Captive Premium a "Nice Target for Tax Revenue," Say Some Regulators

Captive insurance company sponsors and others who would like to see changes to Vermont's captive insurance company statute should soon contact Vermont captive regulators and the trade association representing many of the state's captives, a top regulator recommends.

"If you have ideas on what (changes) you'd like to see ... talk to the VCIA (Vermont Captive Insurance Association) and us, and we'll consider adding it to the list in January" when the next state legislative session begins, said David Provost, Vermont's deputy commissioner of captive insurance, at the VCIA "Hot Topics" session at the group's annual conference in Burlington.

Vermont lawmakers passed the state's pioneering captive law in 1982. Since then, on a regular basis, lawmakers have amended the captive statute.

For example, during the 2018 legislative session, lawmakers in Vermont, the largest US domicile, with 566 captives at the end of 2017, made several changes.

One of those changes gives captives a little more time—2 additional weeks to March 15—to pay premium taxes. Due to that extension, captive sponsors can coordinate their premium tax payments with the March 15 deadline for filing annual reports.

Also on the horizon is Vermont's upcoming elections in November. While current Governor Phil Scott is expected to be reelected, Mr. Provost notes that there will be new legislators and new committee chairs who will need captive regulators to "teach them what captives are all about."

In other areas, Mr. Provost said that, while the National Association of Insurance Commissioners has not recently focused much on captives, some states have.

For example, the state of Washington is locked in a legal battle with Redmond, Washington-based Microsoft Corp. on whether Microsoft's Arizona-licensed captive owes premium taxes for Microsoft risks insured through the captive.

Some states regulators, Mr. Provost said, are looking at corporations based in their states and the premium dollars they are putting into their captives and saying that those premiums are a "nice target for tax revenue."

Pictured above, from left, are "Hot Topics with David Provost" panelists Sandy Bigglestone, director of captive insurance, Department of Financial Regulation, State of Vermont, and David Provost, deputy commissioner, Captive Insurance Division, Department of Financial Regulation, State of Vermont. Photo is by Jim Eaton, VCIA photographer.