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

Thank you and Congratulations!

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ICCIE-award-squareAs I wrote about in last week’s blog, VCIA hosted our annual Member’s Legislative Day in Vermont’s state capital, Montpelier, yesterday and it was a big success!

Our members, including many who came in from afar, got to hear from Vermont’s Lt. Governor, David Zuckerman, as well as Commerce Secretary Mike Schirling at our luncheon, and then later in the day from the Speaker of the House, Mitzi Johnson, the President Pro Tempore of the Senate, Tim Ashe, and finally from House Minority Leader Don Turner. Even though they represent different parties under the Gold Dome, what they do have in common is their unwavering support of the captive insurance industry in Vermont.

At lunch the Vermont State Economist provided a view of the State and national economy for members. VCIA and ICCIE board member presented the second ICCIE Fellow designation to Vermont’s own Kate Boucher from Premier Insurance Management Services. Congratulations, Kate, much deserved!

VCIA testified before House Commerce and Senate Finance on the captive bill that was introduced this week and to provide an overview of VCIA and the captive industry. Joining me was Ian Davis, Director of Financial Services for the State of Vermont, VCIA’s board vice chair, and Jan Klodowski, vice president for Agri-Services Agency, LLC, a subsidiary of Dairy Farmers of America.  As usual, Ian and Jan did a great job!

And finally, under the sure hands of Dave Provost, the House Commerce committee passed out this year’s captive bill with an 11 – 0 vote.
For a copy of the captive bill, please click here

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

Rich Smith
VCIA President

Happy Holidays and See You in 2018

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I just wanted to wish all of you Happy Holidays as we head out of 2017 and into 2018. It’s been another busy years in captives, that included a horrific hurricane season, the decision of the Avrahami case on 831(b)s, the specter of continued cyber security issues with the hacking of Equifax (among others), and the soon-to-be-passed Tax Reform bill – all of which impact our industry.

That being said, captive insurance is growing and remains a robust part of the world’s risk management sector. Vermont broke through the 1000 captive license mark and looks to add around 25 new captives before year’s end. With challenges and opportunities that lie ahead such as healthcare, drones, (more) cyber risk, and AI (artificial intelligence – get used to it), captives will show how entrepreneurial and innovative our industry can be!

Thank you all for another great year and Happy New Year!

Rich Smith
VCIA President

A Nice Little Holiday Gift from Congress

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As reported by Business Insurance on December 13th, the House Financial Services Committee adopted legislation that aims to preserve the U.S. state-based system of insurance regulation and gives Congress greater oversight and transparency on international insurance standard negotiations.

As beneficiaries of the strong, state-based insurance regulatory framework, the captive insurance industry applauds the goal of this legislation. The bill was introduced in response to concerns expressed about the covered agreement signed by the United States and the European Union to address the U.S. lack of equivalency related to the bloc’s Solvency II directive for the insurance industry. Although we supported the covered agreement in terms of trying to create parity between jurisdictions, the NAIC objected to what they believe to be a lack of transparency and consultation with state regulators on the issue.

As reported in BI, the bill states that entities representing the United States may not agree to insurance-related international agreements unless they are consistent with and recognize existing federal and state law, particularly on the regulation of insurance. U.S. federal entities participating in negotiations would be required to coordinate and consult with state insurance commissioners, according to the bill.

Whether this bill gets enough immediate traction to pass in the next year remains to be seen. I think it does bode well that Congress reiterate the near supremacy in states regulating insurance (I say “near supremacy” because Congress can always change its mind!).

Thank you and I look forward to hearing from you.

Rich Smith
VCIA President