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The Vermont Statutes Online
Title
08
:
Banking and Insurance
Chapter
141
:
CAPTIVE INSURANCE COMPANIES
Subchapter
001
:
GENERAL PROVISIONS
§
6006. Formation of captive insurance companies in this State
(a) A pure
captive insurance company may be incorporated as a stock insurer with its
capital divided into shares and held by the stockholders, as a nonprofit
corporation with one or more members, or as a manager-managed limited liability
company.
(b) An
association captive insurance company, an industrial insured captive insurance
company, or a risk retention group may be:
(1) incorporated
as a stock insurer with its capital divided into shares and held by the
stockholders;
(2) incorporated
as a mutual corporation;
(3) organized as
a reciprocal insurer in accordance with chapter 132 of this title; or
(4) organized as
a manager-managed limited liability company.
(c) A captive
insurance company incorporated or organized in this State shall have one or
more incorporators or one or more organizers, at least one of which shall be a
resident of this State.
(d) In the case
of a captive insurance company:
(1)(A) Formed as
a corporation, before the articles of incorporation are transmitted to the
Secretary of State, the incorporators shall petition the Commissioner to issue
a certificate setting forth the Commissioner's finding that the establishment
and maintenance of the proposed corporation will promote the general good of
the State. In arriving at such a finding, the Commissioner shall consider:
(i) the
character, reputation, financial standing, and purposes of the incorporators;
(ii) the
character, reputation, financial responsibility, insurance experience, and
business qualifications of the officers and directors; and
(iii) such other
aspects as the Commissioner shall deem advisable.
(B) The articles
of incorporation, such certificate, and the organization fee shall be
transmitted to the Secretary of State, who shall thereupon record both the
articles of incorporation and the certificate.
(2) Formed as a
reciprocal insurer, the organizers shall petition the Commissioner to issue a
certificate setting forth the Commissioner's finding that the establishment and
maintenance of the proposed association will promote the general good of the
State. In arriving at such a finding, the Commissioner shall consider the items
set forth in subdivisions (1)(A)(i)-(iii) of this subsection.
(3) Formed as a
limited liability company, before the articles of organization are transmitted
to the Secretary of State, the organizers shall petition the Commissioner to
issue a certificate setting forth the Commissioner's finding that the
establishment and maintenance of the proposed company will promote the general
good of the State. In arriving at such a finding, the Commissioner shall
consider the items set forth in subdivisions (1)(A)(i)-(iii) of this
subsection.
(e) The capital
stock of a captive insurance company incorporated as a stock insurer may be
authorized with no par value.
(f) In the case
of a captive insurance company:
(1) formed as a
corporation, at least one of the members of the board of directors shall be a
resident of this State;
(2) formed as a
reciprocal insurer, at least one of the members of the subscribers' advisory
committee shall be a resident of this State;
(3) formed as a
limited liability company, at least one of the managers shall be a resident of
this State.
(g) Other than
captive insurance companies formed as limited liability companies under 11
V.S.A. chapter 21 or as nonprofit corporations under Title 11B, captive
insurance companies formed as corporations under the provisions of this chapter
shall have the privileges and be subject to the provisions of Title 11A as well
as the applicable provisions contained in this chapter. In the event of
conflict between the provisions of said general corporation law and the
provisions of this chapter, the latter shall control.
(h) Captive
insurance companies formed under the provisions of this chapter:
(1) As limited
liability companies shall have the privileges and be subject to the provisions
of 11 V.S.A. chapter 21 as well as the applicable provisions contained in this
chapter. In the event of a conflict between the provisions of 11 V.S.A. chapter
21 and the provisions of this chapter, the latter shall control.
(2) As nonprofit
corporations shall have the privileges and be subject to the provisions of
Title 11B as well as the applicable provisions contained in this chapter. In
the event of conflict between the provisions of Title 11B and the provisions of
this chapter, the latter shall control.
(i) The
provisions of subchapter 3 and subchapter 3A of chapter 101 of this title,
pertaining to mergers, consolidations, conversions, mutualizations,
redomestications, and mutual holding companies, shall apply in determining the
procedures to be followed by captive insurance companies in carrying out any of
the transactions described therein, except that:
(1) The Commissioner
may, upon request of an insurer party to a merger authorized under this
subsection, waive the requirement of 3424(6) of this title.
(2) The
Commissioner may waive the requirements for public notice and hearing or, in
accordance with rules which the Commissioner may adopt addressing categories of
transactions, modify the requirements for public notice and hearing. If a
notice of public hearing is required, but no one requests a hearing ten days
before the day set for the hearing, then the Commissioner may cancel the
hearing.
(3) The
provisions of subsections 3423(f) and (h) of this title shall not apply, and
the Commissioner may waive or modify the requirement of subdivision 3423(b)(4)
of this title, with respect to market value of a converted company as necessary
or desirable to reflect applicable restrictions on ownership of companies
formed under this chapter.
(4) An alien
insurer may be a party to a merger authorized under this subsection; provided
that the requirements for a merger between a captive insurance company and a
foreign insurer under section 3431 of this title shall apply to a merger
between a captive insurance company and an alien insurer under this subsection.
Such alien insurer shall be treated as a foreign insurer under section 3431 and
such other jurisdictions shall be the equivalent of a state for purposes of
section 3431.
(5) The
Commissioner may issue a certificate of general good to permit the formation of
a captive insurance company that is established for the purpose of consolidating
or merging with or assuming existing insurance or reinsurance business from an
existing licensed captive insurance company. The Commissioner may, upon request
of such newly formed captive insurance company, waive or modify the
requirements of subdivisions 6002(c)(1)(B) and (2) of this title.
(j) Captive
insurance companies formed as reciprocal insurers under the provisions of this
chapter shall have the privileges and be subject to the provisions of chapter
132 of this title in addition to the applicable provisions of this chapter. In
the event of a conflict between the provisions of chapter 132 and the
provisions of this chapter, the latter shall control. However, in approving
assessments levied upon subscribers of a captive insurance company formed as a
reciprocal insurer, the Commissioner may exempt the company from any provision
of sections 4850 (assessments), 4851 (time limit for assessments), and 4852
(aggregate of liability) of chapter 132. To the extent a reciprocal insurer is
made subject to other provisions of this title pursuant to chapter 132, such
provisions shall not be applicable to a reciprocal insurer formed under this
chapter unless such provisions are expressly made applicable to captive
insurance companies under this chapter.
(k) The articles
of incorporation or bylaws of a captive insurance company formed as a
corporation may authorize a quorum of its board of directors to consist of no
fewer than one-third of the fixed or prescribed number of directors determined
under 11A V.S.A. § 8.24(a) or under 11B V.S.A. § 8.24.
( l ) The
subscribers' agreement or other organizing document of a captive insurance
company formed as a reciprocal insurer may authorize a quorum of its
subscribers' advisory committee to consist of no fewer than one-third of the
number of its members.
(m) With the
Commissioner's approval, a captive insurance company organized as a stock
insurer may convert to a nonprofit corporation with one or more members by
filing with the Secretary of State an irrevocable election for such conversion,
provided that:
(1) the
irrevocable election shall certify that, at the time of the company's original
organization and at all times thereafter, the company conducted its business in
a manner not inconsistent with a nonprofit purpose; and
(2) at the time
of the filing of its irrevocable election, the company shall file with both the
Commissioner and the Secretary of State amended and restated articles of
incorporation consistent with the provisions of this chapter and with Title 11B,
duly authorized by the corporation.
(n) The
following provisions of Title 11B shall not apply to captive insurance
companies which are nonprofit corporations:
(1) subsection
2.02(c) (relating to the signing of articles of incorporation by directors);
(2) section
11.02, in the case of any merger in which a captive insurance company merges
with and into a captive insurance company organized as a nonprofit corporation
under Title 11B where the latter is the surviving corporation.
(o) In the case
of a captive insurance company formed as a limited liability company, a
reciprocal insurance company or mutual insurance company, any proxy executed by
the members, subscribers, and policyholders of each shall be valid if executed
and transmitted in compliance with 11A V.S.A. § 7.22.
(p) With the
Commissioner's prior written approval, a captive insurance company may
establish one or more separate accounts and may allocate to them amounts to
provide for the insurance of risks of certain of its parents, affiliates, or members,
as the case may be, subject to the following:
(1) The income,
gains, and losses, realized or unrealized, from assets allocated to a separate
account shall be credited to or charged against the account, without regard to
other income, gains, or losses of the captive insurance company.
(2) Amounts
allocated to a separate account in the exercise of the power granted by this
subsection are owned by the captive insurer, and the captive insurer may not be
nor hold itself out to be a trustee with respect to such amounts.
(3) Unless
otherwise approved by the Commissioner, assets allocated to a separate account
shall be valued in accordance with the rules otherwise applicable to the
captive insurer's assets.
(4) If and to
the extent so provided under the applicable contracts, that portion of the
assets of any such separate account equal to the reserves and other contract
liabilities with respect to such account shall not be chargeable with
liabilities arising out of any other business the captive insurer may conduct.
(5) No sale,
exchange, or other transfer of assets may be made by such captive insurer
between any of its separate accounts or between any other investment account
and one or more of its separate accounts unless, in the case of a transfer into
a separate account, such transfer is made solely to establish the account or to
support the operation of the contracts with respect to the separate account to
which the transfer is made and unless such transfer, whether into or from a
separate account is made by a transfer of cash or by a transfer of securities
having a readily determinable market value, provided that such transfer of
securities is approved by the Commissioner. The Commissioner may approve other
transfers among such accounts if, in his or her opinion, such transfers would
be equitable.
(6) To the
extent such captive insurer deems it necessary to comply with any applicable
federal or State laws, such captive insurer, with respect to any separate
account, including any separate account which is a management investment
company or a unit investment trust, may provide for persons having an interest
therein appropriate voting and other rights and special procedures for the
conduct of the business of such account, including special rights and procedures
relating to investment policy, investment advisory services, selection of
independent public accountants, and the selection of a committee, the members
of which need not be otherwise affiliated with such company, to manage the
business of such account. (Added 1981, No. 28; 1989, No. 72, § 1; amended 1989,
No. 72, § 1; 1991, No. 41, § 5; 1993, No. 85, § 3(d), eff. Jan. 1, 1994; 1995,
No. 179 (Adj. Sess.), § 1d, eff. Jan. 1, 1997; 1997, No. 49, § 11, eff. June
26, 1997; 1997, No. 100 (Adj. Sess.), § 2, eff. April 16, 1998; 1999, No. 38, §
8, eff. May 20, 1999; 1999, No. 86 (Adj. Sess.), § 8, eff. April 27, 2000;
2003, No. 55, § 7; 2003, No. 105 (Adj. Sess.), § 19, eff. May 4, 2004; 2005,
No. 36, §§ 11, 12, 13, eff. June 1, 2005; 2007, No. 178 (Adj. Sess.), § 10;
2009, No. 42, § 30a; 2009, No. 137 (Adj. Sess.), §§ 19, 20, eff. May 29, 2010;
2013, No. 29, § 48, eff. May 13, 2013; 2013, No. 103 (Adj. Sess.), § 5, eff.
April 14, 2014; 2015, No. 20, § 1, eff. May 7, 2015.)