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MONTPELIER, Vt.-Requirements for captive insurance companies under Vermont's Special Insurer Act of 1981 include:
Minimum capitalization of $250,000 for single-parent captives, $500,000 for industrial insured captives and $750,000 for association captives.
Approved letters of credit can be used to meet capitalization requirements.
A multi-tier tax structure for direct and reinsurance premiums.
The first $20 million of direct written premiums is taxed at 0.4%.
That rate falls to 0.3% for direct premiums from $20 million to $40 million and to 0.2% for premiums between $40 million and $60 million.
The tax on direct premiums exceeding $60 million is 0.075%.
For reinsurance, the tax is 0.225% on the first $20 million of reinsurance assumed, 0.15% on premiums between $20 million and $40 million, 0.05% on premiums between $40 million and $60 million and 0.025% on premiums exceeding $60 million.
In addition, captives are subject to a minimum annual premium tax of $5,000.
Single-parent and industrial insured captives file simplified annual financial reports; trade association captives and risk retention groups use the National Assn. of Insurance Commissioners' convention blank.
Financial reports are due by Feb. 28 each year.
Single-parent captives may apply to file on a fiscal year-end basis consistent with the parent company's fiscal year. If an alternative reporting date is granted, the annual report is due 60 days after the fiscal year ends.
To support its premium tax return, the captive must file pages 1, 2, 3 and 5 of the "Captive Annual Statement: Pure or Industrial Insured" by Feb. 28.
Captives can directly write all types of property/casualty insurance, except primary workers compensation coverage. Primary workers comp risks can be reinsured by a captive, however, while excess workers compensation coverage can be written directly or reinsured.
A captive's financial records must be kept in the state and its board of directors must hold an annual meeting in Vermont.
A $200 initial application fee and a $300 annual license fee.
A prospective captive must have its actuarial assumptions reviewed by one of five actuar-ial/risk management consulting firms selected by the insurance department. The review fee is $3,200.
Rate and policy form approval are not required.
For more information about captives in Vermont, contact Leonard D. Crouse, Director of Captive Insurance, Vermont Department of Banking, Insurance and Securities, 89 Main St., Drawer 20, Montpelier, Vt. 05620-3101; 802-828-3304.