§ 6002. Licensing; authority
(a) Any captive insurance company, when permitted by its articles of association, charter, or other organizational document, may apply to the Commissioner for a license to do any and all insurance comprised in subdivisions 3301(a)(1), (2), (3)(A)-(C), (E)-(Q), and (4)-(9) of this title and may grant annuity contracts as defined in section 3717 of this title; provided, however, that:
(1) No pure captive insurance company may insure any risks other than those of its parent and affiliated companies or controlled unaffiliated business.
(2) No agency captive insurance company may do any insurance business in this State unless:
(A) an insurance agency or brokerage that owns or controls the agency captive insurance company remains in regulatory good standing in all states in which it is licensed;
(B) it insures only the risks of the commercial policies that are placed by or through an insurance agency or brokerage that owns or directly or indirectly controls the agency captive insurance company and, if required by the Commissioner in his or her discretion, it provides the Commissioner the form of such commercial policies;
(C) it discloses to the original policyholder or policyholders, in a form or manner approved by the Commissioner, any limitations, rights, and obligations held by the agency captive insurance company as a result of its affiliation with an insurance agency or brokerage; and
(D) if required by the Commissioner in his or her discretion, the business written by an agency captive insurance company is:
(i) Fronted by an insurance company licensed under the laws of any state.
(ii) Reinsured by a reinsurer authorized or approved by the State of Vermont.
(iii) Secured by a trust fund in the United States for the benefit of policyholders and claimants or funded by an irrevocable letter of credit or other arrangement that is acceptable to the Commissioner. The Commissioner may require the agency captive insurance company to increase the funding of any security arrangement established under this subdivision. If the form of security is a letter of credit, the letter of credit shall be issued or confirmed by a bank approved by the Commissioner. A trust maintained pursuant to this subdivision shall be established in a form and upon terms approved by the Commissioner.
(3) No association captive insurance company may insure any risks other than those of its association, those of the member organizations of its association, and those of a member organization's affiliated companies.
(4) No industrial insured captive insurance company may insure any risks other than those of the industrial insureds that comprise the industrial insured group, those of their affiliated companies, and those of the controlled unaffiliated business of an industrial insured or its affiliated companies.
(5) No risk retention group may insure any risks other than those of its members and owners.
(6) No captive insurance company may provide personal motor vehicle or homeowner's insurance coverage or any component thereof.
(7) No captive insurance company may accept or cede reinsurance except as provided in section 6011 of this title.
(8) Any captive insurance company may provide excess workers' compensation insurance to its parent and affiliated companies, unless prohibited by the federal law or laws of the state having jurisdiction over the transaction. Any captive insurance company, unless prohibited by federal law, may reinsure workers' compensation of a qualified self-insured plan of its parent and affiliated companies.
(9) Any captive insurance company that insures risks described in subdivisions 3301(a)(1) and (2) of this title shall comply with all applicable State and federal laws.
(b) No captive insurance company shall do any insurance business in this State unless:
(1) it first obtains from the Commissioner a license authorizing it to do insurance business in this State;
(2) its board of directors or committee of managers or, in the case of a reciprocal insurer, its subscribers' advisory committee holds at least one meeting each year in this State;
(3) it maintains its principal place of business in this State; and
(4) it appoints a registered agent to accept service of process and to otherwise act on its behalf in this State; provided that whenever such registered agent cannot with reasonable diligence be found at the registered office of the captive insurance company, the Secretary of State shall be an agent of such captive insurance company upon whom any process, notice, or demand may be served.
(c)(1) Before receiving a license, a captive insurance company shall:
(A) File with the Commissioner a certified copy of its organizational documents, a statement under oath of its president and secretary showing its financial condition, and any other statements or documents required by the Commissioner.
(B) Submit to the Commissioner for approval a description of the coverages, deductibles, coverage limits, and rates, together with such additional information as the Commissioner may reasonably require. In the event of any subsequent material change in any item in such description, the captive insurance company shall submit to the Commissioner for approval an appropriate revision and shall not offer any additional kinds of insurance until a revision of such description is approved by the Commissioner. The captive insurance company shall inform the Commissioner of any material change in rates within 30 days of the adoption of such change.
(2) Each applicant captive insurance company shall also file with the Commissioner evidence of the following:
(A) the amount and liquidity of its assets relative to the risks to be assumed;
(B) the adequacy of the expertise, experience, and character of the person or persons who will manage it;
(C) the overall soundness of its plan of operation;
(D) the adequacy of the loss prevention programs of its insureds; and
(E) such other factors deemed relevant by the Commissioner in ascertaining whether the proposed captive insurance company will be able to meet its policy obligations.
(3) Information submitted pursuant to this subsection shall be and remain confidential, and may not be made public by the Commissioner or an employee or agent of the Commissioner without the written consent of the company, except that:
(A) such information may be discoverable by a party in a civil action or contested case to which the captive insurance company that submitted such information is a party, upon a showing by the party seeking to discover such information that:
(i) the information sought is relevant to and necessary for the furtherance of such action or case;
(ii) the information sought is unavailable from other nonconfidential sources; and
(iii) a subpoena issued by a judicial or administrative officer of competent jurisdiction has been submitted to the Commissioner; provided, however, that the provisions of this subdivision (3) shall not apply to any risk retention group; and
(B) the Commissioner may, in the Commissioner's discretion, disclose such information to a public officer having jurisdiction over the regulation of insurance in another state, provided that:
(i) such public official shall agree in writing to maintain the confidentiality of such information; and
(ii) the laws of the state in which such public official serves require such information to be and to remain confidential.
(d) Each captive insurance company shall pay to the Commissioner a nonrefundable fee of $500.00 and each special purpose financial insurance company shall pay to the Commissioner a nonrefundable fee of $5,000.00 for examining, investigating, and processing its application for license, and for issuing same, and the Commissioner is authorized to retain legal, financial, and examination services from outside the Department, the reasonable cost of which may be charged against the applicant. The provisions of section 3576 of this title shall apply to examinations, investigations, and processing conducted under the authority of this section. In addition, each captive insurance company shall pay a license renewal fee for each year thereafter of $500.00, and each special purpose financial insurance company shall pay to the Commissioner a nonrefundable fee of $5,000.00.
(e) If the Commissioner is satisfied that the documents and statements that such captive insurance company has filed comply with the provisions of this chapter, the Commissioner may grant a license authorizing it to do insurance business in this State until April 1 thereafter, which license may be renewed. (Added 1981, No. 28; amended 1987, No. 47, § 2, eff. May 13, 1987; 1987, No. 168 (Adj. Sess.), § 2, eff. May 3, 1988; 1993, No. 40, § 2, eff. June 3, 1993; 1993, No. 235 (Adj. Sess.), § 9c, eff. June 21, 1994; 1997, No. 49, § 9, eff. June 26, 1997; 1999, No. 38, § 5, eff. May 20, 1999; 1999, No. 84 (Adj. Sess.), § 10, eff. April 19, 2000; 2003, No. 55, § 7; 2003, No. 105 (Adj. Sess.), § 18, eff. May 4, 2004; 2007, No. 49, § 9; 2009, No. 134 (Adj. Sess.), § 25; 2013, No. 29, § 47, eff. May 13, 2013; 2017, No. 12, § 4, eff. May 1, 2017; 2017, No. 90 (Adj. Sess.), § 1, eff. March 8, 2018.)