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

Come Hell or High Water

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Back in July I wrote a blog about the possibility of some sort of border tax being proposed by Congress as part of a broader tax reform bill that could have a negative impact on the captive insurance industry.  Well, as I write this blog the House and Senate have passed versions of tax reform that both have an effect on our industry.

Now, here’s the deal with this bill: Congress is so desperate to pass a bill that shows they achieved something that this bill isn’t on the fast-track, it’s on a rocket with limited guidance control! So there will be a tax reform bill on the President’s desk by Christmas. Using the streamlined “budget reconciliation” process, the GOP needs only a simple majority in the Senate rather than the standard 60 votes, and because Republicans currently control 52 seats, victory seems assured provided defections are be minimized.

Its politics over policy, I am afraid. And though it seems certain that there will be a reduction in the corporate tax rate to 20%, both houses are looking for place to “pay for” these cuts in other areas, and insurance is a pretty easy target. Domestic reinsurers and specialty insurers would be the primary beneficiaries of tax reform, along with insurance brokers and standard commercial insurers, but captives with off-shore reinsurance agreements will be paying more. Relevant to the P&C insurance industry are provisions affecting net operating losses, discounted loss reserves, and, for P&C carriers with a diverse portfolio, the provisions affecting amortization of policy acquisition expenses.

Luckily for you all, VCIA will be presenting a webinar next week to try and make sense out of this chaos. On December 14th, a group of noted captive tax specialists will  also explore the recently introduced Tax Reform bill, its impact on captives, and the process it will go through to get passed by Congress.

Panelists include Daniel Kusaila and Thomas Jones, each of whom have been recognized by Captive Review as well as receiving numerous other industry awards, as well as Charles Boustany, Jr., MD, former U.S. Congressman on the influential House Ways and Means Committee and former chairman of the Subcommittee on Tax Policy.  Charles is currently a partner with Capitol Counsel LLC, a Washington law firm with expertise on taxation and insurance issues. His insight will bring great value to this session.

Click here to register today!

Thank you and I look forward to hearing from you.

Rich Smith
VCIA President

Well, hello Molly!

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Former VCIA President, Honorary Member, and all around wonderful friend, Molly Lambert stopped by our offices last week, and, as many of you know, she is Vermont’s most respected community servant. Molly is doing a little work for a local affordable housing organization here in Burlington, Champlain Housing Trust, and it just so happens the stars align that bring the world of captive insurance and affordable housing.

This past year, the Vermont General Assembly passed an amendment in a housing bill that added captive insurers as a listed group that can take advantage of a tax credit that supports affordable housing. Currently banks and traditional insurance companies can take advantage of the credit. This change was welcome by both the Governor and legislature, as affordable housing is a priority for both.

CPA Mutual Insurance Company of America Risk Retention Group is the first captive insurance company to take advantage of Vermont’s Affordable Housing Tax Credit program. The captive purchased credits from the Champlain Housing Trust who will use the proceeds to create permanently affordable homes in Essex, Vermont.

CPA Mutual’s captive management company, Strategic Risk Solutions, worked with VCIA and the Vermont Department of Financial Regulation to bring the initiative to the legislature. The purchase of the tax credits will provide a reduction in state tax liability spread out over the next five years, while providing a lump sum up front for Champlain Housing Trust to subsidize four condominiums for sale in its shared equity program.  The revenue from the sale of the credits will subsidize the purchase of the homes. In exchange for this down payment assistance, buyers agree to share any market appreciation if they decide to sell at a future date.

William Thompson, president of CPA Mutual, commented: “This was an easy decision for us. To play a role in increasing the availability of affordable housing in Chittenden County is critical right now, and investing in the tax credits makes good business sense, too.”

Just like Molly to be on the side of good community and good business!  Thank you and I look forward to hearing from you.

Rich Smith
VCIA President

Vermont Ranks High for Fair and Reasonable

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The results of the most recent Lawsuit Climate Survey conducted for the U.S. Chamber Institute for Legal Reform were just released and Vermont gets another set of high marks. The poll explored how fair and reasonable the states’ liability systems are perceived to be by U.S. businesses. These perceptions matter because they can be influential in business decisions about where to conduct, expand, and constrict business operations or sales.

Vermont ranked #2 in the 2017 Lawsuit Climate Survey: Ranking the States, staying consistent with the 2015 Survey. The state came in first in the key element categories of scientific and technical evidence and judges’ impartiality.  I think this is just another example of the high standards we set for ourselves and our industries here in Vermont; standards that are also reflected in the recognized Gold Standard status of our captive insurance industry and regulation.

I will be out in Seattle next week for one of our world famous Captive Road Shows! Featuring the Risk Managers from Microsoft Corporation and Starbucks Coffee Company, attendees will learn the why’s and how’s of captive insurance, as well as hear their experiences in forming and operating and all about the captive climate and regulatory requirements in Vermont. Go to www.vcia.com/Events to see more. I hope you will join us if you can!

Thank you and I look forward to hearing from you.

Rich Smith
VCIA President

Old Home Week

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As many of you know, VCIA hosts a couple of educational sessions in different cities across the country to espouse the virtues of captive insurance. We call these our World Famous Road Shows, well, because the Ringley Brothers Barnum & Bailey Circus is no more! It is an afternoon that focuses on the basics of captive insurance companies, including the reasons for formation, the feasibility process and key issues in putting a successful captive program together.  A brief overview of Vermont as a captive domicile is also discussed.

It hit us late last year that we have never brought our Road Show to our Homeland – the Great State of Vermont! So next Wednesday, October 25th at the Burlington Hilton we will presenting the Road Show for companies in Vermont (and neighboring regions), as well as enticing finance, business and accounting students from local colleges to come learn about this great industry in their backyard.

We will have Vermont’s chief regulator, Dave Provost on a panel with Rusty Young, a Shareholder at Burlington law firm Primmer Piper Eggleston & Cramer, PC. The panel will be moderated by Ian Davis of Vermont’s Department of Economic Development. I will host the second panel of two of the industry’s experienced captive owners. Jan Klodowski is vice present of Agrisurance Inc. and is responsible for developing and administering their successful Captive/Alternative Risk Financing programs. She manages Agrisurance, Inc., a Vermont-domiciled Sponsored Captive focused on service the farming and agricultural industry. And Wilda Seymour, the corporate director of Professional Liability for the University of Pennsylvania Health System and vice president, Franklin Casualty Insurance Company, their Vermont-domiciled captive.

Hope you can join us to get a better idea why Vermont is the #1 captive domicile in the United States!

One last thing – we need your input! Today is the deadline to submit topics for VCIA’s annual conference next August. Please click link below to submit a conference topic suggestion:

http://conta.cc/2uY3JFL

 

Thank you and I look forward to hearing from you.

Rich Smith
VCIA President

 

state-of-the-unionEvery year VCIA hosts a webinar for our members that provides an informative and timely update on VCIA legislative activities on behalf of our members and the industry.  We call it “Captive State of the Union” because, like the President’s address to Congress every January, this is a chance for our members to hear just what’s going on in Montpelier, Washington, and across the world.  I will be joined by Dave Provost, Deputy Commissioner for Captive Insurance at the Vermont Department of Financial Regulation, and Jim McIntyre, VCIA’s representative in Washington for an overview of new and pending regulations in the state and in Washington D.C. and the NAIC.  The webinar is for VCIA Members only and is free of charge!

This is a relaxed but informative hour where we will discuss issues like the potential impact of tax reform on captives, status of the Captive Insurers Clarification Act, the Vermont captive bill signed into law this past spring, and updates from the NAIC, including the proposed NAIC Insurance Data Security Model Law, XXX / AXXX regulations and proposal to collect expanded mid-year investment information, plus more.  So join us on October 19th from 2:00 – 3:00 pm ET and become informed!

Thank you and I look forward to hearing from you.

Rich Smith
VCIA President

Mr. Smith Goes to Washington

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You may have heard about Richard Smith being grilled in Congress this week over a huge data breach that exposed millions of Americans’ personal information. I just want assure you that I am not THAT Richard Smith!

I think our industry has been very focused on cyber security for some time now, both in their businesses and as an opportunity to craft a captive solution for their clients – and I have certainly blogged it to death so enough said. That still has not stopped the NAIC from proposing to adopt a Data Security Model Law this year. If you have not seen it you can download it here:

Data Security Model Law (click here to view)

And although it becomes another “thing” to deal with in our industry, there is no doubt that a cybersecurity plan is a necessary element of any good captive management plan. I give Vermont’s insurance commissioner, Mike Pieciak, and his dauntless captive team high marks for keeping the NAIC’s model act as manageable as possible.

In the meantime, this Mr. Smith will be heading to Washington this fall to meet with congressional staff and leaders on the hill about issues impacting captive insurance.  Hopefully, I will get a little warmer welcome than my namesake!

Thank you and I look forward to hearing from you.

Rich Smith
VCIA President