§ 6048d - Licensing; authority - Vermont Statutes

§ 6048d. Licensing; authority

(a) A special purpose financial captive insurance company may reinsure the risks of a ceding insurer only. A special purpose financial captive insurance company may purchase reinsurance to cede the risks assumed under a reinsurance contract, subject to the prior approval of the commissioner.

(b) In conjunction with the issuance of a license to a special purpose financial captive insurance company, the commissioner may issue an order that includes any provisions, terms, and conditions regarding the organization, licensing, and operation of the special purpose financial captive insurance company that are deemed appropriate by the commissioner and that are not inconsistent with the provisions of this chapter. Except as provided in sections 6048l and 6048m of this subchapter, a license issued to a special purpose financial captive insurance company pursuant to this chapter and any order issued to a special purpose financial captive insurance company pursuant to this subsection shall not be revoked, suspended, amended, or modified other than as follows:

(1) The special purpose financial captive insurance company consents to such revocation, suspension, amendment, or modification; or

(2) The commissioner makes a showing of clear and convincing evidence demonstrating that such revocation, suspension, amendment, or modification is necessary to avoid irreparable harm to the special purpose financial captive insurance company or to the ceding insurer.

(c) To qualify for a license, a special purpose financial captive insurance company shall be subject, in addition to the requirements of subsection 6002(c) of this chapter, to the following:

(1) The special purpose financial captive insurance company's plan of operation shall include:

(A) a complete description of all significant transactions, including reinsurance, reinsurance security arrangements, securitizations, related transactions or arrangements, and to the extent not included in the transactions listed in this subdivision (A), a complete description of all parties other than the special purpose financial captive insurance company and the ceding insurer that will be involved in the issuance of special purpose financial captive insurance company securities and a description of any pledge, hypothecation, or grant of a security interest in any of the special purpose financial captive insurance company's assets and in any stock or limited liability company interest in the special purpose financial captive insurance company;

(B) the source and form of the special purpose financial captive insurance company's capital and surplus;

(C) the proposed investment policy of the special purpose financial captive insurance company;

(D) a description of the underwriting, reporting, and claims payment methods by which losses covered by the reinsurance contract are reported, accounted for, and settled;

(E) pro forma balance sheets and income statements illustrating one or more adverse case scenarios, as determined under criteria required by the commissioner, for the performance of the special purpose financial captive insurance company under all reinsurance contracts; and

(F) the proposed rate and method for discounting reserves, if the special purpose financial captive insurance company is requesting authority to discount its reserves.

(2) The special purpose financial captive insurance company shall submit an affidavit of its president, a vice-president, the treasurer, or the chief financial officer that includes the following statements, to the best of such person's knowledge and belief after reasonable inquiry:

(A) the proposed organization and operation of the special purpose financial captive insurance company comply with all applicable provisions of this chapter;

(B) the special purpose financial captive insurance company's investment policy reflects and takes into account the liquidity of assets and the reasonable preservation, administration, and management of such assets with respect to the risks associated with the reinsurance contract and the insurance securitization transaction; and

(C) the reinsurance contract and any arrangement for securing the special purpose financial captive insurance company's obligations under such reinsurance contract, including but not limited to any agreements or other documentation to implement such arrangement, comply with the provisions of this subchapter.

(3) The application shall include copies of all agreements and documentation described in subdivision (c)(1) of this section unless otherwise approved by the commissioner and any other statements or documents required by the commissioner to evaluate the special purpose financial captive insurance company's application for licensure.

(4) The application shall include an opinion of qualified legal counsel, in a form acceptable to the commissioner, that the offer and sale of any special purpose financial captive insurance company securities complies with all applicable registration requirements or applicable exemptions from or exceptions to such requirements of the federal securities laws and that the offer and sale of securities by the special purpose financial captive insurance company itself comply with all registration requirements or applicable exemptions from or exceptions to such requirements of the securities laws of this state. Such opinions shall not be required as part of the application if the special purpose financial captive insurance company includes a specific statement in its plan of operation that such opinions will be provided to the commissioner in advance of the offer or sale of any special purpose financial captive insurance company securities.

(d) The commissioner may grant a license, that shall be valid through the next April 1 following the date of initial issuance and may be renewed annually thereafter, authorizing the special purpose financial captive insurance company to transact reinsurance business as a special purpose financial captive insurance company in this state upon finding that:

(1) The proposed plan of operation provides for a reasonable and expected successful operation;

(2) The terms of the reinsurance contract and related transactions comply with this subchapter;

(3) The proposed plan of operation is not hazardous to any ceding insurer; and

(4) The insurance regulator of the state of domicile of each ceding insurer has notified the commissioner in writing or otherwise has provided assurance satisfactory to the commissioner that it has approved or has not disapproved the transaction, provided that the commissioner shall not be precluded from issuing a license to a special purpose financial captive insurance company in the event that the insurance regulator of the state of domicile of a ceding insurer has not responded with respect to all or any part of the transaction.

(e) The special purpose financial captive insurance company shall provide the commissioner with a copy of a complete set of executed documentation of an insurance securitization no later than 30 days after the closing on the transactions for such securitization.

(f) Subdivision 6002(c)(3) of this chapter shall apply to all information submitted pursuant to subsections (c) and (e) of this section and to any order issued to the special purpose financial captive insurance company pursuant to subsection (b) of this section. (Added 2007, No. 49, § 17.)