§ 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(b)-(c) [Repealed.]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.)