts and may allocate to
them amounts to provide for the insurance of risks of one or more participants, or
controlled unaffiliated business of such participant or participants, subject to the
following:
(1) The income, gains, and losses, realized or unrealized, from assets allocated to a
separate account shall be credited to or charged against the account, without regard
to other income, gains, or losses of the protected cell.
(2) Amounts allocated to a separate account in the exercise of the power granted by this
subsection are owned by the protected cell, and the protected cell may not be nor
hold itself out to be a trustee with respect to such amounts.
(3) Unless otherwise approved by the Commissioner, assets allocated to a protected cell
shall be valued in accordance with the rules otherwise applicable to the protected
cell’s assets.
(4) If and to the extent so provided under the applicable contracts that portion of the
assets of any such protected cell equal to the reserves and other contract liabilities
with respect to such account shall not be chargeable with liabilities arising out
of any other business the protected cell may conduct.
(5) No sale, exchange, or other transfer of assets may be made by such protected cell
between any of its separate accounts or between any other investment account and one
or more of its separate accounts unless, in the case of a transfer into a separate
account, such transfer is made solely to establish the account or to support the operation
of the contracts with respect to the separate account to which the transfer is made
and unless such transfer, whether into or from a separate account, is made by a transfer
of cash or by a transfer of securities having a readily determinable market value,
provided that such transfer of securities is approved by the Commissioner. The Commissioner
may approve other transfers among such accounts if, in his or her opinion, such transfers
would be equitable.
(6) To the extent such protected cell deems it necessary to comply with any applicable
federal or State laws, such protected cell, with respect to any separate account,
including any separate account that is a management investment company or a unit investment
trust, may provide for persons having an interest therein appropriate voting and other
rights and special procedures for the conduct of the business of such account, including
special rights and procedures relating to investment policy, investment advisory services,
selection of independent public accountants, and the selection of a committee, the
members of which need not be otherwise affiliated with such protected cell, to manage
the business of such account. (Added 2019, No. 110 (Adj. Sess.), § 6, eff. June 15, 2020.)
§ 6034c. Protected cell conversion
(a)(1) Subject to the prior written approval of the Commissioner, on application of the sponsor
and with the prior consent of each participant of the affected protected cells or
as otherwise permitted pursuant to a participation agreement and the consent of each
affected incorporated protected cell, a sponsored captive insurance company or a sponsored
captive insurance company licensed as a special purpose financial insurance company
may convert one or more protected cells or incorporated protected cells into a:
(A) single protected cell or incorporated protected cell;
(B) new sponsored captive insurance company;
(C) new sponsored captive insurance company licensed as a special purpose financial insurance
company;
(D) new special purpose financial insurance company;
(E) new pure captive insurance company;
(F) new risk retention group;
(G) new agency captive insurance company;
(H) new industrial insured captive insurance company; or
(I) new association captive insurance company.
(2) Any such conversion shall be subject to section 6031 and subchapters 1 and 4 of this
chapter, as applicable, as well as to a plan or plans of operation approved by the
Commissioner, without affecting any protected cell’s or incorporated protected cell’s
assets, rights, benefits, obligations, and liabilities.
(b) Any such conversion shall be deemed for all purposes to be a continuation of each
such protected cell’s or incorporated protected cell’s existence together with all
of its assets, rights, benefits, obligations, and liabilities, as a new protected
cell or incorporated protected cell, a licensed sponsored captive insurance company,
a sponsored captive insurance company licensed as a special purpose financial insurance
company, a pure captive insurance company, a risk retention group, an industrial insured
captive insurance company, or an association captive insurance company, as applicable.
Any such conversion shall be deemed to occur without any transfer or assignment of
any such assets, rights, benefits, obligations, or liabilities and without the creation
of any reversionary interest in, or impairment of, any such assets, rights, benefits,
obligations, and liabilities.
(c) Any such conversion shall not be construed to limit any rights or protections applicable
to any converted protected cell or incorporated protected cell and such sponsored
captive insurance company or sponsored captive insurance company licensed as a special
purpose financial insurance company under this subchapter or under subchapter 4 of
this chapter, as applicable, that existed immediately prior to the date of any such
conversion.
(d)(1) Any protected cell converting into an incorporated protected cell pursuant to this
section, or converting into a new captive insurance company or risk retention group
pursuant to this section, shall perform such conversion in accordance with:
(A) the provisions of 11A V.S.A. chapter 11 if the converted entity is to be a corporation;
(B) the provisions of 11 V.S.A. chapter 25, subchapter 10 if the converted entity is to
be a limited liability company; or
(C) the provisions applicable to any other type of entity permissible under Vermont law
if the converted entity is to be such an entity.
(2) As used in this subdivision, a protected cell that is not an incorporated protected
cell shall be considered an “organization” as that term is defined in 11A V.S.A. § 11.01 and 11 V.S.A. § 4141; an “other insurer” as that term is defined in 8 V.S.A. § 6020; and an “entity” as that term is defined in 11C V.S.A. § 102. (Added 2015, No. 74 (Adj. Sess.), § 3, eff. April 13, 2016; amended 2019, No. 110 (Adj. Sess.), § 5, eff. June 15, 2020; 2021, No. 25, § 24, eff. May 12, 2021.)
§ 6034d. Sale, transfer, or assignment of protected cells
(a) Subject to the prior written approval of the Commissioner, on application of the sponsor
and with the prior consent of each participant of the affected protected cell or as
otherwise permitted pursuant to a participation agreement, or the consent of the affected
incorporated protected cell, a sponsored captive insurance company or a sponsored
captive insurance company licensed as a special purpose financial insurance company
may sell, transfer, assign, and otherwise convey a protected cell or incorporated
protected cell together with all of the protected cell’s assets, rights, benefits,
obligations, and liabilities to a new or existing sponsored captive insurance company
or sponsored captive insurance company licensed as a special purpose financial insurance
company, pursuant to a plan or plans of operation approved by the Commissioner.
(b) Any such sale, transfer, assignment, or conveyance shall be deemed for all purposes
to be a continuation of the protected cell’s existence together with all of its assets,
rights, benefits, obligations, and liabilities, as a protected cell of the transferee.
(c) Any such sale, transfer, assignment, or conveyance shall not be construed to limit
any rights or protections applicable to the transferred protected cell or incorporated
protected cell and the transferor sponsored captive insurance company or sponsored
captive insurance company licensed as a special purpose financial insurance company
under this subchapter or under section 6048n of this title, as applicable, that existed immediately prior to any such sale, transfer, assignment,
or conveyance. (Added 2015, No. 74 (Adj. Sess.), § 4, eff. April 13, 2016; amended 2019, No. 110 (Adj. Sess.), § 5, eff. June 15, 2020.)
§ 6034e. Repealed. 2021, No. 25, § 25, eff. May 12, 2021.
§ 6034f. Annual report; books and records
(a) For purposes of subsection 6007(b) of this chapter:
(1) Each sponsored captive insurance company shall annually file with the Commissioner
such financial reports as the Commissioner requires, which shall include accounting
statements detailing the financial experience of each protected cell.
(2) Unless otherwise approved in advance by the Commissioner, a sponsored captive insurance
company shall maintain its books, records, documents, accounts, vouchers, and agreements
in this State. A sponsored captive insurance company shall make its books, records,
documents, accounts, vouchers, and agreements available for inspection by the Commissioner
at any time. A sponsored captive insurance company shall keep its books and records
in such manner that its financial condition, affairs, and operations can be readily
ascertained and so that the Commissioner may readily verify its financial statements
and determine its compliance with this chapter.
(3) Unless otherwise approved in advance by the Commissioner, all original books, records,
documents, accounts, vouchers, and agreements shall be preserved and kept available
in this State for the purpose of examination and inspection and until such time as
the Commissioner approves the destruction or other disposition of such books, records,
documents, accounts, vouchers, and agreements. If the Commissioner approves the keeping
of the items listed in this subdivision outside this State, the sponsored captive
insurance company shall maintain in this State a complete and true copy of each such
original. Books, records, documents, accounts, vouchers, and agreements may be photographed,
reproduced on film, or stored and reproduced electronically. (Added 2021, No. 139 (Adj. Sess.), § 17, eff. May 27, 2022.)
§ 6034g. Confidentiality
(a) Subdivision 6002(c)(3) and subsection 6008(c) of this title shall apply to all documents, materials, or other information, including confidential
and privileged documents, examination reports, preliminary examination reports or
results, working papers, recorded information, 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 subchapter.
(b) In furtherance of the Commissioner’s regulatory duties, the Commissioner may share
and receive documents, materials, or other information pursuant to section 22 of this title. (Added 2023, No. 110 (Adj. Sess.), § 13, eff. July 1, 2024.)
§ 6034h. Conversion into protected cell
(a)(1) Subject to the prior written approval of the Commissioner, a captive insurance company
domiciled in this State and organized as an agency captive insurance company, association
captive insurance company, industrial insured captive insurance company, pure captive
insurance company, risk retention group, or special purpose financial insurance company
may be converted into an unincorporated protected cell.
(2) Any such conversion shall be subject to subchapters 1 and 4 of this chapter, as applicable,
as well as to a plan or plans of operation approved by the Commissioner, without affecting
the converted entity’s assets, rights, benefits, obligations, or liabilities.
(b) Any such conversion shall be deemed for all purposes to be a continuation of such
converted entity’s existence together with all of its assets, rights, benefits, obligations,
and liabilities as a new protected cell. Any such conversion shall be deemed to occur
without any transfer or assignment of any such assets, rights, benefits, obligations,
or liabilities and without the creation of any reversionary interest in, or impairment
of, any such assets, rights, benefits, obligations, and liabilities.
(c) Any such conversion shall not be construed to limit any rights or protections applicable
to any converted entity under this subchapter or under subchapter 1 or 4 of this chapter,
as applicable, that existed immediately prior to the date of such conversion.
(d)(1) Any entity converting into a protected cell pursuant to this section shall perform
such conversion in accordance with:
(A) the provisions of 11A V.S.A. chapter 11 if the converted entity was a corporation;
(B) the provisions of 11 V.S.A. chapter 25, subchapter 10 if the converted entity was
a limited liability company; or
(C) the provisions applicable to any other type of entity permissible under Vermont law
if the converted entity was such an entity.
(2) As used in this subsection (d), a protected cell that is not an incorporated protected
cell shall be considered an “organization” as that term is defined in 11A V.S.A. § 11.01 and 11 V.S.A. § 4141, an “other insurer” as that term is defined in 8 V.S.A. § 6020, and an “entity” as that term is defined in 11C V.S.A. § 102. (Added 2023, No. 110 (Adj. Sess.), § 2, eff. July 1, 2024.)
§ 6035. Qualification of sponsors
A sponsor of a sponsored captive insurance company may be any person approved by the
Commissioner in the exercise of his or her discretion, based on a determination that
the approval of such person as a sponsor is consistent with the purposes of this chapter.
In evaluating the qualifications of a proposed sponsor, the Commissioner shall consider
the type and structure of the proposed sponsor entity, its experience in financial
operations, financial stability and strength, business reputation, and such other
facts deemed relevant by the Commissioner. A risk retention group shall not be a sponsor
of a sponsored captive insurance company. (Added 1999, No. 38, § 18, eff. May 20, 1999; amended 1999, No. 80 (Adj. Sess.), § 2, eff. April 11, 2000; 2003, No. 55, § 9; 2005, No. 122 (Adj. Sess.), § 6; 2007, No. 49, § 16; 2011, No. 21, § 24; 2011, No. 78 (Adj. Sess.), § 39, eff. April 2, 2012.)
§ 6036. Participants in sponsored captive insurance companies
(a) Associations, corporations, limited liability companies, partnerships, trusts, risk
retention groups, sole proprietorships, and other business entities may be participants
in any sponsored captive insurance company formed or licensed under this chapter.
(b) A sponsor may be a participant in a sponsored captive insurance company.
(c) A participant need not be a shareholder of the sponsored captive insurance company
or any affiliate thereof.
(d) A participant shall not insure any risks other than its own and the risks of affiliated
entities or of controlled unaffiliated entities. (Added 1999, No. 38, § 19, eff. May 20, 1999; amended 2003, No. 55, § 9; 2011, No. 78 (Adj. Sess.), § 40, eff. April 2, 2012; 2015, No. 20, § 6, eff. May 7, 2015; 2019, No. 3, § 7, eff. April 18, 2019.)
§ 6037. Investments by sponsored captive insurance companies and protected cells
Notwithstanding the provisions of section 6034 of this title, the assets of two or more protected cells may be combined for purposes of investment,
and such combination shall not be construed as defeating the segregation of such assets
for accounting or other purposes. Sponsored captive insurance companies and protected
cells shall comply with the investment requirements contained in section 6010 of this title. (Added 2003, No. 55, § 9; amended 2019, No. 110 (Adj. Sess.), § 8, eff. June 15, 2020.)
§ 6038. Delinquency of sponsored captive insurance companies
(a) Except as otherwise provided in this section, the provisions of chapter 145 of this
title shall apply in full to a sponsored captive insurance company and to each of
its protected cells.
(b) Upon any order of supervision, rehabilitation, or liquidation of a sponsored captive
insurance company or any of its protected cells, the receiver shall manage the assets
and liabilities of the sponsored captive insurance company or any of its protected
cells pursuant to the provisions of this subchapter.
(c) Notwithstanding the provisions of chapter 145 of this title to the contrary:
(1) In connection with the conservation, rehabilitation, or liquidation of a sponsored
captive insurance company or any of its protected cells, the assets and liabilities
of a protected cell shall at all times be kept separate from, and shall not be commingled
with, those of other protected cells and the sponsored captive insurance company.
(2) The assets of a protected cell may not be used to pay any expenses or claims other
than those attributable to such protected cell.
(3) Unless the sponsor consents and the Commissioner has granted prior written approval,
the assets of the sponsored captive insurance company’s general account shall not
be used to pay any expenses or claims attributable solely to a protected cell or protected
cells of the sponsored captive insurance company. In the event that the assets of
the sponsored captive insurance company’s general account are used to pay expenses
or claims attributable solely to a protected cell or protected cells of the sponsored
captive insurance company, the sponsor is not required to contribute additional capital
and surplus to the sponsored captive insurance company’s general account, notwithstanding
the provisions of section 6004 of this title.
(4) A sponsored captive insurance company’s capital and surplus shall at all times be
available to pay any expenses of or claims against the sponsored captive insurance
company.
(d) Notwithstanding the provisions of chapter 145 of this title or any other provision
of law to the contrary, and, in addition to the provisions of this section, in the
event of an insolvency of a sponsored captive insurance company or any of its protected
cells where the Commissioner determines that one or more protected cells remain solvent,
the Commissioner may separate such cells from the sponsored captive insurance company
and, on application of the sponsor, may allow for the conversion of such protected
cells into one or more new or existing sponsored captive insurance companies, or one
or more other captive insurance companies, pursuant to a plan or plans of operation
approved by the Commissioner.
(e) Notwithstanding the provisions of chapter 145 of this title or any other provision
of law to the contrary, and in addition to the provisions of this section, in the
event of an insolvency of one or more protected cells of a sponsored captive insurance
company, the Commissioner may separate such cell or cells from the sponsored captive
insurance company and may allow for the conversion of such protected cell or cells
into one or more new or existing sponsored captive insurance companies, or one or
more other captive insurance companies, pursuant to a plan or plans of operation approved
by the Commissioner. (Added 2003, No. 55, § 9; amended 2009, No. 42, § 24, eff. May 27, 2009; 2015, No. 20, § 7, eff. May 7, 2015; 2021, No. 139 (Adj. Sess.), § 14, eff. May 27, 2022.)
§ 6039. Claimant recourse
(a) Consistent with the provisions of this subchapter, a creditor of a sponsored captive
insurance company shall have recourse against the assets attributable to a protected
cell if, and only if it is a creditor of the protected cell. A creditor of a protected
cell shall not be entitled to recourse against the assets attributable to any other
protected cell or to the assets in the sponsored captive insurance company’s general
account.
(b) When a sponsored captive insurance company has an obligation to a creditor arising
from a transaction, or otherwise imposed, with respect to a particular protected cell,
the obligation:
(1) shall extend only to the assets attributable to that protected cell, and the creditor
shall be entitled to recourse only against the assets attributable to that protected
cell; and
(2) shall not extend to the assets of any other protected cell or to the assets in the
sponsored captive insurance company’s general account, and the creditor shall not
be entitled to recourse against the assets attributable to any other protected cell
or to the assets of the sponsored captive insurance company’s general account.
(c) When an obligation of a sponsored captive insurance company relates solely to its
general account, a creditor shall have recourse only against the assets in the general
account.
(d) The establishment of one or more protected cells alone, and without more, shall not
constitute or be deemed to be a fraudulent conveyance, an intent by the sponsored
captive insurance company to defraud creditors, or the carrying out of business by
the sponsored captive insurance company for any other fraudulent purpose. (Added 2015, No. 20, § 8, eff. May 7, 2015.)
-
Subchapter 004: SPECIAL PURPOSE FINANCIAL INSURANCE COMPANIES
§ 6048a. Applicable law
(a) A special purpose financial insurance company shall be subject to the provisions of
this subchapter and to the provisions of subchapter 1 of this chapter. In the event
of any conflict between the provisions of this subchapter and the provisions of subchapter
1 of this chapter, the provisions of this subchapter shall control.
(b) A special purpose financial insurance company shall be subject to all applicable rules
adopted pursuant to section 6015 of this chapter that are in effect as of July 1,
2007 and that are adopted after July 1, 2007.
(c) The Commissioner may, by order, exempt a special purpose financial insurance company
from any provision of this chapter or from any rule adopted pursuant to section 6015
of this chapter if the Commissioner determines such provision to be inappropriate
based on the special purpose financial insurance company’s plan of operation. (Added 2007, No. 49, § 17; amended 2013, No. 29, § 52, eff. May 13, 2013.)
§ 6048b. Existing licenses
Except as otherwise determined by the Commissioner, a captive insurance company that
has been licensed by the Commissioner pursuant to this chapter as of July 1, 2007
and that is engaged in or that will be engaged in an insurance securitization shall
be subject to the provisions of this subchapter as a special purpose financial insurance
company. The Commissioner may require such captive insurance company to take any action
that the Commissioner determines is reasonably necessary to bring such captive insurance
company into compliance with the provisions of this subchapter. The Commissioner may
issue an order described in subsection 6048d(b) of this title with respect to such captive insurance company. (Added 2007, No. 49, § 17; amended 2013, No. 29, § 53.)
§ 6048c. Definitions
As used in this subchapter:
(1) “Ceding insurer” means an insurance company approved by the Commissioner and licensed
or otherwise authorized to transact the business of insurance or reinsurance in its
state or country of domicile, which cedes risk to a special purpose financial insurance
company pursuant to a reinsurance contract.
(2) “Insolvency” and “insolvent,” for purpose of applying the provisions of chapter 145
of this title to a special purpose financial insurance company, mean:
(A) that the special purpose financial insurance company is unable to pay its obligations
when they are due, unless those obligations are the subject of a bona fide dispute;
or
(B) the special purpose financial insurance company has failed to meet all criteria and
conditions for solvency of the special purpose financial insurance company established
by the Commissioner by rule or order.
(3) “Insurance securitization” and “securitization” mean a transaction or a group of related
transactions, which may include capital market offerings, that are effected through
related risk transfer instruments and facilitating administrative agreements where
all or part of the result of such transactions is used to fund the special purpose
financial insurance company’s obligations under a reinsurance contract with a ceding
insurer and by which:
(A) proceeds are obtained by a special purpose financial insurance company, directly or
indirectly, through the issuance of securities by the special purpose financial insurance
company or any other person; or
(B) a person provides one or more letters of credit or other assets for the benefit of
the special purpose financial insurance company, which the Commissioner authorizes
the special purpose financial insurance company to treat as admitted assets for purposes
of the special purpose financial insurance company’s annual report; where all or any
part of such proceeds, letters of credit, or assets, as applicable, are used to fund
the special purpose financial insurance company’s obligations under a reinsurance
contract with a ceding insurer. The terms “insurance securitization” and “securitization”
do not include the issuance of a letter of credit for the benefit of the Commissioner
to satisfy all or part of the special purpose financial insurance company’s capital
and surplus requirements under section 6048g of this chapter.
(4) “Management” means the board of directors, managing board, or other individual or
individuals vested with overall responsibility for the management of the affairs of
the special purpose financial insurance company, including officers or other agents
elected or appointed to act on behalf of the special purpose financial insurance company.
(5) “Organizational document” means:
(A) in the case of a special purpose financial insurance company formed as a stock corporation,
the special purpose financial insurance company’s articles of incorporation and bylaws;
and
(B) in the case of a special purpose financial insurance company formed as a limited liability
company, the special purpose financial insurance company’s articles of organization
and operating agreement.
(6) “Reinsurance contract” means a contract between a special purpose financial insurance
company and a ceding insurer pursuant to which the special purpose financial insurance
company agrees to provide reinsurance to the ceding insurer for risks associated with
the ceding insurer’s insurance or reinsurance business.
(7) “Security” shall have the same meaning as defined in 9 V.S.A. § 5102(28) and shall also include any form of debt obligation, equity, surplus certificate,
surplus note, funding agreement, derivative, or other financial instrument that the
Commissioner designates, by rule or order, as a “security” for purposes of this subchapter.
(8) “Special purpose financial insurance company” means a captive insurance company that
has received a license from the Commissioner to operate as a special purpose financial
insurance company pursuant to this subchapter.
(9) “Special purpose financial insurance company security” means:
(A) a security issued by a special purpose financial insurance company; or
(B) a security issued by a third party, the proceeds of which are obtained directly or
indirectly by a special purpose financial insurance company.
(10) “Surplus note” means an unsecured subordinated debt obligation possessing characteristics
consistent with paragraph 3 of the National Association of Insurance Commissioners
Statement of Statutory Accounting Principles No. 41, as amended from time to time
and as modified or supplemented by rule or order of the Commissioner. (Added 2007, No. 49, § 17; amended 2013, No. 29, § 54, eff. May 13, 2013.)
§ 6048d. Licensing; authority
(a) A special purpose financial insurance company may reinsure the risks of a ceding insurer
only. A special purpose financial insurance company may purchase reinsurance to cede
the risks assumed under a reinsurance contract, subject to the prior approval of the
Commissioner.
(b) In conjunction with the issuance of a license to a special purpose financial insurance
company, the Commissioner may issue an order that includes any provisions, terms,
and conditions regarding the organization, licensing, and operation of the special
purpose financial insurance company that are deemed appropriate by the Commissioner
and that are not inconsistent with the provisions of this chapter. Except as provided
in sections 6048l and 6048m of this subchapter, a license issued to a special purpose
financial insurance company pursuant to this chapter and any order issued to a special
purpose financial insurance company pursuant to this subsection shall not be revoked,
suspended, amended, or modified other than as follows:
(1) the special purpose financial insurance company consents to such revocation, suspension,
amendment, or modification; or
(2) the Commissioner makes a showing of clear and convincing evidence demonstrating that
such revocation, suspension, amendment, or modification is necessary to avoid irreparable
harm to the special purpose financial insurance company or to the ceding insurer.
(c) To qualify for a license, a special purpose financial insurance company shall be subject,
in addition to the requirements of subsection 6002(c) of this chapter, to the following:
(1) The special purpose financial insurance company’s plan of operation shall include:
(A) a complete description of all significant transactions, including reinsurance, reinsurance
security arrangements, securitizations, related transactions or arrangements, and,
to the extent not included in the transactions listed in this subdivision (A), a complete
description of all parties other than the special purpose financial insurance company
and the ceding insurer that will be involved in the issuance of special purpose financial
insurance company securities and a description of any pledge, hypothecation, or grant
of a security interest in any of the special purpose financial insurance company’s
assets and in any stock or limited liability company interest in the special purpose
financial insurance company;
(B) the source and form of the special purpose financial insurance company’s capital and
surplus;
(C) the proposed investment policy of the special purpose financial insurance company;
(D) a description of the underwriting, reporting, and claims payment methods by which
losses covered by the reinsurance contract are reported, accounted for, and settled;
(E) pro forma balance sheets and income statements illustrating one or more adverse case
scenarios, as determined under criteria required by the Commissioner, for the performance
of the special purpose financial insurance company under all reinsurance contracts;
and
(F) the proposed rate and method for discounting reserves, if the special purpose financial
insurance company is requesting authority to discount its reserves.
(2) The special purpose financial insurance company shall submit an affidavit of its president,
a vice president, the treasurer, or the chief financial officer or, in the case of
a special purpose financial insurance company formed as a limited liability company
or as a reciprocal insurer, of an individual authorized by the governing board that
includes the following statements, to the best of such person’s knowledge and belief
after reasonable inquiry:
(A) the proposed organization and operation of the special purpose financial insurance
company comply with all applicable provisions of this chapter;
(B) the special purpose financial insurance company’s investment policy reflects and takes
into account the liquidity of assets and the reasonable preservation, administration,
and management of such assets with respect to the risks associated with the reinsurance
contract and the insurance securitization transaction; and
(C) the reinsurance contract and any arrangement for securing the special purpose financial
insurance company’s obligations under such reinsurance contract, including any agreements
or other documentation to implement such arrangement, comply with the provisions of
this subchapter.
(3) The application shall include copies of all agreements and documentation described
in subdivision (1) of this subsection (c) unless otherwise approved by the Commissioner
and any other statements or documents required by the Commissioner to evaluate the
special purpose financial insurance company’s application for licensure.
(4) The application shall include an opinion of qualified legal counsel, in a form acceptable
to the Commissioner, that the offer and sale of any special purpose financial insurance
company securities complies with all applicable registration requirements or applicable
exemptions from or exceptions to such requirements of the federal securities laws
and that the offer and sale of securities by the special purpose financial insurance
company itself comply with all registration requirements or applicable exemptions
from or exceptions to such requirements of the securities laws of this State. Such
opinions shall not be required as part of the application if the special purpose financial
insurance company includes a specific statement in its plan of operation that such
opinions will be provided to the Commissioner in advance of the offer or sale of any
special purpose financial insurance company securities.
(d) The Commissioner may grant a license, which shall be valid through the next April
1 following the date of initial issuance and may be renewed annually thereafter, authorizing
the special purpose financial insurance company to transact reinsurance business as
a special purpose financial insurance company in this State upon finding that:
(1) the proposed plan of operation provides for a reasonable and expected successful operation;
(2) the terms of the reinsurance contract and related transactions comply with this subchapter;
(3) the proposed plan of operation is not hazardous to any ceding insurer; and
(4) the insurance regulator of the state of domicile of each ceding insurer has notified
the Commissioner in writing or otherwise has provided assurance satisfactory to the
Commissioner that it has approved or has not disapproved the transaction, provided
that the Commissioner shall not be precluded from issuing a license to a special purpose
financial insurance company in the event that the insurance regulator of the state
of domicile of a ceding insurer has not responded with respect to all or any part
of the transaction.
(e) The special purpose financial insurance company shall provide the Commissioner with
a copy of a complete set of executed documentation of an insurance securitization
no later than 30 days after the closing on the transactions for such securitization.
(f) Subdivision 6002(c)(3) of this chapter shall apply to all information submitted pursuant
to subsections (c) and (e) of this section and to any order issued to the special
purpose financial insurance company pursuant to subsection (b) of this section. (Added 2007, No. 49, § 17; amended 2013, No. 29, § 55, eff. May 13, 2013; 2025, No. 23, § 13, eff. July 1, 2025.)
§ 6048e. Changes in plan of operation; voluntary dissolution or cessation of business
(a) Any change in the special purpose financial insurance company’s plan of operation
shall require prior approval of the Commissioner.
(b) Any transaction or series of transactions shall be subject to the prior approval of
the Commissioner if such transaction or series of transactions:
(1) is undertaken to dissolve a special purpose financial insurance company; or
(2) results in the termination of all or any part of a special purpose financial insurance
company’s business; but no prior approval of the Commissioner shall be required for
any transaction or series of transactions described in this subdivision (2) if such
transaction or series of transactions is done in accordance with a document or agreement
described in the special purpose financial insurance company’s plan of operation and
if the Commissioner is notified in advance of such transaction or series of transactions.
(c) A special purpose financial insurance company shall notify the Commissioner in advance
of any change in the legal ownership of any security issued by the special purpose
financial insurance company. (Added 2007, No. 49, § 17; amended 2013, No. 29, § 56, eff. May 13, 2013.)
§ 6048f. Formation
(a) A special purpose financial insurance company may be incorporated as a stock insurer
with its capital divided into shares and held by its stockholders, or it may be organized
as a manager-managed limited liability company.
(b) A special purpose financial insurance company’s organizational documents shall limit
the special purpose financial insurance company’s authority to transact the business
of insurance or reinsurance to those activities that the special purpose financial
insurance company conducts to accomplish its purposes as expressed in this subchapter. (Added 2007, No. 49, § 17; amended 2013, No. 29, § 57.)
§ 6048g. Minimum capital and surplus
A special purpose financial insurance company shall not be issued a license unless
it shall possess and thereafter maintain unimpaired paid-in capital and surplus of
not less than $5,000,000.00. (Added 2007, No. 49, § 17; amended 2013, No. 29, § 58.)
§ 6048h. Securities
(a) A special purpose financial insurance company may:
(1) subject to the prior approval of the Commissioner, account for the proceeds of a surplus
note issued by the special purpose financial insurance company as surplus; and
(2) submit for prior approval of the Commissioner periodic written requests for authorization
to make payments of interest on and repayments of principal of surplus notes and other
debt obligations issued by the special purpose financial insurance company, provided
that the Commissioner shall not approve such payment if the Commissioner determines
that such payment would jeopardize the ability of the special purpose financial insurance
company or any other person to fulfill his or her respective obligations pursuant
to the special purpose financial insurance company securitization agreements, the
reinsurance contract, or any related transaction. In lieu of approval of periodic
written requests for authorization to make payments of interest on and repayments
of principal of surplus notes and other debt obligations issued by the special purpose
financial insurance company, the Commissioner may approve a formula or plan, which
shall be included in the special purpose financial insurance company’s plan of operation
as amended from time to time, for payment of interest, principal, or both with respect
to such surplus notes and debt obligations.
(b) In addition to the provisions of section 6005 of this chapter, no dividend or distribution
may be declared or paid by a special purpose financial insurance company if such dividend
or distribution would jeopardize the ability of the special purpose financial insurance
company or any other person to fulfill the company’s or other person’s respective
obligations pursuant to the special purpose financial insurance company securitization
agreements, the reinsurance contract, or any related transaction.
(c) A special purpose financial insurance company security shall not be subject to regulation
as an insurance or reinsurance contract. An investor in such a security or a holder
of such a security shall not be considered to be transacting the business of insurance
in this State solely by reason of having an interest in the security. The underwriter’s
placement or selling agents and their partners, commissioners, officers, members,
managers, employees, agents, representatives, and advisors involved in an insurance
securitization by a special purpose financial insurance company shall not be considered
to be insurance producers or brokers or to be conducting business as an insurance
or reinsurance company or as an insurance agency, brokerage, intermediary, advisory,
or consulting business solely by virtue of their underwriting activities in connection
with such securitization. (Added 2007, No. 49, § 17; amended 2013, No. 29, § 59, eff. May 13, 2013.)
§ 6048i. Permitted reinsurance
(a) A special purpose financial insurance company may reinsure only the risks of a ceding
insurer, pursuant to a reinsurance contract. A special purpose financial insurance
company may not issue a contract of insurance or a contract for assumption of risk
or indemnification of loss other than such reinsurance contract.
(b) Unless otherwise approved in advance by the Commissioner, a special purpose financial
insurance company may not assume or retain exposure to insurance or reinsurance losses
for its own account that are not funded by:
(1) proceeds from a special purpose financial insurance company securitization or letters
of credit or other assets described in subdivision 6048c(3) of this chapter;
(2) premium and other amounts payable by the ceding insurer to the special purpose financial
insurance company pursuant to the reinsurance contract; and
(3) any return on investment of the items in subdivisions (1) and (2) of this subsection.
(c) The reinsurance contract shall contain all provisions reasonably required or approved
by the Commissioner, which requirements shall take into account the laws applicable
to the ceding insurer regarding the ceding insurer taking credit for the reinsurance
provided under such reinsurance contract.
(d) A special purpose financial insurance company may cede risks assumed through a reinsurance
contract to one or more reinsurers through the purchase of reinsurance, subject to
the prior approval of the Commissioner.
(e) A special purpose financial insurance company may enter into contracts and conduct
other commercial activities related or incidental to and necessary to fulfill the
purposes of the reinsurance contract, the insurance securitization, and this subchapter,
provided such contracts and activities are included in the special purpose financial
insurance company’s plan of operation or are otherwise approved in advance by the
Commissioner. Such contracts and activities may include: entering into reinsurance
contracts; issuing special purpose financial insurance company securities; complying
with the terms of these contracts or securities; entering into trust, guaranteed investment
contract, swap, or other derivative, tax, administration, reimbursement, or fiscal
agent transactions; complying with trust indenture, reinsurance, or retrocession;
and other agreements necessary or incidental to effect an insurance securitization
in compliance with this subchapter and the special purpose financial insurance company’s
plan of operation.
(f) Unless otherwise approved in advance by the Commissioner, a reinsurance contract shall
not contain any provision for payment by the special purpose financial insurance company
in discharge of its obligations under the reinsurance contract to any person other
than the ceding insurer or any receiver of the ceding insurer.
(g) A special purpose financial insurance company shall notify the Commissioner immediately
of any action by a ceding insurer or any other person to foreclose on or otherwise
take possession of collateral provided by the special purpose financial insurance
company to secure any obligation of the special purpose financial insurance company. (Added 2007, No. 49, § 17; amended 2013, No. 29, § 60, eff. May 13, 2013.)
§ 6048j. Disposition of assets; investments
(a) The assets of a special purpose financial insurance company shall be preserved and
administered by or on behalf of the special purpose financial insurance company to
satisfy the liabilities and obligations of the special purpose financial insurance
company incident to the reinsurance contract, the insurance securitization, and other
related agreements.
(b) In the special purpose financial insurance company securitization, the security offering
memorandum or other document issued to prospective investors regarding the offer and
sale of a surplus note or other security shall include a disclosure that all or part
of the proceeds of such insurance securitization will be used to fund the special
purpose financial insurance company’s obligations to the ceding insurer.
(c) A special purpose financial insurance company shall not be subject to any restriction
on investments other than the following:
(1) a special purpose financial insurance company shall not make a loan to any person
other than as permitted under its plan of operation or as otherwise approved in advance
by the Commissioner; and
(2) the Commissioner may prohibit or limit any investment that threatens the solvency
or liquidity of the special purpose financial insurance company unless the investment
is otherwise approved in its plan of operation or in an order issued to the special
purpose financial insurance company pursuant to subsection 6048d(b) of this chapter,
as either is amended from time to time. (Added 2007, No. 49, § 17; amended 2013, No. 29, § 61, eff. May 13, 2013.)
§ 6048k. Annual report; books and records
(a) For purposes of subsection 6007(b) of this chapter:
(1) the Commissioner shall, by rule or order, establish the form and content of the annual
report to be filed by a special purpose financial insurance company; and
(2) a special purpose financial insurance company shall report using statutory accounting
principles, unless the Commissioner requires, approves, or accepts the use of generally
accepted accounting principles or other comprehensive basis of accounting, in each
case with any appropriate or necessary modifications or adaptations required or approved
or accepted by the Commissioner and as supplemented by additional information required
by the Commissioner.
(b) A special purpose financial insurance company may make written application to file
its annual report on a fiscal-year basis. If an alternative reporting date is granted,
the Commissioner shall establish the due date and content of any filing required by
the special purpose financial insurance company in addition to its annual report.
(c) Unless otherwise approved in advance by the Commissioner, a special purpose financial
insurance company shall maintain its books, records, documents, accounts, vouchers,
and agreements in this State. A special purpose financial insurance company shall
make its books, records, documents, accounts, vouchers, and agreements available for
inspection by the Commissioner at any time. A special purpose financial insurance
company shall keep its books and records in such manner that its financial condition,
affairs, and operations can be readily ascertained and so that the Commissioner may
readily verify its financial statements and determine its compliance with this chapter.
(d) Unless otherwise approved in advance by the Commissioner, all books, records, documents,
accounts, vouchers, and agreements shall be preserved and kept available in this State
for the purpose of examination and inspection and until such time as the Commissioner
approves the destruction or other disposition of such books, records, documents, accounts,
vouchers, and agreements. If the Commissioner approves the keeping of the items listed
in this subsection outside this State, the special purpose financial insurance company
shall maintain in this State a complete and true copy of each such item. Books, records,
documents, accounts, vouchers, and agreements may be photographed, reproduced on film,
or stored and reproduced electronically. (Added 2007, No. 49, § 17; amended 2009, No. 42, § 27, eff. May 27, 2009; 2013, No. 29, § 62, eff. May 13, 2013; 2023, No. 12, § 4, eff. May 8, 2023.)
§ 6048l. License suspension and revocation
(a) The Commissioner shall notify a special purpose financial insurance company not less
than 30 days before suspending or revoking its license pursuant to section 6009 of
this chapter, which notice shall state the basis for such suspension or revocation.
The special purpose financial insurance company shall be afforded the opportunity
for a hearing pursuant to the provisions of the Vermont Administrative Procedure Act,
3 V.S.A. chapter 25.
(b) Notwithstanding subsection (a) of this section and 3 V.S.A. § 814(c), no prior notice or hearing shall be required if the grounds for suspension or revocation
of a special purpose financial insurance company’s license pursuant to section 6009
of this chapter relate primarily to the financial condition or soundness of the special
purpose financial insurance company or to a deficiency in its assets.
(c) For purposes of this subchapter, reference to section 6004 in subdivision 6009(a)(2) of this title shall be construed also as a reference to section 6048g of this subchapter. (Added 2007, No. 49, § 17; amended 2013, No. 29, § 63, eff. May 13, 2013.)
§ 6048m. Delinquency
(a) Except as otherwise provided in this section, the provisions of chapter 145 of this
title shall apply in full to a special purpose financial insurance company.
(b) Upon any order of supervision, rehabilitation, or liquidation of a special purpose
financial insurance company, the receiver shall manage the assets and liabilities
of the special purpose financial insurance company pursuant to the provisions of this
subchapter.
(c) Amounts recoverable by the receiver of a special purpose financial insurance company
under a reinsurance contract shall not be reduced or diminished as a result of the
entry of an order of conservation, rehabilitation, or liquidation with respect to
a ceding insurer, notwithstanding any provision in the contracts or other documentation
governing the special purpose financial insurance company securitization.
(d) Notwithstanding the provisions of chapter 145 of this title or any other law of this
State:
(1) An application or petition or a temporary restraining order or injunction issued pursuant
to the provisions of chapter 145 of this title with respect to a ceding insurer does
not prohibit the transaction of business by a special purpose financial insurance
company, including any payment by a special purpose financial insurance company made
with respect to a special purpose financial insurance company security, or any action
or proceeding against a special purpose financial insurance company or its assets.
(2) The commencement of a summary proceeding with respect to a special purpose financial
insurance company and any order issued by the court in such summary proceeding shall
not prohibit payments by a special purpose financial insurance company and shall not
prohibit the special purpose financial insurance company from taking any action required
to make such payments, provided such payments are made:
(A) pursuant to a special purpose financial insurance company security or reinsurance
contract; and
(B) consistent with the special purpose financial insurance company’s plan of operation
and any order issued to the special purpose financial insurance company pursuant to
subsection 6048d(b) of this subchapter, as either is amended from time to time.
(3) A receiver of a ceding insurer may not void a nonfraudulent transfer by a ceding insurer
to a special purpose financial insurance company of money or other property made pursuant
to a reinsurance contract.
(4) A receiver of a special purpose financial insurance company may not void a nonfraudulent
transfer by the special purpose financial insurance company of money or other property:
(A) made to a ceding insurer pursuant to a reinsurance contract or made to or for the
benefit of any holder of a special purpose financial insurance company security with
respect to the special purpose financial insurance company security; and
(B) made consistent with the special purpose financial insurance company’s plan of operation
and any order issued to the special purpose financial insurance company pursuant to
subsection 6048d(b) of this subchapter, as either is amended from time to time.
(e) With the exception of the fulfillment of the obligations under a reinsurance contract
and notwithstanding another provision of this subchapter or other laws of this State,
the assets of a special purpose financial insurance company, including assets held
in trust, on a funds-withheld basis, or in any other arrangement to secure the special
purpose financial insurance company’s obligations under a reinsurance contract, shall
not be consolidated with or included in the estate of a ceding insurer in any delinquency
proceeding against the ceding insurer pursuant to the provisions of this subchapter
for any purpose including distribution to creditors of the ceding insurer. (Added 2007, No. 49, § 17; amended 2013, No. 29, § 64, eff. May 13, 2013.)
§ 6048n. Sponsored captives
In addition to the provisions of sections 6048a-6048m of this subchapter, the provisions
of this section shall apply to any sponsored captive insurance company licensed as
a special purpose financial insurance company pursuant to this subchapter.
(1) A sponsored captive insurance company may be licensed as a special purpose financial
insurance company pursuant to the provisions of this subchapter.
(2) The special purpose financial insurance company shall be subject to the provisions
of subchapter 2 of this chapter. In the event of any conflict between the provisions
of this subchapter and the provisions of subchapter 2 of this chapter, the provisions
of this subchapter shall control.
(3) Unless otherwise approved in advance by the Commissioner, a participant in a special
purpose financial insurance company shall be a ceding insurer. Any change in a participant
shall be subject to prior approval by the Commissioner.
(4) The special purpose financial insurance company on behalf of a protected cell shall
be entitled to assert the same claims and defenses in actions in law or equity as
if the protected cell were a corporation established under Title 11A of the Vermont
Statutes Annotated, including claims and defenses in actions at law or equity alleging
alter ego, corporate veil piercing, offset, substantive consolidation, equitable subordination,
or recoupment. In connection with the conservation, rehabilitation, or liquidation
of a special purpose financial insurance company or one or more of its protected cells,
the assets and liabilities of a protected cell shall at all times be kept separate
from, and shall not be commingled with, those of other protected cells and the special
purpose financial insurance company, and the assets of one protected cell shall not
be used to satisfy the obligations or liabilities of another protected cell or the
special purpose financial insurance company based on legal or equitable claims or
defenses, including alter ego, piercing the corporate veil, offset, substantive consolidation,
equitable subordination, or recoupment, unless such claims or defenses would apply
to such protected cell if it were a special purpose finance insurance company without
separate cells.
(5) Notwithstanding subdivision 6034(1) of this chapter, the special purpose financial
insurance company may issue securities to any person approved in advance by the Commissioner.
(6) Notwithstanding section 6048g of this subchapter, the special purpose financial insurance
company shall possess and thereafter maintain unimpaired paid-in capital and surplus
of not less than $500,000.00.
(7) The “general account” of a sponsored captive insurance company licensed as a special
purpose financial insurance company shall mean all assets and liabilities of the sponsored
captive insurance company not attributable to a protected cell.
(8)(A) Any security issued by a special purpose financial insurance company with respect
to a protected cell and any other contract or obligation of the special purpose financial
insurance company with respect to a protected cell shall include the designation of
such protected cell and shall include the following statement, or such other statement
as may be required by the Commissioner:
(i) In the case of a security: “The holder of this security shall have no right or recourse
against the special purpose financial insurance company and its assets other than
against assets properly attributable to the designated protected cell and the special
purpose financial insurance company’s general account, to the extent permitted by
Vermont law.”
(ii) In the case of a contract or obligation: “The counterparty to this contract or obligation
shall have no right or recourse against the special purpose financial insurance company
and its assets other than against assets properly attributable to the designated protected
cell and the special purpose financial insurance company’s general account, to the
extent permitted by Vermont law.”
(B) Notwithstanding the requirements of this subdivision (8) and subject to the provisions
of this chapter and other applicable law or regulation, the failure to include such
disclosure, in whole or part, in such security, contract, or obligation with respect
to a protected cell shall not serve as the sole basis for a creditor, ceding insurer,
or any other person to have recourse against the general account of the special purpose
financial insurance company in excess of the limitations provided for in subdivision
(12)(E) of this subsection, or against the assets of any other protected cell.
(9) In addition to the provisions of section 6034 of this chapter, the special purpose
financial insurance company shall be subject to the following with respect to its
protected cells:
(A) The special purpose financial insurance company shall establish a protected cell only
for the purpose of insuring or reinsuring risks of one or more reinsurance contracts
with a ceding insurer or two or more affiliated ceding insurers, with the intent of
facilitating an insurance securitization. A separate protected cell shall be established
with respect to each separate securitization transaction; and
(B) A sale, an exchange, or another transfer of assets may not be made by the special
purpose financial insurance company between or among any of its protected cells without
the prior approval of the Commissioner.
(10) All attributions of assets and liabilities to the protected cells and the general
account shall be in accordance with the plan of operation approved by the Commissioner.
No other attribution of assets or liabilities may be made by a special purpose financial
insurance company between its general account and any protected cell or between any
protected cells. The special purpose financial insurance company shall attribute all
insurance obligations, assets, and liabilities relating to a reinsurance contract
entered into with respect to a protected cell and shall attribute the related insurance
securitization transaction, including any securities issued by the special purpose
financial insurance company as part of the insurance securitization, to such protected
cell. The rights, benefits, obligations, and liabilities of any securities attributable
to such protected cell and the performance under such reinsurance contract and the
related securitization transaction and any tax benefits, losses, refunds, or credits
allocated pursuant to a tax allocation agreement to which the special purpose financial
insurance company is a party, including any payments made by or due to be made to
the special purpose financial insurance company pursuant to the terms of such agreement,
shall reflect the insurance obligations, assets, and liabilities relating to the reinsurance
contract and the insurance securitization transaction that are attributed to such
protected cell.
(11) For purposes of applying the provisions of chapter 145 of this title to a sponsored
captive insurance company licensed as a special purpose financial insurance company,
the definition of “insolvency” and “insolvent” in subdivision 6048c(2) of this title shall be applied separately to each protected cell and to the special purpose financial
insurance company’s general account.
(12) In addition to the provisions of section 6048m of this chapter:
(A) Except as otherwise modified in this section, the terms and conditions set forth in
chapter 145 of this title pertaining to administrative supervision of insurers and
the rehabilitation, receiverships, and liquidation of insurers apply in full to special
purpose financial insurance companies or any of the special purpose financial insurance
company’s protected cells, independently, without causing or otherwise effecting a
conservation, rehabilitation, receivership, or liquidation of the special purpose
financial insurance company or another protected cell that is not otherwise insolvent.
(B) Notwithstanding the provisions of chapter 145 of this title, and without causing or
otherwise effecting the conservation or rehabilitation of an otherwise solvent protected
cell of a special purpose financial insurance company and subject to the provisions
of subdivision (G)(v) of this subdivision (12), the Commissioner may apply by petition
to the Superior Court for an order authorizing the Commissioner to conserve, rehabilitate,
or liquidate a special purpose financial insurance company domiciled in this State
on one or more of the following grounds:
(i) embezzlement, wrongful sequestration, dissipation, or diversion of the assets of the
special purpose financial insurance company intended to be used to pay amounts owed
to the ceding insurer or the holders of special purpose financial insurance company
securities; or
(ii) the special purpose financial insurance company is insolvent; or
(iii) the holders of a majority in outstanding principal amount of each class of special
purpose financial insurance company securities attributable to each particular protected
cell requests or consents to conservation, rehabilitation, or liquidation pursuant
to the provisions of this subchapter.
(C) Notwithstanding the provisions of chapter 145 of this title, the Commissioner may
apply by petition to the Superior Court for an order authorizing the Commissioner
to conserve, rehabilitate, or liquidate one or more of a special purpose financial
insurance company’s protected cells, independently, without causing or otherwise effecting
a conservation, rehabilitation, receivership, or liquidation of the special purpose
financial insurance company generally or another of its protected cells, on one or
more of the following grounds:
(i) embezzlement, wrongful sequestration, dissipation, or diversion of the assets of the
special purpose financial insurance company attributable to the affected protected
cell or cells intended to be used to pay amounts owed to the ceding insurer or the
holders of special purpose financial insurance company securities of the affected
protected cell or cells; or
(ii) the affected protected cell is insolvent; or
(iii) the holders of a majority in outstanding principal amount of each class of special
purpose financial insurance company securities attributable to that particular protected
cell request or consent to conservation, rehabilitation, or liquidation pursuant to
the provisions of this subchapter.
(D) Except where consent is given as described in subdivisions (B)(iii) and (C)(iii) of
this subdivision (12), the Court may not grant relief provided by subdivision (B)
or (C) of this subdivision (12) unless, after notice and a hearing, the Commissioner,
who shall have the burden of proof, establishes by clear and convincing evidence that
relief must be granted. The Court’s order may be made in respect of one or more protected
cells by name, rather than the special purpose financial insurance company generally.
(E) Notwithstanding another provision in this title, regulations adopted under this title,
or another applicable law or regulation, upon any order of conservation, rehabilitation,
or liquidation of a special purpose financial insurance company, or one or more of
the special purpose financial insurance company’s protected cells, the receiver shall
manage the assets and liabilities of the special purpose financial insurance company
or the applicable protected cell pursuant to the provisions of this subchapter. The
assets attributable to one protected cell shall not be applied to the liabilities
attributable to another protected cell, unless an asset or liability is attributable
to more than one protected cell, in which case the receiver shall deal with the asset
or liability in accordance with the terms of any relevant governing instrument or
contract. Recourse to the special purpose financial insurance company’s general account
in connection with the conservation, rehabilitation, or liquidation of a protected
cell shall be limited to the greater of the amount of assets in the general account
as of the date such proceeding is commenced or the required minimum capital for the
general account as of the date such proceeding is commenced. Assets attributable to
one protected cell shall not be set off against the liabilities attributable to another
protected cell, and assets attributable to the special purpose financial insurance
company’s general account shall not be set off against the liabilities attributable
to any protected cell except to the extent provided in the preceding sentence. Relief
shall not be granted nor shall any order be issued based on equitable theories of
recovery, including substantive consolidation, equitable subordination, or recoupment,
to attach or seize the assets of any solvent protected cell for the benefit of another
protected cell or special purpose financial insurance company, or to pierce the corporate
veil of any protected cell, in connection with the conservation, rehabilitation, or
liquidation of a special purpose financial insurance company or one or more protected
cells, unless such equitable theories, attachment, seizure, or corporate veil piercing
would apply to such cell if it were a special purpose financial insurance company
without separate cells.
(F) With respect to amounts recoverable under a reinsurance contract, the amount recoverable
by the receiver of a special purpose financial insurance company must not be reduced
or diminished as a result of the entry of an order of conservation, rehabilitation,
or liquidation with respect to the ceding insurer, notwithstanding another provision
in the contract or other documentation governing the insurance securitization.
(G) Notwithstanding the provisions of chapter 145 of this title or other laws of this
State:
(i) An application or petition, or a temporary restraining order or injunction issued
pursuant to the provisions of chapter 145 of this title, with respect to a ceding
insurer, does not prohibit the transaction of business by a special purpose financial
insurance company with the ceding insurer, including any payment by a special purpose
financial insurance company made pursuant to a security issued by a special purpose
financial insurance company with respect to a protected cell, or any action or proceeding
against a special purpose financial insurance company or its assets.
(ii) The commencement of a summary proceeding or other interim proceeding commenced before
a formal delinquency proceeding with respect to a special purpose financial insurance
company, and any order issued by the Court, does not prohibit the payment by a special
purpose financial insurance company made pursuant to a security issued by a special
purpose financial insurance company with respect to a protected cell or special purpose
financial insurance company contract or the special purpose financial insurance company
from taking any action required to make the payment.
(iii) A receiver of a ceding insurer may not void a nonfraudulent transfer by the ceding
insurer to a special purpose financial insurance company of money or other property
made pursuant to a reinsurance contract.
(iv) A receiver of a special purpose financial insurance company may not void a nonfraudulent
transfer by the special purpose financial insurance company of money or other property
made to a ceding insurer pursuant to a reinsurance contract or made to or for the
benefit of any holder of a special purpose financial insurance company security issued
with respect to a protected cell, or a special purpose financial insurance company
security.
(v) In the event of an insolvency of a special purpose financial insurance company where
one or more protected cells remain solvent, the Commissioner shall separate the special
purpose financial insurance company’s solvent protected cells from the insolvent special
purpose financial insurance company, shall allow on petition of the sponsor for the
conversion of such solvent protected cells into one or more special purpose financial
insurance companies, and shall issue such orders as the Commissioner deems necessary
to protect the solvency of the remaining solvent protected cells. In the event of
an insolvency of a protected cell, the special purpose financial insurance company’s
assets shall be accounted for and managed in compliance with subdivision (E) of this
subdivision (12) and the other laws of this State.
(H) Subdivision (G) of this subdivision (12) does not prohibit the Commissioner from taking
any action permitted under chapter 145 of this title with respect only to the conservation
or rehabilitation of a special purpose financial insurance company with protected
cell or cells, provided the Commissioner would have had sufficient grounds to seek
to declare the special purpose financial insurance company insolvent; subject to and
without otherwise affecting the provisions of subdivision (G)(v) of this subdivision
(12). In this case, with respect to the solvent protected cell or cells, the Commissioner
may not prohibit payments made by the special purpose financial insurance company
pursuant to the special purpose financial insurance company security, reinsurance
contract, or otherwise made under the insurance securitization transaction that are
attributable to these protected cell or cells or prohibit the special purpose financial
insurance company from taking any action required to make these payments.
(I) With the exception of the fulfillment of the obligations under a special purpose financial
insurance company contract, and notwithstanding another provision of this title or
other laws of this State, the assets of a special purpose financial insurance company,
including assets held in trust, shall not be consolidated with or included in the
estate of a ceding insurer in any delinquency proceeding against the ceding insurer
pursuant to the provisions of this title for any purpose, including distribution to
creditors of the ceding insurer. (Added 2007, No. 49, § 17; amended 2007, No. 178 (Adj. Sess.), § 11; 2009, No. 42, § 28, eff. May 27, 2009; 2013, No. 29, § 65, eff. May 13, 2013.)
§ 6048o. Confidentiality
(a) Subdivision 6002(c)(3) and subsection 6008(c) of this title shall apply to all documents, materials, or other information, including examination
reports, preliminary examination reports or results, working papers, recorded information,
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 subchapter.
(b) In furtherance of the Commissioner’s regulatory duties, the Commissioner may share
and receive documents, materials, or other information pursuant to section 22 of this title.
(c) [Repealed.] (Added 2013, No. 29, § 66, eff. May 13, 2013; amended 2023, No. 110 (Adj. Sess.), § 10, eff. July 1, 2024.)