The Vermont Statutes Online

Title 8: Banking and Insurance

Chapter 157: Transfer and Assumption of Insurance Contracts

• § 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 2 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:

  (Added 1993, No. 235 (Adj. Sess.), § 7.)