Committee hears H.649 to codify captive-insurance reporting and bar member loans to risk-retention groups

A legislative committee heard testimony Feb. 12 on H.649, an annual captive-insurance bill that would codify existing regulatory practice and tighten reporting and funding attestations for captive insurers.

Deputy Commissioner Christine Brown of the Department of Insurance Regulations told the committee the bill’s first section would bar risk retention groups from making loans to or investments in their members or affiliates, while preserving an exception for arrangements in effect before Jan. 1, 2026. "We really want to make sure that the premium dollars and the capital that is in the risk retention group is preserved to pay the claims," Brown said, explaining the department’s reason for codifying what it described as longstanding practice.

The bill also clarifies reporting requirements. Legislative counsel explained the proposal adds explicit statutory language requiring risk retention groups to file an annual statement and signed jurat page with the National Association of Insurance Commissioners (NAIC) before March 1 and to submit quarterly financial reports on prescribed dates. Counsel said the department already required these filings in practice but lacks explicit statutory language for quarterly statements; H.649 places the captive-specific reporting obligations directly in the captive section of state law rather than cross-referencing general insurance statutes.

H.649 would also impose a new attestation for sponsored "protected cell" captives: within 30 days of forming a protected cell the sponsor must file a sworn statement certifying that the cell possessed the required funding and any required collateral prior to commencing business. The presenter said the provision is intended to align cell captives with existing capital and funding attestations that the department requires of full captive insurers and to protect cell owners and potential claimants. The bill’s effective date for that requirement was reported as taking effect in July.

Brown outlined the department’s oversight tools: annual actuarial opinions, independent audits, and statutory examinations every five years, supplemented by remote and on-site review when needed. She said the department sometimes finds substantive problems and uses company action plans or, in solvency cases, hires a deputy rehabilitator to rehabilitate or liquidate insurers. "If they're substantial, they're included in the examination report," Brown said of findings, and she added that regulatory actions and their details are posted on the department’s website when taken.

Ian Davis, president of the Vermont Insurance Association, testified the bill is developed in coordination with the industry and the department as an annual consensus exercise. Davis said the current measure is not materially substantive but is important for Vermont’s reputation as a regulatory jurisdiction; he also signaled industry interest in pursuing more comprehensive modernizations in future sessions.

No motions or votes were recorded during the hearing. Committee members asked clarifying questions about member eligibility for risk retention groups, the department’s remote and on-site review process, and the frequency and substance of enforcement actions; presenters reiterated that many of the bill’s provisions codify existing practices. The committee concluded testimony and prepared to proceed with the agenda; no formal committee action on H.649 was recorded during this session.

Next steps reported during the hearing included continued review by the committee and potential follow-up questions from members; the department and industry witnesses indicated they would continue to work with legislators on any substantive changes in future sessions.