§ 6006 - Formation of captive insurance companies in this state - Vermont Statutes

§ 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 not less than three incorporators or three organizers of whom not less than one 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 chapter 21 of Title 11 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 chapter 21 of Title 11 as well as the applicable provisions contained in this chapter. In the event of a conflict between the provisions of chapter 21 of Title 11 and the provisions of this chapter, the latter shall control; or

(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 subdivision (6) of section 3424 of this title;

(2) the commissioner may waive or modify the requirements for public notice and hearing in accordance with rules which the commissioner may adopt addressing categories of transactions. If a notice of public hearing is required, but no one requests a 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; and

(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 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. 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 subsection 8.24(a) of Title 11A, or under section 8.24 of Title 11B.

( 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. (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.)