§ 8201. Purpose
The purpose of this chapter is to regulate the transfer and novation of contracts
of insurance, including annuities, through the assumption of the contract. (Added 1993, No. 235 (Adj. Sess.), § 7.)
§ 8202. Scope
(a) The requirements of this chapter apply to any insurer authorized to transact business
in this State who contracts to assume or transfer the obligations or risks on contracts
of insurance, including annuities, pursuant to an assumption reinsurance agreement.
(b) This chapter does not apply to:
(1) any reinsurance agreement or transaction in which the ceding insurer continues to
remain directly liable for insurance obligations or risks under the contracts of insurance
that are subject to the reinsurance agreement;
(2) the substitution of one insurer for another upon the expiration of insurance coverage
pursuant to statutory or contractual requirements and the issuance of a new contract
of insurance by another insurer;
(3) the transfer of contracts of insurance pursuant to a merger or consolidation of two
or more insurers to the extent that those transactions are regulated by statute;
(4) any insurer subject to a judicial order of liquidation or rehabilitation;
(5) any reinsurance agreement or transaction to which a state insurance guaranty association
is a party, provided that policyholders do not lose any rights or claims afforded
under their original policies pursuant to chapter 101, subchapter 9 or chapter 112
of this title; or
(6) the transfer of liabilities from one insurer to another under a single group policy
upon the written request of the group policyholder. (Added 1993, No. 235 (Adj. Sess.), § 7.)
§ 8203. Definitions
As used in this chapter:
(1) “Assuming insurer” means the insurer that acquires an insurance obligation or risk
from the transferring insurer pursuant to an assumption reinsurance agreement.
(2) “Assumption reinsurance agreement” means any contract, whether or not coupled with
a reinsurance or indemnity agreement, that:
(A) transfers insurance obligations or risks of existing or in-force contracts of insurance
from a transferring insurer to an assuming insurer; and
(B) is intended to effect a novation of the transferred contract of insurance with the
result that the assuming insurer becomes directly and solely liable to the policyholders
of the transferring insurer and the transferring insurer’s insurance obligations or
risks under the contracts are extinguished.
(3) “Contract of insurance” means any written agreement between an insurer and policyholder
pursuant to which the insurer, in exchange for premium or other consideration, agrees
to assume an obligation or risk of the policyholder or to make payments on behalf
of, or to, the policyholder or any beneficiary. “Contract of insurance” includes all
property, casualty, life, health, accident, surety, title, and annuity business authorized
to be written pursuant to the insurance laws of this State.
(4) “Home service business” means insurance business on which premiums are collected on
a weekly or monthly basis by an agent of the insurer.
(5) “Notice of transfer” means the written notice to policyholders required by subsection 8204(a) of this title.
(6) “Policyholder” means any individual or entity who owns or has the right to terminate
or otherwise alter the terms of a contract of insurance. It includes any certificateholder
whose certificate is in force on the proposed effective date of the assumption, if
the certificateholder has the right to keep the certificate in force without change
in benefit following termination of the group policy. The right to keep the certificate
in force referred to in this subdivision shall not include the right to elect individual
coverage arising out of a group contract continued pursuant to the Consolidated Omnibus
Budget Reconciliation Act (“COBRA”), Section 601, et seq., of the Employee Retirement
Income Security Act of 1974, as amended, 29 U.S.C. § 1161 et seq., or chapter 107, subchapter 4 of this title.
(7) “Transferring insurer” means the insurer that transfers an insurance obligation or
risk to an assuming insurer pursuant to an assumption reinsurance agreement. (Added 1993, No. 235 (Adj. Sess.), § 7.)
§ 8204. Assumption, transfer, and notice requirements
(a) Except as provided in, and subject to, subsection 8207(d) of this title, the transferring insurer shall provide or cause to be provided to each policyholder
a notice of transfer by first-class mail, addressed to the policyholder’s last known
address or to the address to which premium notices or other policy documents are sent
or, with respect to home service business, by personal delivery with receipt acknowledged
by the policyholder. A notice of transfer shall also be sent to the transferring insurer’s
agents or brokers of record on the affected policies.
(b) The notice of transfer shall state or provide:
(1) the date the transfer and novation of the policyholder’s contract of insurance is
proposed to take place;
(2) the name, address, and telephone number of the assuming and transferring insurer;
(3) that the policyholder has the right to either consent to or reject the transfer and
novation;
(4) the procedures and time limit for consenting to or rejecting the transfer and novation;
(5) a summary of any effect that consent to or rejection of the transfer and novation
will have on the policyholder’s rights, including disclosure of the possible loss
of insurability;
(6) a statement that the assuming insurer is licensed to write the type of business being
assumed in the state where the policyholder resides, or is otherwise authorized, as
provided in this chapter, to assume such business;
(7) the name and address of the person at the transferring insurer to whom the policyholder
should send a written statement of acceptance or rejection of the transfer and novation;
(8) the address and telephone number of the insurance department of the state where the
policyholder resides so that the policyholder may write or call the insurance department
for further information regarding the financial condition of the assuming insurer;
and
(9) the following financial data for both companies:
(A) ratings for the last five years if available or for such lesser period as is available
from two nationally recognized insurance rating services acceptable to the Commissioner,
including the rating service’s explanation of the meaning of the ratings. If ratings
are unavailable for any year of the five-year period, this fact shall also be disclosed,
together with those ratings that are available;
(B) balance sheets as of December 31 for the previous three years if available or for
such lesser period as is available and as of the date of the most recent quarterly
statement;
(C) a copy of the management’s discussion and analysis that was filed as a supplement
to the previous year’s annual statement; and
(D) an explanation of the reason for the transfer.
(c) The form contained in section 8208 of this title may be used as general guidance in complying with the requirements of subsection
(b) of this section.
(d) The notice of transfer shall include a pre-addressed, postage-paid response card that
a policyholder may return as his or her written statement of acceptance or rejection
of the transfer and novation.
(e) Prior approval by the Commissioner is required for any transaction where an insurer
domiciled in this State assumes or transfers obligations or risks on contracts of
insurance under an assumption reinsurance agreement. An insurer domiciled in this
State shall not assume obligations or risks on contracts of insurance issued to or
owned by policyholders residing in any other state unless it is licensed in the other
state or the insurance regulatory official of that state has approved the assumption.
(f) Prior to the transfer of any of the obligations or risks on contracts of insurance
issued to or owned by residents of this State that is the subject of this chapter,
any licensed foreign insurer that enters into an assumption reinsurance agreement
shall obtain the Commissioner’s approval under subsection (g) of this section or shall
apply to the Commissioner for a determination that the requirements imposed on the
transaction by the state of domicile of each participating insurer are substantially
similar to the requirements of this chapter. An insurer making a request for a determination
of substantial similarity shall file or cause to be filed with the Commissioner the
assumption certificate, a copy of the proposed notice of transfer, an analysis of
the requirements to be imposed by its state of domicile, and an affidavit that the
transaction is subject to requirements substantially similar to this chapter. The
Commissioner shall review the submissions and determine whether the requirements are
substantially similar to the requirements of this chapter. If the law of the state
of domicile permits the policyholder a longer period of time for consent or rejection
than provided by section 8205 of this title, the Commissioner may, at the request of the insurer, waive the time limitations
in section 8205 of this title in determining substantial similarity. If the Commissioner does not act on the insurer’s
request for a determination of substantial similarity within 30 days of receipt, the
insurer’s request shall be deemed approved. If the Commissioner determines that the
requirements imposed on the licensed foreign insurers are not substantially similar
to the requirements of this chapter, then the requirements of subsection (g) of this
section shall apply to the transfer.
(g) Any licensed foreign insurer that enters into an assumption reinsurance agreement
that proposes to transfer the obligations or risks on contracts of insurance issued
to or owned by residents of this State, subject to all other requirements of this
chapter with respect to residents of this State, shall submit the transaction to the
Commissioner for approval. If the Commissioner does not act on the insurer’s request
within 60 days of receipt, the insurer’s request shall be deemed approved. The Commissioner
may extend by not more than an additional 30 days the period within which he or she
may so affirmatively approve or disapprove any such transaction by giving notice to
the insurer of such extension before expiration of the initial 60-day period. At the
end of any such period of extension and in the absence of an affirmative approval
or disapproval, any such transaction shall be deemed approved.
(h) The following factors, along with such other factors as the Commissioner deems appropriate
under the circumstances, shall be considered by the Commissioner in reviewing a request
for approval:
(1) the financial condition of the transferring and assuming insurers and the effect the
transaction is expected to have on the financial condition of each company;
(2) the competence, experience, and integrity of those persons who control the operation
of the assuming insurer;
(3) any plans the assuming party has with respect to the administration of the policies
subject to the proposed transfer;
(4) whether the transfer is fair and reasonable to the policyholders of both companies;
and
(5) whether the notice of transfer to be provided by the insurer is fair, adequate, and
not misleading.
(i) No insurer shall transfer obligations or risks on contracts of insurance issued to
or owned by residents of this State to any insurer that is not licensed in this State.
(j) Except as provided in, and subject to, subsection 8207(d) of this title, the Commissioner may modify the notice requirements of this chapter if the Commissioner
determines that the transfer is between affiliates or that the transfer is not contemplated
within the purposes of this chapter. (Added 1993, No. 235 (Adj. Sess.), § 7; amended 1993, No. 235 (Adj. Sess.), § 11a, eff. July 1, 1996; 2009, No. 137 (Adj. Sess.), § 7f; 2021, No. 105 (Adj. Sess.), § 269, eff. July 1, 2022.)
§ 8205. Policyholder rights
(a) Policyholders shall have the right to accept or reject the transfer and novation of
their contracts of insurance. Policyholders electing to reject the assumption transaction
shall return to the transferring insurer the pre-addressed, postage-paid response
card or other written notice and indicate thereon that the assumption is rejected
(collectively referred to as the “Response Card”).
(b) Payment of any premium to the assuming company during the 12-month period after notice
is received shall be deemed to indicate the policyholder’s consent to the transfer
to the assuming insurer and a novation shall be deemed to have been effected, provided
that the premium notice states in a manner calculated to give the policyholder notice
that payment of the premium to the assuming insurer shall constitute acceptance of
the transfer, unless the policyholder reserves the right to reject the transfer. The
premium notice shall also provide a method for the policyholder to pay the premium
while reserving the right to reject the transfer. With respect to any home service
business or any other business not using premium notices, the Commissioner must approve
the disclosures and procedures used to inform policyholders of the proposed assumption
or transfer, which notice, at a minimum, must meet the requirements set forth in section 8204 of this title.
(c) After no fewer than 12 months from the mailing of the initial notice of transfer required
under subsection 8204(a) of this title, if positive consent to, or rejection of, the transfer and assumption has not been
received as provided in subsection (a) of this section or consent has not been deemed
to have occurred under subsection (b) of this section, the transferring company shall
send to the policyholder a second and final notice of transfer as provided in section 8204 of this title. If the policyholder does not accept or reject the transfer during the two-month
period immediately following the date on which the transferring insurer mails the
second and final notice of transfer, the policyholder’s consent will be deemed to
have occurred and novation of the contract will be effected. With respect to the home
service business or any other business not using premium notices, the 12- and two-month
periods shall be measured from the date of delivery of the notice of transfer pursuant
to section 8204 of this title.
(d) The transferring insurer will be deemed to have received the response card on the
date it is postmarked. A policyholder may also send his or her response card by facsimile
or other electronic transmission or by registered mail, express delivery or courier
service, in which case the response card shall be deemed to have been received by
the assuming insurer on the date of actual receipt by the transferring insurer. (Added 1993, No. 235 (Adj. Sess.), § 7.)
§ 8206. Effect of consent
If a policyholder consents or is deemed to have consented to the transfer pursuant
to section 8205 of this title or if the transfer is effected under subsection 8207(b) of this title, there shall be a novation of the contract of insurance subject to the assumption
reinsurance agreement with the result that the transferring insurer shall thereby
be relieved of all insurance obligations or risks transferred under the assumption
reinsurance agreement and the assuming insurer shall become directly and solely liable
to the policyholder for those insurance obligations or risks. (Added 1993, No. 235 (Adj. Sess.), § 7.)
§ 8207. Commissioner’s powers
(a) Except as provided in subsection 8204(f) of this title, the Commissioner shall approve all forms used by an insurer in a transaction under
this subchapter, including the notice of transfer, the assumption contract, any related
reinsurance or indemnity contract, the proposed assumption certificate, and any proposed
premium or other notice proposed to give notice of and to reserve a policyholder’s
right to make premium payments without consenting to the assumption or transfer.
(b) If an insurer domiciled in this State or in a jurisdiction having a substantially
similar law is deemed by the domiciliary commissioner to be in hazardous financial
condition or an administrative proceeding has been instituted against it for the purpose
of reorganizing or conserving the insurer, and the transfer of the contracts of insurance
is in the best interests of the policyholders, as determined by the domiciliary commissioner,
a transfer and novation may be effected notwithstanding the provisions of this chapter
to the contrary. The Commissioner shall approve the transfer and the form of notice
to policyholders, that shall describe the circumstances that require the transfer.
The Commissioner may, in the Commissioner’s discretion, permit assumption based on
implied consent.
(c) Any insurer failing, without just cause, to file timely any form as required in this
chapter shall be required to pay a penalty of not more than $10,000.00 for each form,
with a maximum penalty of $100,000.00. In assessing any penalty under this provision,
the Commissioner shall consider whether the violation was willful, the amount of the
violator’s gain, the damages to Vermont policyholders, the remedial actions taken
by the violator, and any other factors the Commissioner finds relevant. The Commissioner
may void any transfer and restore the status quo if the transfer was not approved
in accordance with section 8204 of this title. In determining whether to void a transfer, the Commissioner shall consider the interests
of policyholders, creditors, and the public. Insurers charged with a violation of
this chapter shall be entitled to notice and an opportunity to be heard in accordance
with 3 V.S.A. chapter 25. No private right of action shall arise from this section.
(d) In the case of policyholders who do not reside in this State, and where the insurance
regulatory authority in such other state has approved or intends to approve the notice
requirements and other policyholder rights with respect to such policyholders, the
Commissioner shall defer to the decisions of such other insurance regulatory authority.
In the case of policyholders who do not reside in this State, and where the insurance
regulatory authority in such other state has not established an obligation to file
forms used by an insurer in a transaction under this subchapter, the Commissioner
may modify notice requirements and other policyholder rights when in his or her judgment
it appears that the interests of the policyholders and insurers are best served by
the exercise of such discretion. Factors to be considered in making this determination
shall include the following:
(1) the existence of duplicative or conflicting requirements in other jurisdictions;
(2) the number of Vermont policyholders affected by a proposed assumption transaction;
(3) the number of states that have adopted assumption reinsurance requirements substantially
similar to those set forth in this chapter;
(4) the impact of the assumption reinsurance transaction on the insurance companies involved
in a transaction;
(5) the possibility of adverse consequences to policyholders choosing to opt out of an
assumption transaction;
(6) the possibility of adverse consequences to policyholders if a significant number of
other policyholders opt out of the transaction;
(7) the economic consequences of imposing notice and policyholder rights provisions on
Vermont domestic insurance companies; and
(8) such other factors that the Commissioner deems to be relevant.
(e) The Commissioner may modify or waive the notice, consent, and other requirements of
this chapter where the transfer of the obligations or risks on contracts of insurance
pursuant to an assumption reinsurance agreement is part of a voluntary plan of dissolution
by the transferring insurer and where the Commissioner is satisfied the transfer will
adequately protect the interests of the affected policyholders. (Added 1993, No. 235 (Adj. Sess.), § 7; amended 1995, No. 58, § 1; 2005, No. 36, § 16, eff. June 1, 2005; 2009, No. 137 (Adj. Sess.), § 7g; 2021, No. 105 (Adj. Sess.), § 270, eff. July 1, 2022.)
§ 8208. Form of notice of transfer
NOTICE OF TRANSFER
IMPORTANT: THIS NOTICE AFFECTS YOUR CONTRACT
RIGHTS. PLEASE READ IT CAREFULLY.
Transfer of Policy
The AB Insurance company has agreed to replace us as your insurer under (insert policy/certificate
name and number) effective (insert date). The AB Insurance Company’s principal place
of business is (insert address). Financial information concerning both companies is
attached, including (1) ratings for the last five years, if available, or for such
lesser period as is available from two nationally recognized insurance rating services;
(2) balance sheets for the previous three years, if available, or for such lesser
period as is available and as of the date of the most recent quarterly statement;
(3) a copy of the Management’s Discussion and Analysis that was filed as a supplement
to the previous year’s annual statement; and (4) an explanation of the reason for
the transfer. You may obtain additional information concerning AB Insurance Company
from reference materials in your local library or by contacting your Insurance Commissioner
at (insert address and phone number).
The AB Insurance Company is licensed to write this coverage in your state. The Commissioner
of Insurance in your state has reviewed the potential effect of the proposed transaction,
and has approved the transaction (if the commissioner has approved the transaction).
Your Rights
You may choose to consent to or reject the transfer of your policy to AB Insurance
Company. If you want your policy transferred, you may notify us in writing by signing
and returning the enclosed pre-addressed, postage-paid card.
Payment of your premium to the AB Insurance Company will also constitute consent to
the transfer of your policy unless you reject or reserve the right to reject the transfer
when you make your payment. Your next premium notice will tell you how to pay the
premium and keep your policy in force while reserving your right to reject the transfer.
If you do not want your policy transferred, you must notify us in writing that you
reject the transfer. You may use the enclosed pre-addressed, postage-paid card to
notify us that you reject the transfer.
If you reject the transfer, you may keep your policy with us or exercise any option
under your policy. If we do not receive notice of rejection, you will, as a matter
of law, be deemed to have consented to the transfer effective (insert date). However,
before this consent is final you will be provided a second notice of the transfer
12 months from now. After the second notice is provided, you will have two months
to reply. If you pay your premium to the AB Insurance Company without reserving your
right to reject the transfer, you will not receive a second notice.
You may also notify us of your consent to or rejection of the transfer of your policy
by writing to us at:
Insert name, address and facsimile number of contact person.
Effect of Transfer
If you accept this transfer, AB Insurance Company will be your insurer. It will have
direct responsibility to you for the payment of all claims, benefits and for all other
policy obligations. We will no longer have any obligations to you.
If you accept this transfer, you should make all premium payments and claims submissions
to AB Insurance Company and direct all questions to AB Insurance Company.
If you have any further questions about this agreement, you may contact XY Insurance
(the transferring insurer) or AB Insurance Company.
Sincerely,
| XY Insurance Company |
AB Insurance Company |
| address |
address |
| toll-free telephone number |
toll-free telephone number |
For your convenience, we have enclosed a pre-addressed postage-paid response card.
Please take time now to read the enclosed notice and complete and return the response
card to us.
[Notice Date]
| RESPONSE CARD |
|
| ___________ |
|
Yes, I accept the transfer of my policy from XY Insurance |
| |
|
Company (transferring company) to AB Insurance Company |
| |
|
(assuming company). |
| ___________ |
|
No, I reject the proposed transfer of my policy from XY |
| |
|
Insurance Company to AB Insurance Company and wish to |
| |
|
retain or exercise my rights under my policy with XY Insurance |
| |
|
Company. |
| Date: _________________________________________ |
|
Signature: _______________________________________ |
|
| Name: |
|
|
|
|
| Street Address: |
|
|
|
|
| City, State, Zip: |
|
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(Added 1993, No. 235 (Adj. Sess.), § 7.)