Expanded captive law enhances Vermont’s domicile status: A.M. BestReprints
Vermont’s captive insurance law update that allows for the inclusion of agency captives and expands the scope of dormancy status to include all captives makes the state an even more attractive domicile, according to a report by A.M. Best Co. Inc.
On May 1, Gov. Phil Scott signed H.B. 85, which updated captive insurance laws to allow the state to license agency captives — reinsurance companies controlled by agencies or brokerages, according to the Oldwick, New Jersey-based rating agency. H.B. 85 adds agency captives to the list of captives already allowed, including pure captives, association captives, industrial insured captives and risk retention groups. Agency captives would be required to maintain capital and surplus of at least $500,000.
“A.M. Best believes the inclusion of agency captives highlights the push by the insurance industry in recent years to get closer to the insureds,” the agency said in a briefing released on Friday. “Many agents have deep-rooted relationships with profitable books of business. The agency captive will allow them to continue to control that relationship through working with a primary carrier, while sharing in the risk by participating in the fortunes of the business written.
“The dormancy status will allow captive owners to reactivate a captive if capacity shrinks; commercial prices harden; and, especially, if the business performs profitably, making it attractive enough to bear the risk,” the report stated.
The number of captives in the state has remained stable during the past five years, with Vermont reporting 593 captives in Business Insurance’s most recent captive survey, down from 596 in 2015, but up from 587 in 2014.