Lights, Camera, Act(ion)!

bill signing blog

Governor Phil Scott signs Vermont’s updated captive bill on April 18, 2019. Behind him from left to right are Ben Gould (Paul Frank + Collins), Ian Davis (State of Vermont Department of Economic Development) and Mike Marcotte (Chair of the House Commerce Committee)

As I mentioned in my blog a couple of weeks ago, the Vermont legislature passed this year’s captive bill pretty quickly and all we were waiting for was the Governor’s signature to make it officially
an Act.

Yesterday, at the Governor’s ceremonial office in the State House, Governor Scott did just that! Surrounded by VCIA members the Governor signed this year’s captive bill into law strengthening Vermont’s captive regulation in a variety of areas. This year’s bill proposed several updates, including modifications to the captive examination schedule and improvements to the statute governing group captive investments. The enhancements included in this year’s bill highlight the state’s ability to work closely in partnership with Vermont’s Governor and state legislature to ensure its captive law remains the industry gold standard.

Along with State officials, those participating included VCIA legislative chair Ben Gould of Paul Frank + Collins, John James from Performa, Mat Robitaille and Connor Duffy from KeyBank, Steve Killoran and Rich Litchfield from Maple Capital,
Michelle Ambrose and Linda Elliott of Marsh, and Christina Kindstedt
from Advantage Insurance Management.

Thank you all very much, and I look forward to hearing from you

Rich Smith
VCIA President

 

Great News: VCIA’s captive bill passes… but you knew that was going to happen

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Thanks to the expert testimony of Deputy Commissioner Dave Provost, this year’s captive bill passed the House and Senate and is on its way to the Governor for his signature. Unless there is a calamity, the Governor will sign it into law within the next week.

Here is a quick outline of what it will do:

  • Allows non-profit protected cells can issue dividends to its owners.
  • Eliminates the requirement for an attorney-in-fact bond of a reciprocal RRG in most circumstances.
  • The commissioner currently can waive the three-year exam period, but with the maturity of many of Vermont’s captives, it made sense to revisit the timeframe. This section makes default exam period 5 years, but commissioner can shorten if determined to be prudent.
  • Allows any type of entity recognized by the Secretary of State to be formed as a captive.
  • Allows groups and agencies to either comply with current statutory investment requirements OR come up with an acceptable plan (which DFR will keep confidential). Section 3463a – valuation methodology – still applies.
  • Re-writes the RRG independent director section for clarity.
  • Makes NAIC statutory accounting the standard for the new affiliated reinsurance company or ARCs.  Vermont didn’t need to meet accreditation standards, but wanted to avoid a repeat of the AXXX/XXX fights.

Thank you all very much, and I look forward to hearing from you!

VCIA Legislative Day – Cyber-up!

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As we all know, cybersecurity is one of the main issues facing society today. From data breaches that expose personal information to malware that can infect computer systems, in our growing IOT (internet of everything) world it’s the problem of the day. The insurance industry, including captives, have focused on cybersecurity for some time now. Both to provide their clients with the proper mitigation policies and to protect their own data systems, our industry continues to be in the forefront.

Who would have figured that in our small state, Vermont hosts one of the top cybersecurity institutions in the nation! Located in Northfield, Vermont (just south of our State’s capital, Montpelier) Norwich University hosts the NU Applied Research Institutes (NUARI).  NUARI was federally chartered in 2002 to address cyber incident management challenges through research, training programs and technology development and has been a global leader for more than a decade in developing cyber war gaming, distributed learning technology, distributed simulation technology, critical infrastructure exercises, and cybersecurity curriculum.  Norwich provides a truly unique program utilizing state-of-the-art forensic tools unheard of at other institutions of this size.

We are honored to have the President of NUARI, Phil Susmann, address our members at next week’s VCIA Legislative Day in Montpelier. Phil will speak at lunch in the Capital Plaza Hotel on January 23rd along with DFR Commissioner Mike Pieciak and a welcome from Lt. Governor David Zuckerman.

Legislative Day is a chance for our members to meet the State’s top political leaders and hear about the issues that are facing Vermont in the upcoming year. It’s also a great chance for the captive industry to say “thank you” for the over 30 years of support from politicians and policy leaders from all stripes: Democrats, Republicans, Progressives and Independents.

There will be meetings with legislative leaders and presentations to House and Senate committees. And don’t miss the Q&A opportunity with Dave Provost and the DFR Team after lunch! The event concludes with a fabulous evening reception where legislators, elected and appointed officials and VCIA Members mingle and exchange information about Vermont’s captive insurance industry and make plans for its continued success in 2019.

So, if you haven’t done so already, register here for a great day!

Thank you all very much, and I look forward to hearing from you!

Rich Smith
VCIA President

Let the Games Begin (and Congrats Vermont – Again)!

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The Vermont General Assembly began the first half of the legislative biennium this month. Both houses of the Vermont legislature now have a supermajority of Democrats, so Governor Scott (R) will have less room to push back on any legislation he doesn’t support. That being said, the House Commerce Committee’s new chair is Mike Marcotte, a Republican and former vice chair of the committee. Senate Finance remains in the hands of veteran Ann Cummings; both these committees oversee captive insurance in Vermont and both are strong captive insurance supporters.

As we do every year, VCIA initiated a process to build an agenda for suggested changes to the captive statutes for the 2019 legislative session.   With the results from our membership survey in hand, we meet with  Vermont’s captive management firms and law firms to hear their suggested changes. Then comes an iterative process with Dave Provost’s team at Vermont’s Department of Financial Regulation resulting in a consensus bill to present to the legislature. This year’s captive bill will be mostly tweaks and technical corrections, but even those are important in staying current in our ever-changing industry.

On another note, congratulations again to DFR and the State of Vermont! For the fifth straight year, Vermont was ranked the BEST  insurance regulatory environment in the United States, according to the R Street Institute’s  Insurance Regulation Report Card, an annual examination of which states best regulate the business of insurance.

Don’t forget that January 23rd  is VCIA’s annual Legislative Day in Montpelier, Vermont’s capital. It’s a full day of meeting and hearing from Vermont’s political leaders on the captive industry and issues facing the State broadly. Go to www.vcia.com and register today!

Thank you and I look forward to hearing from you.

Rich Smith
VCIA President

Washington State News

Rubber stamp "TAX"You have probably already heard of the recent pronouncement by the Office of the Insurance Commissioner in Washington State “allowing captive insurance companies that have unlawfully insured any risk in Washington State in the past 15 years to pay a substantially reduced fine and premium tax penalty for self-reporting the activity.”

The fact that the Washington State believes they can basically outlaw captive insurance with a press release is disturbing at best. It contradicts established federal law on insurance and creates a direct threat to the industry for those organizations that have risks in the state covered with a captive.  In the original legal filing by the K&L Gates law firm on the Microsoft case, they laid out the comprehensive argument that (1) the Office of the Insurance Commissioner (OIC) does not have the authority to regulate self-insurance; (2) the captive was not in the business of making contracts of insurance and therefore excluded from the definition of “insurer”; (3) the captive is outside the scope of the OIC’s authority under the federal McCarran-Ferguson Act litigated under Todd Shipyards; and (4) the OIC was outside its bounds to try and tax premiums related to risks outside the State of Washington.

VCIA is working with CICA and our other captive insurance partners on a cohesive response to the bulletin. In the meantime, I would advise captives with Washington State presence to check with their captive advisors on the issue.  We strongly urge you to give it some time before deciding to comply with the release.

I look forwarded to hearing from you!

I Kind of Like the Swamp…

rich-swamp-2I am down in Washington for a couple of days meeting with various Congressional staff people about moving the Captive Clarity Bill forward, slowly but surely.

The Captive Clarity Bill is seeking to clarify (hence the name!) an issue passed in legislation a number of years ago.  Within the Dodd-Frank Act was passed the Nonadmitted and Reinsurance Reform Act (NRRA), which was intended to streamline the regulation and taxation of surplus lines insurance. However, some of the definitions in the Act are so broad that questions have been raised about its effect on captive insurance. If captive insurance is considered “nonadmitted insurance” under the NRRA, captive insureds may be required to pay a premium tax to their home state in addition to their captives paying domiciliary state premium taxes, and be partially regulated by the insured’s “home state.”

Currently, captives are taxed and regulated in the state that they are domiciled regardless of where their corporate owners’ headquarters may be located. Under NRRA, the home state could assert the right to tax the self-procured insurance premiums written within the captive entity even though the state of domicile already charges the captive a premium tax.  It would suddenly penalize many companies by double taxing them for being domiciled in a state that is not their home state.  Although the Act does not give states any additional taxing authority, the prospect of nondomiciliary states accessing additional insurance transactions to tax has increased the risk of states attempting to impose new taxes on captive insurance. On the other side of that coin, domiciliary states may be at risk of losing their ability to collect premium taxes and regulate certain aspects of captive insurance.

Ian Davis, Director of Financial Services for the State of Vermont, and I will be meeting with our Vermont contingent, Patrick Satalin with Rep. Welch (D-VT), and Erica Chabot and JP Dowd with Senator Leahy’s Office. We will also be meeting with key Congressional staffers, including John Hair with Rep. Sean Duffy (R-WI) – Chairman of the Housing and Insurance Subcommittee, Saat Altey with Senator Tim Scott (R-SC) – Member of the Senate Banking and Insurance Subcommittee, Brandon Beall, Professional Staff for Insurance, Senate Banking Committee, and Amanda Fischer, Director of the Democrat/Minority Policy for the House Financial Services Committee. Finally, I will be meeting with Richard Ifft in the Federal Insurance Office at the Treasury Department. Phew… I need a break just looking at the list!

Jim McIntyre and I will be providing a full legislative report during the VCIA Annual Conference to VCIA Members attending the  Annual Meeting, so come on by and find out more!

We look forward to seeing you in Vermont in August. Thank you all very much, and I look forward to hearing from you soon.

Rich Smith
VCIA President

Another Year, Another Bill

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I want to thank all those VCIA Members who travelled to Montpelier last week during one of our ongoing snow storms to join Vermont Governor Phil Scott in signing this year’s captive bill into law.

H.764, introduced during VCIA’s Legislative Day in  January, quickly made its way through the legislative process and on to the Governor’s desk a week or so ago. Every year, VCIA and the State work to improve the ease of doing business in Vermont by proposing refinements to Vermont’s captive bill. This year’s bill included some common-sense changes to our annual filing date and reporting requirements which will help streamline processes and provide a new level of consistency for our regulated entities.

As Governor Scott said at the signing, “It is critical that we are responsive to the needs of the industry. These improvements to our captive legislation illustrate Vermont’s ongoing commitment to the captive insurance industry…  This bill will further advance Vermont’s reputation as the ‘Gold Standard’ of domiciles and will provide greater flexibility and consistency for our companies going forward.”

Joining the Governor was Department of Financial Regulation Commissioner Mike Pieciak, Deputy Commissioner Dave Provost, Director of Financial Services Ian Davis, and a number of DFR staffers. With me were VCIA Members Jonathan McKenzie from Alterna, Pattie Henderson from SRS, Dustin Partlow from JLT, Steve Killoran from Maple Capital (straight from maple sugaring – or so he looks in the picture!), Sandi Prescott from Performa, David White from AIG, David Angus from The Angus Law Firm, Keith Jones from National Life, Kristen Sharrow from Johnson Lambert, and Bill Mourelatos and Patti Pallito from Aon. Thank you all for coming on down!

Thank you and I look forward to hearing from you.

Rich Smith
VCIA President