Vermont officials are looking to ride the latest wave in captive insurance company formations– companies looking to reinsure life insurance policies.
The Vermont Department of Banking, Insurance, Securities and Health Care Administration has scheduled a Jan. 4 hearing in Montpelier to consider reserving and annual reporting requirements for captive insurance companies wishing to reinsure life insurance policies.
The proposed regulation sets forth reserve requirements and the form of the annual report required of a captive insurance company that reinsures life insurance policies, including term, universal and variable life policies, and related guarantees and riders. A captive insurance company completes its annual report to BISHCA based on GAAP accounting principles, unless the commissioner approves the use of statutory accounting principles. The rule specifies the form of annual report to be used, which depends on the accounting method the captive uses. The rule also requires that the captive maintain adequate reserves for its insurance obligations.
The proposed rule would apply with respect to fiscal years ending on and after December 31, 2005, but would not require any captive insurance company to amend or change its annual reports filed for the 2005 and 2006 fiscal years.
Vermont officials cite a recent trend whereby a traditional life insurance company may reduce its exposure under a life insurance policy it issues by forming a pure captive insurance company, which reinsures all or a portion of the risk insured under the policy.
Currently, Vermont and South Carolina are the two leading captive insurance domiciles competing for captive insurers reinsuring life insurance policies, according to BISHCA.
The proposed rule is meant to facilitate the formation these captive insurance programs in Vermont and provide the state with additional premium tax revenues
The hearing on the proposal will be Jan. 4, 2007, from 2pm to 4pm, at the offices of BISHCA, 89 Main Street, 3rd Floor, Montpelier, Vermont.
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