Vermont Statutes Title 8 Sec. 6048n
Terms Used In Vermont Statutes Title 8 Sec. 6048n
- Assets: (1) The property comprising the estate of a deceased person, or (2) the property in a trust account.
- Attachment: A procedure by which a person's property is seized to pay judgments levied by the court.
- Captive insurance company: means any pure captive insurance company, association captive insurance company, sponsored captive insurance company, industrial insured captive insurance company, agency captive insurance company, risk retention group, affiliated reinsurance company, or special purpose financial insurance company formed or licensed under the provisions of this chapter. See
- Ceding insurer: means an insurance company approved by the Commissioner and licensed or otherwise authorized to transact the business of insurance or reinsurance in its state or country of domicile, which cedes risk to a special purpose financial insurance company pursuant to a reinsurance contract. See
- Commissioner: means the Commissioner of Financial Regulation. See
- Contract: A legal written agreement that becomes binding when signed.
- Corporation: A legal entity owned by the holders of shares of stock that have been issued, and that can own, receive, and transfer property, and carry on business in its own name.
- Embezzlement: In most states, embezzlement is defined as theft/larceny of assets (money or property) by a person in a position of trust or responsibility over those assets. Embezzlement typically occurs in the employment and corporate settings. Source: OCC
- Equitable: Pertaining to civil suits in "equity" rather than in "law." In English legal history, the courts of "law" could order the payment of damages and could afford no other remedy. See damages. A separate court of "equity" could order someone to do something or to cease to do something. See, e.g., injunction. In American jurisprudence, the federal courts have both legal and equitable power, but the distinction is still an important one. For example, a trial by jury is normally available in "law" cases but not in "equity" cases. Source: U.S. Courts
- Evidence: Information presented in testimony or in documents that is used to persuade the fact finder (judge or jury) to decide the case for one side or the other.
- following: when used by way of reference to a section of the law shall mean the next preceding or following section. See
- Injunction: An order of the court prohibiting (or compelling) the performance of a specific act to prevent irreparable damage or injury.
- Liabilities: The aggregate of all debts and other legal obligations of a particular person or legal entity.
- Obligation: An order placed, contract awarded, service received, or similar transaction during a given period that will require payments during the same or a future period.
- Person: shall include any natural person, corporation, municipality, the State of Vermont or any department, agency, or subdivision of the State, and any partnership, unincorporated association, or other legal entity. See
- Recourse: An arrangement in which a bank retains, in form or in substance, any credit risk directly or indirectly associated with an asset it has sold (in accordance with generally accepted accounting principles) that exceeds a pro rata share of the bank's claim on the asset. If a bank has no claim on an asset it has sold, then the retention of any credit risk is recourse. Source: FDIC
- Reinsurance contract: means a contract between a special purpose financial insurance company and a ceding insurer pursuant to which the special purpose financial insurance company agrees to provide reinsurance to the ceding insurer for risks associated with the ceding insurer's insurance or reinsurance business. See
- Special purpose financial insurance company: means a captive insurance company that has received a license from the Commissioner to operate as a special purpose financial insurance company pursuant to this subchapter. See
- Special purpose financial insurance company security: means :
- State: when applied to the different parts of the United States may apply to the District of Columbia and any territory and the Commonwealth of Puerto Rico. See
- Temporary restraining order: Prohibits a person from an action that is likely to cause irreparable harm. This differs from an injunction in that it may be granted immediately, without notice to the opposing party, and without a hearing. It is intended to last only until a hearing can be held.
§ 6048n. Sponsored captives
In addition to the provisions of sections 6048a-6048m of this subchapter, the provisions of this section shall apply to any sponsored captive insurance company licensed as a special purpose financial insurance company pursuant to this subchapter.
(1) A sponsored captive insurance company may be licensed as a special purpose financial insurance company pursuant to the provisions of this subchapter.
(2) The special purpose financial insurance company shall be subject to the provisions of subchapter 2 of this chapter. In the event of any conflict between the provisions of this subchapter and the provisions of subchapter 2 of this chapter, the provisions of this subchapter shall control.
(3) Unless otherwise approved in advance by the Commissioner, a participant in a special purpose financial insurance company shall be a ceding insurer. Any change in a participant shall be subject to prior approval by the Commissioner.
(4) The special purpose financial insurance company on behalf of a protected cell shall be entitled to assert the same claims and defenses in actions in law or equity as if the protected cell were a corporation established under Title 11A of the Vermont Statutes Annotated, including claims and defenses in actions at law or equity alleging alter ego, corporate veil piercing, offset, substantive consolidation, equitable subordination, or recoupment. In connection with the conservation, rehabilitation, or liquidation of a special purpose financial insurance company or one or more of its protected cells, the assets and liabilities of a protected cell shall at all times be kept separate from, and shall not be commingled with, those of other protected cells and the special purpose financial insurance company, and the assets of one protected cell shall not be used to satisfy the obligations or liabilities of another protected cell or the special purpose financial insurance company based on legal or equitable claims or defenses, including alter ego, piercing the corporate veil, offset, substantive consolidation, equitable subordination, or recoupment, unless such claims or defenses would apply to such protected cell if it were a special purpose finance insurance company without separate cells.
(5) Notwithstanding subdivision 6034(1) of this chapter, the special purpose financial insurance company may issue securities to any person approved in advance by the Commissioner.
(6) Notwithstanding section 6048g of this subchapter, the special purpose financial insurance company shall possess and thereafter maintain unimpaired paid-in capital and surplus of not less than $500,000.00.
(7) The “general account” of a sponsored captive insurance company licensed as a special purpose financial insurance company shall mean all assets and liabilities of the sponsored captive insurance company not attributable to a protected cell.
(8)(A) Any security issued by a special purpose financial insurance company with respect to a protected cell and any other contract or obligation of the special purpose financial insurance company with respect to a protected cell shall include the designation of such protected cell and shall include the following statement, or such other statement as may be required by the Commissioner:
(i) In the case of a security: “The holder of this security shall have no right or recourse against the special purpose financial insurance company and its assets other than against assets properly attributable to the designated protected cell and the special purpose financial insurance company’s general account, to the extent permitted by Vermont law.”
(ii) In the case of a contract or obligation: “The counterparty to this contract or obligation shall have no right or recourse against the special purpose financial insurance company and its assets other than against assets properly attributable to the designated protected cell and the special purpose financial insurance company’s general account, to the extent permitted by Vermont law.”
(B) Notwithstanding the requirements of this subdivision (8) and subject to the provisions of this chapter and other applicable law or regulation, the failure to include such disclosure, in whole or part, in such security, contract, or obligation with respect to a protected cell shall not serve as the sole basis for a creditor, ceding insurer, or any other person to have recourse against the general account of the special purpose financial insurance company in excess of the limitations provided for in subdivision (12)(E) of this subsection, or against the assets of any other protected cell.
(9) In addition to the provisions of section 6034 of this chapter, the special purpose financial insurance company shall be subject to the following with respect to its protected cells:
(A) The special purpose financial insurance company shall establish a protected cell only for the purpose of insuring or reinsuring risks of one or more reinsurance contracts with a ceding insurer or two or more affiliated ceding insurers, with the intent of facilitating an insurance securitization. A separate protected cell shall be established with respect to each separate securitization transaction; and
(B) A sale, an exchange, or another transfer of assets may not be made by the special purpose financial insurance company between or among any of its protected cells without the prior approval of the Commissioner.
(10) All attributions of assets and liabilities to the protected cells and the general account shall be in accordance with the plan of operation approved by the Commissioner. No other attribution of assets or liabilities may be made by a special purpose financial insurance company between its general account and any protected cell or between any protected cells. The special purpose financial insurance company shall attribute all insurance obligations, assets, and liabilities relating to a reinsurance contract entered into with respect to a protected cell and shall attribute the related insurance securitization transaction, including any securities issued by the special purpose financial insurance company as part of the insurance securitization, to such protected cell. The rights, benefits, obligations, and liabilities of any securities attributable to such protected cell and the performance under such reinsurance contract and the related securitization transaction and any tax benefits, losses, refunds, or credits allocated pursuant to a tax allocation agreement to which the special purpose financial insurance company is a party, including any payments made by or due to be made to the special purpose financial insurance company pursuant to the terms of such agreement, shall reflect the insurance obligations, assets, and liabilities relating to the reinsurance contract and the insurance securitization transaction that are attributed to such protected cell.
(11) For purposes of applying the provisions of chapter 145 of this title to a sponsored captive insurance company licensed as a special purpose financial insurance company, the definition of “insolvency” and “insolvent” in subdivision 6048c(2) of this title shall be applied separately to each protected cell and to the special purpose financial insurance company’s general account.
(12) In addition to the provisions of section 6048m of this chapter:
(A) Except as otherwise modified in this section, the terms and conditions set forth in chapter 145 of this title pertaining to administrative supervision of insurers and the rehabilitation, receiverships, and liquidation of insurers apply in full to special purpose financial insurance companies or any of the special purpose financial insurance company’s protected cells, independently, without causing or otherwise effecting a conservation, rehabilitation, receivership, or liquidation of the special purpose financial insurance company or another protected cell that is not otherwise insolvent.
(B) Notwithstanding the provisions of chapter 145 of this title, and without causing or otherwise effecting the conservation or rehabilitation of an otherwise solvent protected cell of a special purpose financial insurance company and subject to the provisions of subdivision (G)(v) of this subdivision (12), the Commissioner may apply by petition to the Superior Court for an order authorizing the Commissioner to conserve, rehabilitate, or liquidate a special purpose financial insurance company domiciled in this State on one or more of the following grounds:
(i) embezzlement, wrongful sequestration, dissipation, or diversion of the assets of the special purpose financial insurance company intended to be used to pay amounts owed to the ceding insurer or the holders of special purpose financial insurance company securities; or
(ii) the special purpose financial insurance company is insolvent; or
(iii) the holders of a majority in outstanding principal amount of each class of special purpose financial insurance company securities attributable to each particular protected cell requests or consents to conservation, rehabilitation, or liquidation pursuant to the provisions of this subchapter.
(C) Notwithstanding the provisions of chapter 145 of this title, the Commissioner may apply by petition to the Superior Court for an order authorizing the Commissioner to conserve, rehabilitate, or liquidate one or more of a special purpose financial insurance company’s protected cells, independently, without causing or otherwise effecting a conservation, rehabilitation, receivership, or liquidation of the special purpose financial insurance company generally or another of its protected cells, on one or more of the following grounds:
(i) embezzlement, wrongful sequestration, dissipation, or diversion of the assets of the special purpose financial insurance company attributable to the affected protected cell or cells intended to be used to pay amounts owed to the ceding insurer or the holders of special purpose financial insurance company securities of the affected protected cell or cells; or
(ii) the affected protected cell is insolvent; or
(iii) the holders of a majority in outstanding principal amount of each class of special purpose financial insurance company securities attributable to that particular protected cell request or consent to conservation, rehabilitation, or liquidation pursuant to the provisions of this subchapter.
(D) Except where consent is given as described in subdivisions (B)(iii) and (C)(iii) of this subdivision (12), the Court may not grant relief provided by subdivision (B) or (C) of this subdivision (12) unless, after notice and a hearing, the Commissioner, who shall have the burden of proof, establishes by clear and convincing evidence that relief must be granted. The Court’s order may be made in respect of one or more protected cells by name, rather than the special purpose financial insurance company generally.
(E) Notwithstanding another provision in this title, regulations adopted under this title, or another applicable law or regulation, upon any order of conservation, rehabilitation, or liquidation of a special purpose financial insurance company, or one or more of the special purpose financial insurance company’s protected cells, the receiver shall manage the assets and liabilities of the special purpose financial insurance company or the applicable protected cell pursuant to the provisions of this subchapter. The assets attributable to one protected cell shall not be applied to the liabilities attributable to another protected cell, unless an asset or liability is attributable to more than one protected cell, in which case the receiver shall deal with the asset or liability in accordance with the terms of any relevant governing instrument or contract. Recourse to the special purpose financial insurance company’s general account in connection with the conservation, rehabilitation, or liquidation of a protected cell shall be limited to the greater of the amount of assets in the general account as of the date such proceeding is commenced or the required minimum capital for the general account as of the date such proceeding is commenced. Assets attributable to one protected cell shall not be set off against the liabilities attributable to another protected cell, and assets attributable to the special purpose financial insurance company’s general account shall not be set off against the liabilities attributable to any protected cell except to the extent provided in the preceding sentence. Relief shall not be granted nor shall any order be issued based on equitable theories of recovery, including substantive consolidation, equitable subordination, or recoupment, to attach or seize the assets of any solvent protected cell for the benefit of another protected cell or special purpose financial insurance company, or to pierce the corporate veil of any protected cell, in connection with the conservation, rehabilitation, or liquidation of a special purpose financial insurance company or one or more protected cells, unless such equitable theories, attachment, seizure, or corporate veil piercing would apply to such cell if it were a special purpose financial insurance company without separate cells.
(F) With respect to amounts recoverable under a reinsurance contract, the amount recoverable by the receiver of a special purpose financial insurance company must not be reduced or diminished as a result of the entry of an order of conservation, rehabilitation, or liquidation with respect to the ceding insurer, notwithstanding another provision in the contract or other documentation governing the insurance securitization.
(G) Notwithstanding the provisions of chapter 145 of this title or other laws of this State:
(i) An application or petition, or a temporary restraining order or injunction issued pursuant to the provisions of chapter 145 of this title, with respect to a ceding insurer, does not prohibit the transaction of business by a special purpose financial insurance company with the ceding insurer, including any payment by a special purpose financial insurance company made pursuant to a security issued by a special purpose financial insurance company with respect to a protected cell, or any action or proceeding against a special purpose financial insurance company or its assets.
(ii) The commencement of a summary proceeding or other interim proceeding commenced before a formal delinquency proceeding with respect to a special purpose financial insurance company, and any order issued by the Court, does not prohibit the payment by a special purpose financial insurance company made pursuant to a security issued by a special purpose financial insurance company with respect to a protected cell or special purpose financial insurance company contract or the special purpose financial insurance company from taking any action required to make the payment.
(iii) A receiver of a ceding insurer may not void a nonfraudulent transfer by the ceding insurer to a special purpose financial insurance company of money or other property made pursuant to a reinsurance contract.
(iv) A receiver of a special purpose financial insurance company may not void a nonfraudulent transfer by the special purpose financial insurance company of money or other property made to a ceding insurer pursuant to a reinsurance contract or made to or for the benefit of any holder of a special purpose financial insurance company security issued with respect to a protected cell, or a special purpose financial insurance company security.
(v) In the event of an insolvency of a special purpose financial insurance company where one or more protected cells remain solvent, the Commissioner shall separate the special purpose financial insurance company’s solvent protected cells from the insolvent special purpose financial insurance company, shall allow on petition of the sponsor for the conversion of such solvent protected cells into one or more special purpose financial insurance companies, and shall issue such orders as the Commissioner deems necessary to protect the solvency of the remaining solvent protected cells. In the event of an insolvency of a protected cell, the special purpose financial insurance company’s assets shall be accounted for and managed in compliance with subdivision (E) of this subdivision (12) and the other laws of this State.
(H) Subdivision (G) of this subdivision (12) does not prohibit the Commissioner from taking any action permitted under chapter 145 of this title with respect only to the conservation or rehabilitation of a special purpose financial insurance company with protected cell or cells, provided the Commissioner would have had sufficient grounds to seek to declare the special purpose financial insurance company insolvent; subject to and without otherwise affecting the provisions of subdivision (G)(v) of this subdivision (12). In this case, with respect to the solvent protected cell or cells, the Commissioner may not prohibit payments made by the special purpose financial insurance company pursuant to the special purpose financial insurance company security, reinsurance contract, or otherwise made under the insurance securitization transaction that are attributable to these protected cell or cells or prohibit the special purpose financial insurance company from taking any action required to make these payments.
(I) With the exception of the fulfillment of the obligations under a special purpose financial insurance company contract, and notwithstanding another provision of this title or other laws of this State, the assets of a special purpose financial insurance company, including assets held in trust, shall not be consolidated with or included in the estate of a ceding insurer in any delinquency proceeding against the ceding insurer pursuant to the provisions of this title for any purpose, including distribution to creditors of the ceding insurer. (Added 2007, No. 49, § 17; amended 2007, No. 178 (Adj. Sess.), § 11; 2009, No. 42, § 28, eff. May 27, 2009; 2013, No. 29, § 65, eff. May 13, 2013.)