Vermont captive insurance legislation is enacted. – InsuranceNewsNet
The Captives Bill this year included the passage of specific legislation that would allow captive insurance companies to enter into parametric risk transfer contracts. Parametric risk transfer contracts are becoming commonplace as another form of protection against catastrophic events. A parametric contract pays out a certain sum upon the occurrence of certain quantifiable events (for example, a hurricane of a specific category hitting a specific area), whether or not the contract holder suffers a loss. In contrast, an insurance contract pays an amount upon the occurrence of the same or similar events, but the policyholder must sustain and prove a loss, and the amount is subject to adjustment.
“Although purely parametric contracts are not considered insurance largely because of this distinction, the contract is a useful risk management tool,” said the deputy commissioner.
“Parametric risk transfer is the solution for systemic and emerging risks. The symbiosis of capital markets and the index blockchain-based solution is a big step into the future and
Additional changes include simplification of reporting requirements, improved delay procedures, and language consistency for the treatment of affiliated businesses in cells and consolidations.
“These small changes, when added up year after year, make all the difference for captive insurance companies,” said
A summary of the changes to the law includes the following:
Simplified Reporting – Removes the requirement for tax year filers to complete a special calendar year report and now requires a simpler report for premium tax reconciliation on a tax year basis. About 15% of
Delinquency Procedures – Improves delinquency procedures when a sponsored cell company or individual cell becomes insolvent. The change allows the DFR to deal effectively with the affected cell without affecting solvent cells or limiting current authority.
Treatment of Affiliated Businesses in Cells – Removes inconsistencies in current law, making it clear that Cells can insure the risks of one or more Participants or, subject to Commissioner’s approval, other parties not affiliated with Participants .
Consolidations – Removes “consolidations” from 6006a, which is intended to deal with captive mergers only, not consolidations.
For more information on
Captive insurance is a regulated form of self-insurance that has existed since the 1960s and is part of the
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