Vermont Act 134 (H.719) (“Act 134”), signed by Governor Phil Scott on May 17, 2018, is set to come into effect on July 1, 2018. Originally introduced by Representative Botzow of Pownal in January of this year, Act No. 134 makes general amendments to the laws regarding permitted investments of insurance companies and the frequency with which a trust company’s governing board is required to meet. Most notable for Vermont, as the leader in captive insurance, Act 134, authorizes the formation of a new kind of captive insurance company called an affiliated reinsurance company. The affiliated reinsurance company was created in response to the recent imposition of the Base Erosion Anti-Abuse Tax (BEAT) on reinsurance ceded to offshore affiliates. David Provost, Deputy Commissioner of Captive Insurance, was quoted as stating “[t]he industry approached us with a need for an onshore alternative . . . . It’s something we’ve been considering for some time, but the imposition of BEAT taxes on foreign reinsurance made the timing critical. These companies are akin to a hybrid between captives and traditional insurance. Like captives, they will be limited to reinsurance of affiliates, but they will be regulated in accordance with NAIC accreditation standards like a commercial reinsurer would be.”
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