Holding Companies and Subsidiaries

V.S.A. tit. 8, ch. 101, subch. 13

in effect

8 V.S.A. § 3681 Definitions

3681. Definitions As used in this subchapter: (1) “Affiliate” of, or person “affiliated” with, a specific person, means a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the person specified. (2) “Commissioner” means the Commissioner of Financial Regulation or the Commissioner’s deputies, as appropriate. (3) “Control,” including the terms “controlling,” “controlled by,” and “under common control with,” means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract other than a commercial contract for goods or nonmanagement services, or otherwise, unless the power is the result of an official position with or corporate office held by the person. Control shall be presumed to exist if any person, directly or indirectly, owns, controls, holds with the power to vote, or holds proxies representing, 10 percent or more of the voting securities of any other person. This presumption may be rebutted by a showing made in the manner provided by subsection 3684(l) of this title that control does not exist in fact. The Commissioner may determine, after furnishing all persons in interest notice and opportunity to be heard and making specific findings of fact to support such determination, that control exists in fact, notwithstanding the absence of a presumption to that effect. (4) “Group capital calculation instructions” means the group capital calculation instructions as adopted by the NAIC and as amended by the NAIC from time to time in accordance with the procedures adopted by the NAIC. (5) “Groupwide supervisor” means the regulatory official authorized to engage in conducting and coordinating groupwide supervision activities, as specified by the Commissioner under section 3696 of this subchapter. (6) “Insurance holding company system” or “system” means two or more affiliated persons, one or more of which is an insurer. (7) “Insurer” means a company qualified and licensed to transact the business of insurance in this State and includes a health maintenance organization, a nonprofit hospital service corporation, and a nonprofit medical service corporation, except that it shall not include: (A) agencies, authorities, or instrumentalities of the United States, its possessions and territories, the Commonwealth of Puerto Rico, the District of Columbia, or a state or political subdivision of a state; or (B) fraternal benefit societies. (8) “Enterprise risk” means any activity, circumstance, event, or series of events involving one or more affiliates of an insurer that, if not remedied promptly, is likely to have a material adverse effect upon the financial condition or liquidity of the insurer or its insurance holding company system as a whole, including anything that would cause the insurer’s risk-based capital to fall into company action level as set forth in section 8303 of this title or would cause the insurer to be in hazardous financial condition under Department Regulation I-93-2, sections 3–4. (9) “Internationally active insurance group” or “group” means an insurance holding company system that: (A) includes an insurer registered under section 3684 of this subchapter; and (B) meets the following criteria: (i) premiums written in at least three countries; (ii) the percentage of gross premiums written outside the United States is at least 10 percent of the system’s total gross written premiums; and (iii) based on a three-year rolling average, the total assets of the system are at least $50,000,000,000.00, or the total gross written premiums of the system are at least $10,000,000,000.00. (10) “NAIC” means the National Association of Insurance Commissioners. (11) “NAIC liquidity stress test framework” means a separate NAIC publication, which includes a history of the NAIC’s development of regulatory liquidity stress testing, the scope criteria applicable for a specific data year, and the liquidity stress test instructions and reporting templates for a specific data year, such as scope criteria, instructions, and reporting template as adopted by the NAIC. (12) “Person” means an individual, a corporation, a limited liability company, a partnership, an association, a joint stock company, a trust, an unincorporated organization, any similar entity or any combination of the foregoing acting in concert, but shall not include any joint venture partnership exclusively engaged in owning, managing, leasing, or developing real or tangible personal property. (13) “Scope criteria” mean the designated exposure bases along with minimum magnitudes thereof for the specified data year used to establish a preliminary list of insurers considered scoped into the NAIC liquidity stress test framework for that data year, as detailed in the NAIC liquidity stress test framework. (14) “Security holder” of a specified person means one who owns any security of such person, including common stock, preferred stock, debt obligations, and any other security convertible into or evidencing the right to acquire any of the foregoing. (15) “Subsidiary” of a specified person means an affiliate controlled by such person directly, or indirectly through one or more intermediaries. (16) “Voting security” includes any security convertible into or evidencing a right to acquire a voting security. Added 1971, No. 72, § 2; amended 1989, No. 225 (Adj. Sess.), § 25(b); 1991, No. 249 (Adj. Sess.), § 14; 1995, No. 180 (Adj. Sess.), § 38(a); 1997, No. 159 (Adj. Sess.), § 3, eff. April 29, 1998; 2003, No. 163 (Adj. Sess.), § 40, eff. June 10, 2004; 2011, No. 78 (Adj. Sess.), § 2, eff. April 2, 2012; 2013, No. 29, § 27, eff. May 13, 2013; 2015, No. 15, § 3, eff. May 1, 2015; 2019, No. 103 (Adj. Sess.), § 20; 2023, No. 110 (Adj. Sess.), § 24, eff. July 1, 2024.

8 V.S.A. § 3682 Subsidiaries of insurers

3682. Subsidiaries of insurers (a) Any domestic insurer, either by itself or in cooperation with one or more persons, may organize or acquire one or more subsidiaries engaged in the following kinds of business: (1) any kind of insurance business authorized by the jurisdiction in which it is incorporated; (2) acting as an insurance broker or as an insurance agent for its parent or for any of its parent’s insurer subsidiaries; (3) investing, reinvesting, or trading in securities for its own account, that of its parent, any subsidiary of its parent, or any affiliate or subsidiary; (4) management of any investment company subject to or registered pursuant to the Investment Company Act of 1940, as amended, including related sales and service; (5) acting as a broker-dealer subject to or registered pursuant to the Securities Exchange Act of 1934, as amended; (6) rendering investment advice to government agencies, corporations, or other organizations or groups; (7) rendering other services related to the operations of an insurance business, including actuarial, loss prevention, safety engineering, data processing, accounting, claims, appraisal, and collection services; (8) ownership and management of assets that the parent corporation could itself own or manage; (9) acting as administrative agent for a governmental instrumentality that is performing an insurance function; (10) financing of insurance premiums, agents, and other forms of consumer financing; (11) any other business activity determined by the Commissioner to be reasonably ancillary to an insurance business; and (12) owning a corporation or corporations engaged or organized to engage exclusively in one or more of the businesses specified in this section. (b) In addition to investments in common stock, preferred stock, debt obligations, and other securities permitted under all other sections of this title, a domestic insurer may also: (1) Invest, in common stock, preferred stock, debt obligations, and other securities of one or more subsidiaries, amounts that do not exceed the lesser of five percent of such insurer’s assets or 50 percent of such insurer’s surplus as regards policyholders, provided that after such investments the insurer’s surplus as regards policyholders will be reasonable in relation to the insurer’s outstanding liabilities and adequate to its financial needs. In calculating the amount of such investments, investments made under subsection (a) of this section shall be excluded for all insurers, except to the extent provided in subsection (f) of this section, and there shall be included: (A) total net monies or other consideration expended and obligations assumed in the acquisition or formation of a subsidiary, including all organizational expenses and contributions to capital and surplus of such subsidiary whether or not represented by the purchase of capital stock or issuance of other securities; and (B) all amounts expended in acquiring additional common stock, preferred stock, debt obligations, and other securities and all contributions to the capital or surplus, of a subsidiary subsequent to its acquisition or formation. (2) If the insurer’s total liabilities, as calculated for National Association of Insurance Commissioners annual statement purposes, are less than 10 percent of assets, invest any amount in common stock, preferred stock, debt obligations, and other securities of one or more subsidiaries, provided that after such investment the insurer’s surplus as regards policyholders, considering such investment as if it were a disallowed asset, will be reasonable in relation to the insurer’s outstanding liabilities and adequate to its financial needs. (3) Invest any amount in common stock, preferred stock, debt obligations, and other securities of one or more subsidiaries, provided that each such subsidiary agrees to limit its investments in any asset so that such investments will not cause the amount of the total investment of the insurer to exceed any of the investment limitations specified in subdivision (1) of this subsection or in sections 3681 through 3692 of this title applicable to the insurer. For the purpose of this subdivision, “the total investment of the insurer” shall include: (A) any direct investment by the insurer in an asset; and (B) the insurer’s proportionate share of any investment in an asset by any subsidiary of the insurer, which shall be calculated by multiplying the amount of the subsidiary’s investment by the percentage of the insurer’s ownership of such subsidiary. (4) With the approval of the Commissioner, invest any amount in common stock, preferred stock, debt obligations, or other securities of one or more subsidiaries, provided that after such investment the insurer’s surplus as regards policyholders will be reasonable in relation to the insurer’s outstanding liabilities and adequate to its financial needs. (5) Invest any amount in the common stock, preferred stock, debt obligations, or other securities of any subsidiary exclusively engaged in holding title to and managing or developing real or personal property, if after considering as a disallowed asset so much of the investment as is represented by subsidiary assets that if held directly by the insurer would be considered as a disallowed asset, the insurer’s surplus as regards policyholders will be reasonable in relation to the insurer’s outstanding liabilities and adequate to its financial needs, and if following such investment all voting securities of such subsidiary would be owned by the insurer. (c) Investments in common stock, preferred stock, debt obligations, or other securities of subsidiaries made pursuant to subsection (b) of this section shall not be subject to any of the otherwise applicable restrictions or prohibitions contained in this chapter applicable to such investments of insurers. (d) Whether any investment pursuant to subsection (b) of this section meets the applicable requirements thereof is to be determined immediately after such investment is made, taking into account the then outstanding principal balance on all previous investments in debt obligations, and the value of all previous investments in equity securities as of the date they were made. (e) If an insurer ceases to control a subsidiary, it shall dispose of any investment therein made pursuant to this section within three years from the time of the cessation of control or within such further time as the Commissioner may prescribe, unless at any time after such investment shall have been made, such investment shall have met the requirements for investment under any other section of this title, and the insurer has notified the Commissioner thereof. (f) Nothing in this section shall modify or negate any contractual obligation undertaken by a mutual insurance holding company reorganizing under subchapter 3A of this chapter. Added 1971, No. 72, § 2; amended 1999, No. 84 (Adj. Sess.), § 9, eff. April 19, 2000.

8 V.S.A. § 3683 Acquisition of control of or merger with domestic insurer

3683. Acquisition of control of or merger with domestic insurer (a) Filing requirements. (1) No person other than the issuer shall make a tender offer for or a request or invitation for tenders of, or enter into any agreement to exchange securities for, seek to acquire, or acquire, in the open market or otherwise, any voting security of a domestic insurer if, after the consummation thereof, such person would, directly or indirectly (or by conversion or by exercise of any right to acquire) be in control of such insurer, and no person shall enter into an agreement to merge with or otherwise to acquire control of a domestic insurer unless, at the time any such offer, request, or invitation is made or any such agreement is entered into, or prior to the acquisition of such securities if no offer or agreement is involved, such person has filed with the Commissioner and has sent to such insurer, and such insurer has sent to its shareholders, a statement containing the information required by this section and such offer, request, invitation, agreement, or acquisition has been approved by the Commissioner in the manner hereinafter prescribed. (2) For purposes of this subsection, any controlling person of a domestic insurer seeking to divest its controlling interest in the domestic insurer in any manner shall file with the Commissioner, with a copy to the insurer, confidential notice of its proposed divestiture at least 30 days prior to the cessation of control. The Commissioner shall determine those instances in which the party or parties seeking to divest or to acquire a controlling interest in an insurer will be required to file for and obtain approval of the transaction. The information shall remain confidential and not subject to public inspection and copying under the Public Records Act until the conclusion of the transaction unless the Commissioner, in his or her discretion, determines that confidential treatment will interfere with enforcement of this section. If the statement referred to in subdivision (1) of this subsection is otherwise filed, this subdivision shall not apply. (3) With respect to a transaction subject to this section, the acquiring person must also file a preacquisition notification with the Commissioner, which shall contain the information set forth in subdivision 3683a(c)(1). A failure to file the notification may be subject to penalties specified in subsection 3683a(e) of this chapter. (4) For purposes of this section, a domestic insurer shall include any person controlling a domestic insurer unless the person, as determined by the Commissioner, is either directly or through its affiliates primarily engaged in business other than the business of insurance. For the purposes of this section, “person” shall not include any securities broker holding, in the usual and customary broker’s function, less than 20 percent of the voting securities of an insurance company or of any person that controls an insurance company. (b) Content of statement. The statement to be filed with the Commissioner hereunder shall be made under oath or affirmation and shall contain the following information: (1) The name and address of each person by whom or on whose behalf the merger or other acquisition of control referred to in subsection (a) of this section is to be effected (hereinafter called “acquiring party”), and: (A) If such person is an individual, his or her principal occupation and all offices and positions held during the past five years, and any conviction of crimes other than minor traffic violations during the past 10 years. (B) If such person is not an individual, a report of the nature of its business operations during the past five years or for such lesser period as such person and any predecessors thereof shall have been in existence; an informative description of the business intended to be done by such person and such person’s subsidiaries; and a list of all individuals who are or who have been selected to become directors or executive officers of such person, or who perform or will perform functions appropriate to such positions. Such list shall include for each such individual the information required by subdivision (A) of this subdivision (1). (C) Whether such person is a depository institution or an affiliate of a depository institution. (2) The source, nature, and amount of the consideration used or to be used in effecting the merger or other acquisition of control, a description of any transaction wherein funds were or are to be obtained for any such purpose, and the identity of persons furnishing such consideration; provided, however, that where a source of such consideration is a loan made in the lender’s ordinary course of business, the identity of the lender shall remain confidential, if the person filing such statement so requests. (3) Fully audited financial information as to the earnings and financial condition of each acquiring party for the preceding five fiscal years of each such acquiring party (or for such lesser period as such acquiring party and any predecessors thereof shall have been in existence), and similar unaudited information as of a date not earlier than 90 days prior to the filing of the statement. (4) Any plans or proposals that each acquiring party may have to liquidate such insurer, to sell its assets or merge or consolidate it with any person, or to make any other material change in its business or corporate structure or management. (5) The number of shares of any security referred to in subsection (a) of this section that each acquiring party proposes to acquire, and the terms of the offer, request, invitation, agreement, or acquisition referred to in subsection (a) of this section, and a statement as to the method by which the fairness of the proposal was arrived at. (6) The amount of each class of any security referred to in subsection (a) of this section that is beneficially owned or concerning which there is a right to acquire beneficial ownership by each acquiring party. (7) A full description of any contracts, arrangements, or understandings with respect to any security referred to in subsection (a) of this section in which any acquiring party is involved, including transfer of any of the securities, joint ventures, loan or option arrangements, puts or calls, guarantees of loans, guarantees against loss or guarantees of profits, division of losses or profits, or the giving or withholding of proxies. Such description shall identify the persons with whom such contracts, arrangements, or understandings have been entered into. (8) A description of the purchase of any security referred to in subsection (a) of this section during the 12 calendar months preceding the filing of the statement, by any acquiring party, including the dates of purchase, names of the purchasers, and consideration paid or agreed to be paid therefor. (9) A description of any recommendations to purchase any security referred to in subsection (a) of this section made during the 12 calendar months preceding the filing of the statement, by any acquiring party, or by anyone based upon interviews or at the suggestion of such acquiring party. (10) Copies of all tender offers for, requests or invitations for tenders of, exchange offers for, and agreements to acquire or exchange any securities referred to in subsection (a) of this section, and (if distributed) of additional soliciting material relating thereto. (11) The terms of any agreement, contract, or understanding made with any broker-dealer as to solicitation of securities referred to in subsection (a) of this section for tender, and the amount of any fees, commissions, or other compensation to be paid to broker-dealers with regard thereto. (12) An agreement by the person required to file the statement referred to in subsection (a) of this section that it will provide the annual report specified in subsection 3684(m) of this chapter, for so long as control exists. (13) An acknowledgment by the person required to file the statement referred to in subsection (a) of this section that the person and all subsidiaries within its control in the insurance holding company system will provide information to the Commissioner upon request as necessary to evaluate enterprise risk to the insurer. (14) Such additional information as the Commissioner may by rule prescribe as necessary or appropriate for the protection of policyholders and security holders of the insurer or in the public interest. (c) Filing by certain entities. If the person required to file the statement referred to in subsection (a) of this section is a partnership, limited partnership, syndicate, or other group, the Commissioner may require that the information called for by subdivisions (b)(1) through (12) of this section shall be given with respect to each partner of such partnership or limited partnership, each member of such syndicate or group, and each person who controls such partner or member. If any such partner, member, or person is a corporation or the person required to file the statement referred to in subsection (a) of this section is a corporation, the Commissioner may require that the information called for by subdivisions (b)(1) through (14) of this section shall be given with respect to such corporation, each officer and director of such corporation, and each person who is directly or indirectly the beneficial owner of more than 10 percent of the outstanding voting securities of such corporation. (d) Material change to filing. If any material change occurs in the facts set forth in the statement filed with the Commissioner and sent to such insurer pursuant to this section, an amendment setting forth such change, together with copies of all documents and other material relevant to such change, shall be filed with the Commissioner and sent to such insurer within two business days after the person learns of such change. Such insurer shall send such amendment to its shareholders. (e) Alternative filing materials. If any offer, request, invitation, agreement, or acquisition referred to in subsection (a) of this section is proposed to be made by means of a registration statement under the Securities Act of 1933 or in circumstances requiring the disclosure of similar information under the Securities Exchange Act of 1934, or under a state law requiring similar registration or disclosure, the person required to file the statement referred to in subsection (a) may utilize such documents in furnishing the information called for by that statement. (f) Approval by Commissioner; hearings. (1) The Commissioner shall hold a public hearing on any merger or other acquisition of control referred to in subsection (a) of this section if the Commissioner determines that the statement filed as required by this section does not demonstrate compliance with the standards referred to in subsection (b) of this section or if the Commissioner determines that such acquisition of control is likely to be hazardous or prejudicial to the insurance buying public, or at the request of the acquiring party. Holding a public hearing is otherwise optional at the discretion of the Commissioner. In the event the Commissioner determines that a public hearing is not required, the Commissioner shall require that notice of the transaction be published on the website maintained by the Department of Financial Regulation and in two daily newspapers of general jurisdiction in Vermont, as determined by the Commissioner. The notice shall describe the proposed transaction and state that members of the public and interested parties may file written comments on the proposed transaction with the Commissioner. The Commissioner shall consider all written comments received within 14 days after initial publication of the notice and may subsequently hold a public hearing in response to any comments received. The Commissioner shall approve any merger or other acquisition of control referred to in subsection (a) of this section unless he or she finds that: (A) after the change of control the domestic insurer referred to in subsection (a) of this section would not be able to satisfy the requirements for the issuance of a license to write the line or lines of insurance for which it is presently licensed; (B) the effect of the merger or other acquisition of control would be substantially to lessen competition in insurance in this State or tend to create a monopoly. In applying the competitive standard in this subdivision: (i) the informational requirements of subdivision 3683a(c)(1) and the standards of subdivision 3683a(d)(2) of this chapter shall apply; (ii) the merger or other acquisition shall not be disapproved if the Commissioner finds that any of the situations meeting the criteria provided by subdivision 3683a(d)(3) of this chapter exist; and (iii) the Commissioner may condition the approval of the merger or other acquisition on the removal of the basis of disapproval within a specified period of time; (C) the financial condition of any acquiring party is such as might jeopardize the financial stability of the insurer, or prejudice the interest of its policyholders; (D) the terms of the offer, request, invitation, agreement, or acquisition referred to in subsection (a) of this section are unfair and unreasonable to the security holders of the insurer; (E) the plans or proposals that the acquiring party has to liquidate the insurer, sell its assets or consolidate or merge it with any person, or to make any other material change in its business or corporate structure or management are unfair and unreasonable to policyholders of the insurer and not in the public interest; (F) the competence, experience, and integrity of those persons who would control the operation of the insurer are such that it would not be in the interest of policyholders of the insurer and of the public to permit the merger or other acquisition of control; or (G) the acquisition is likely to be hazardous or prejudicial to the insurance-buying public. (2) The public hearing referred to in subdivision (1) of this subsection (f), if required, shall be held within 60 days after the statement required by subsection (a) of this section is filed, and at least 20 days’ notice thereof shall be given by the Commissioner to the person filing the statement. Not less than seven days’ notice of such public hearing shall be given by the person filing the statement to the insurer and to such other persons as may be designated by the Commissioner. The insurer shall give such notice to its security holders. The Commissioner shall make a determination within 30 days after the conclusion of such hearing or, if a public hearing is not required, within 30 days after the comment period deadline; provided, however, that, if the insurer is or will be an affiliate of a depository institution or any affiliate thereof, the Commissioner shall issue a determination within the 60-day period preceding the effective date of the acquisition or change or continuation of control of an insurer. At such hearing, the person filing the statement, the insurer, any person to whom notice of hearing was sent, and any other person whose interests may be affected thereby shall have the right to present evidence, examine, and cross-examine witnesses and offer oral and written arguments and in connection therewith shall be entitled to conduct discovery proceedings in the same manner as is presently allowed in the Superior Court of this State. All discovery proceedings shall be concluded not later than three days prior to the commencement of the public hearing. (3) If the proposed acquisition of control will require the approval of more than one commissioner, the public hearing may be held on a consolidated basis upon request of the person filing the statement referred to in subsection (a) of this section. Such person shall file the statement referred to in subsection (a) of this section with the NAIC within five days of making the request for a public hearing. A commissioner may opt out of a consolidated hearing and shall provide notice to the applicant of the opt-out within 10 days of the receipt of the statement referred to in subsection (a) of this section. A hearing conducted on a consolidated basis shall be public and shall be held within the United States before the commissioners of the states in which the insurers are domiciled. Such commissioners shall hear and receive evidence. A commissioner may attend such hearing in person or by telecommunication. (4) In connection with a change of control of a domestic insurer, any determination by the Commissioner that the person acquiring control of the insurer shall be required to maintain or restore the capital of the insurer to the level required by the laws and rules of this State shall be made not later than 60 days after the date of notification of the change in control submitted pursuant to subdivision (a)(1) of this section. (5) The Commissioner may retain at the acquiring person’s expense any attorneys, actuaries, accountants, and other experts not otherwise a part of the Commissioner’s staff as may be reasonably necessary to assist the Commissioner in reviewing the proposed acquisition of control. (g) Mailings to shareholders; payment of expenses. All statements, amendments, or other material filed pursuant to subsection (a) or (b) of this section, and all notices of public hearings held pursuant to subsection (d) of this section, shall be mailed by the insurer to its shareholders within five business days after the insurer has received such statements, amendments, other material, or notices. The expenses of mailing shall be borne by the person making the filing. As security for the payment of such expenses, such person shall file with the Commissioner an acceptable bond or other deposit in an amount to be determined by the Commissioner. (h) Exemptions. The provisions of this section shall not apply to: (1) [Repealed.] (2) Any transaction that is subject to the provisions of subchapter 3 of this chapter dealing with the merger or consolidation of two or more insurers. (3) Any offer, request, invitation, agreement, or acquisition that the Commissioner by order shall exempt therefrom as: (A) not having been made or entered into for the purpose and not having the effect of changing or influencing the control of a domestic insurer; or (B) as otherwise not comprehended within the purposes of this section. (4) The formation of a mutual holding company and reorganization of a mutual insurance company pursuant to section 3441 of this title or a merger pursuant to section 3442 of this title. (i) Violations. The following shall be violations of this section: (1) the failure to file any statement, amendment, or other material required to be filed pursuant to subsection (a) or (b) of this section; or (2) the effectuation or any attempt to effectuate an acquisition of control of, or merger with, a domestic insurer unless the Commissioner has given his or her approval thereto. (j) Jurisdiction; consent to service of process. The courts of this State are hereby vested with jurisdiction over every person not resident, domiciled, or authorized to do business in this State who files a statement with the Commissioner under this section, and over all actions involving such person arising out of violations of this section, and each such person shall be deemed to have performed acts equivalent to and constituting an appointment of the Commissioner by such a person to be his or her true and lawful attorney upon whom may be served all lawful process in any action, suit, or proceeding arising out of violations of this section. Copies of all such lawful process shall be served on the Commissioner and transmitted by registered or certified mail by the Commissioner to such person at his or her last known address. (k) Additional capital requirements. As a condition for approval under this section, the Commissioner may require the person that is acquiring control of an insurer domiciled in this State to maintain or restore capital in compliance with and under the time frame established under the provisions of 15 U.S.C. § 6701(c)(2)(B). Added 1971, No. 72, § 2; amended 1973, No. 193 (Adj. Sess.), § 3 eff. April 9, 1974; 1991, No. 101, § 12; 1991, No. 249 (Adj. Sess.), § 15; 1993, No. 12, § 9, eff. April 26, 1993; 1995, No. 167 (Adj. Sess.), § 29b; 2001, No. 71, §§ 8-10, eff. June 16, 2001; 2013, No. 29, § 28, eff. May 13, 2013; 2019, No. 103 (Adj. Sess.), § 19.

8 V.S.A. § 3683a Acquisitions involving insurers not otherwise covered

3683a. Acquisitions involving insurers not otherwise covered (a) Definitions. For the purposes of this section: (1) “Acquisition” means any agreement, arrangement, or activity the consummation of which results in a person acquiring directly or indirectly the control of another person and includes the acquisition of voting securities and assets, bulk reinsurance, and mergers. (2) “Highly concentrated market” is a market in which the share of the four largest insurers is 75 percent or more of the market. (3) “Insurer” means a company licensed to do business in this State and includes any company or group of companies under common management, ownership, or control. (4) “Involved insurer” includes an insurer that either acquires or is acquired, is affiliated with an acquirer or acquired, or is the result of a merger. (5) “Market” means the relevant product and geographical markets. In determining the relevant product and geographical markets, the Commissioner shall give due consideration to, among other things, the definitions or guidelines, if any, adopted by the NAIC and to information, if any, submitted by parties to the acquisition. In the absence of sufficient information to the contrary, the relevant product market is assumed to be the direct written insurance premium for a line of business, such line being that used in the annual statement required to be filed by insurers doing business in this State, and the relevant geographical market is assumed to be this State. (6) “Significant trend toward increased concentration” means the aggregate market share of any grouping of the largest insurers in the market, from the two largest to the eight largest, has increased by seven percent or more of the market over a period of time extending from any base year five to 10 years prior to the acquisition up to the time of the acquisition. (b) Covered acquisitions. Except as provided in this subsection, this section applies to any acquisition in which there is a change in control of an insurer licensed to do business in this State, but not domiciled in this State. This section shall not apply to the following: (1) A purchase of securities solely for investment purposes so long as the securities are not used by voting or otherwise to cause or attempt to cause the substantial lessening of competition in any insurance market in this State. If a purchase of securities results in a presumption of control under subdivision 3681(3) of this chapter, it is not solely for investment purposes unless the commissioner of the insurer’s state of domicile accepts a disclaimer of control or affirmatively finds that control does not exist and the disclaimer action or affirmative finding is communicated by the domiciliary commissioner to the Commissioner of this State. (2) The acquisition of a person by another person when both persons are neither directly nor through affiliates primarily engaged in the business of insurance, if preacquisition notification is filed with the Commissioner in accordance with subdivision (c)(1) of this section 30 days prior to the proposed effective date of the acquisition or if the acquisition would otherwise be excluded from this section by any other provision of this subsection. (3) The acquisition of already affiliated persons. (4) An acquisition if, as an immediate result of the acquisition: (A) in no market would the combined market share of the involved insurers exceed five percent of the total market; (B) there would be no increase in any market share; or (C) in no market would the combined market share of the involved insurers exceed 12 percent of the total market and the market share increase by more than two percent of the total market. For purposes of this subdivision, “market” means direct written insurance premium in this State for a line of business as contained in the annual statement required to be filed by insurers licensed to do business in this State. (5) An acquisition for which a preacquisition notification would be required under this section due solely to the resulting effect on the ocean marine insurance line of business. (6) An acquisition of an insurer whose domiciliary commissioner affirmatively finds that the insurer is in failing condition; there is a lack of feasible alternatives to improving such condition; the public benefits of improving the insurer’s condition through the acquisition exceed the public benefits that would arise from not lessening competition; and the findings are communicated by the domiciliary commissioner to the Commissioner of this State. (c) Preacquisition notification; waiting period. An insurer involved in an acquisition covered by subsection (b) of this section shall file a preacquisition notification with the Commissioner so that the Commissioner may determine whether the proposed acquisition, if consummated, would violate the competitive standard established under subsection (d) of this section. The Commissioner shall give confidential treatment to information submitted under this subsection in the same manner as provided in section 3687 of this chapter. (1) The preacquisition notification shall be in such form and contain such information as prescribed by the NAIC relating to those markets that cause the acquisition to be covered under provisions of this section. The Commissioner may require such additional material and information as deemed necessary to carry out the purposes of this section. The required information may include an opinion of an economist as to the competitive impact of the acquisition in this State accompanied by a summary of the education and experience of such person indicating his or her ability to render an informed opinion. (2) The waiting period required shall begin on the date the Commissioner receives a preacquisition notification and shall end on the earlier of the 30th day after the date of receipt or termination of the waiting period by the Commissioner. Prior to the end of the waiting period, the Commissioner on a one-time basis may require the submission of additional needed information relevant to the proposed acquisition, in which event the waiting period shall end on the earlier of the 30th day after the Commissioner receives the additional information or termination of the waiting period by the Commissioner. (d) Competitive standard. (1) The Commissioner may enter an order under subdivision (e)(1) of this section with respect to an acquisition if there is substantial evidence that the effect of the acquisition may be to lessen substantially competition in any line of insurance in this State or may tend to create a monopoly. (2) In determining whether a proposed acquisition would violate the competitive standard of subdivision (1) of this subsection, the Commissioner shall consider the following: (A) Any acquisition covered under subsection (b) of this section involving two insurers competing in the same market is prima facie evidence of violation of the competitive standard if: (i) The market is highly concentrated and the involved insurers possess the following shares of the market: (I) insurer A a share of four percent and insurer B a share of four percent or more; (II) insurer A a share of 10 percent and insurer B a share of two percent or more; or (III) insurer A a share of 15 percent and insurer B a share of one percent or more. (ii) The market is not highly concentrated and the involved insurers possess the following shares of the market: (I) insurer A a share of five percent and insurer B a share of five percent or more; (II) insurer A a share of 10 percent and insurer B a share of four percent or more; (III) insurer A a share of 15 percent and insurer B a share of three percent or more; or (IV) insurer A a share of 19 percent and insurer B a share of one percent or more. (B) If more than two insurers competing in the same market are involved in any acquisition covered under subsection (b) of this section, then exceeding the total of the two figures set forth for insurer A and insurer B established under subdivision (A)(i) or (ii) of this subdivision (2) is prima facie evidence of violation of the competitive standard. For purposes of this subdivision (2), the insurer with the largest share of the market shall be considered to be insurer A. (C) Any acquisition covered under subsection (b) of this section involving two or more insurers competing in the same market is prima facie evidence of violation of the competitive standard in subdivision (1) of this subsection if: (i) there is a significant trend toward increased concentration in the market; (ii) one of the insurers involved is one of the insurers in a grouping of large insurers showing the requisite increase in the market share; and (iii) another involved insurer’s market is two percent or more. (3) If an acquisition is not prima facie violative of the competitive standard under subdivisions (2)(A) through (C) of this subsection, the Commissioner may establish the requisite anticompetitive effect based upon other substantial evidence. If an acquisition is prima facie violative of the competitive standard under subdivisions (2)(A) through (C) of this subsection, a party may establish the absence of the requisite anticompetitive effect based upon other substantial evidence. Relevant factors in making a determination under this subdivision include the following: market shares, volatility of ranking of market leaders, number of competitors, concentration, trend of concentration in the industry, and ease of entry and exit into the market. (4) The burden of showing prima facie evidence of violation of the competitive standard rests upon the Commissioner. (5) Percentages not provided in subdivisions (2)(A) and (B) of this subsection are interpolated proportionately to the percentages that are provided. (6) An order may not be entered under subdivision (e)(1) of this section if: (A) the acquisition will yield substantial economies of scale or economies in resource utilization that cannot be feasibly achieved in any other way and the public benefits that would arise from such economies exceed the public benefits that would arise from not lessening competition; or (B) the acquisition will substantially increase the availability of insurance and the public benefits of the increase exceed the public benefits that would arise from not lessening competition. (e) Orders and penalties. (1) If an acquisition violates the competitive standard of subsection (d) of this section or if an involved insurer fails to file adequate information in compliance with subsection (c) of this section, the Commissioner may enter an order: (A) requiring an involved insurer to cease and desist from doing business in this State with respect to the line or lines of insurance involved in the violation; or (B) denying the application of an acquired or acquiring insurer for a license to do business in this State. (2) Such an order shall not be entered unless there is a hearing, notice of the hearing is issued prior to the end of the waiting period and not less than 15 days prior to the hearing, and the hearing is concluded and the order is issued no later than 60 days after the date of the filing of the preacquisition notification with the Commissioner. (3) Every order shall be accompanied by a written decision of the Commissioner setting forth findings of fact and conclusions of law. An order under this subdivision shall not apply if the acquisition is not consummated. (4) Any person who violates a cease and desist order of the Commissioner under subdivision (1) of this subsection and while the order is in effect may, after notice and hearing and upon order of the Commissioner, be subject to a monetary penalty of not more than $10,000.00 for every day of violation or suspension or revocation of the person’s license, in the discretion of the Commissioner. (5) Any insurer or other person who fails to make any filing required by this section and who also fails to demonstrate a good faith effort to comply with any filing requirement shall be subject to a fine of not more than $50,000.00. (f) Subsections 3689(b) and (c) of this title (regarding voting securities) and section 3691 of this title (regarding receivership) do not apply to acquisitions covered under subsection (b) of this section. Added 2013, No. 29, § 29, eff. May 13, 2013.

8 V.S.A. § 3684 Registration of insurers

3684. Registration of insurers (a) Registration. Every insurer authorized to do business in this State that is a member of an insurance holding company system shall register with the Commissioner, except a foreign insurer subject to registration requirements and standards adopted by statute or regulation in the jurisdiction of its domicile that are substantially similar to those contained in this section and section 3685 of this title. An insurer subject to registration under this section shall register 15 business days after it becomes subject to registration, and annually thereafter on or before March 15 for the previous year ending December 31, unless the Commissioner for good cause shown extends the time for registration, and then within such extended time. The Commissioner may require an authorized insurer that is a member of a holding company system that is not subject to registration under this section to furnish a copy of the registration statement or other information filed by such insurer with the insurance regulatory authority of its domiciliary jurisdiction. (b) Information and form required. Every insurer subject to registration under this section shall file a registration statement on a form provided by the Commissioner, which shall contain current information about: (1) The capital structure, general financial condition, ownership, and management of the insurer and any person controlling the insurer. (2) The identity and relationship of every member of the insurance holding company system. (3) The following agreements in force, relationships subsisting, and transactions currently outstanding between such insurer and its affiliates: (A) loans, other investments, or purchases, sales or exchanges of securities of the affiliates by the insurer or of the insurer by its affiliates; (B) purchases, sales, or exchanges of assets; (C) transactions not in the ordinary course of business; (D) guarantees or undertakings for the benefit of an affiliate that result in an actual contingent exposure of the insurer’s assets to liability, other than insurance contracts entered into in the ordinary course of the insurer’s business; (E) all management and service contracts and all cost sharing arrangements; (F) all reinsurance agreements; (G) dividends and other distributions to shareholders; and (H) consolidated tax allocation agreements. (4) Any pledge of the insurer’s stock, including stock of any subsidiary or controlling affiliate, for a loan made to any member of the insurance holding company system. (5) If requested by the Commissioner, financial statements of or within an insurance holding company system, including all affiliates. Financial statements may include annual audited financial statements filed with the U.S. Securities and Exchange Commission (SEC) pursuant to the Securities Act of 1933, as may be amended, or the Securities Exchange Act of 1934, as may be amended. An insurer required to file financial statements under this subdivision may satisfy the request by providing the Commissioner with the most recently filed parent corporation financial statements that have been filed with the SEC. (6) Other matters concerning transactions between registered insurers and any affiliates as may be included from time to time in any registration forms adopted or approved by the Commissioner. (7) Statements that the insurer’s board of directors oversees corporate governance and internal controls and that the insurer’s officers or senior management have approved, implemented, and continue to maintain and monitor corporate governance and internal control procedures. (8) Any other information required by the Commissioner by rule. (c) Summary of changes to registration statement. All registration statements shall contain a summary outlining all items in the current registration statement representing changes from the prior registration statement. (d) Materiality. No information need be disclosed on the registration statement filed pursuant to subsection (b) of this section if such information is not material for the purposes of this section. Unless the Commissioner by rule or order provides otherwise, sales, purchases, exchanges, loans or extensions of credit, or investments involving one-half of one percent or less of an insurer’s admitted assets as of the 31st day of December next preceding shall not be deemed material for purposes of this section. The definition of materiality provided in this subsection shall not apply for purposes of the group capital calculation or the liquidity stress test framework. (e) Reporting of dividends to shareholders. Subject to subsection 3685(d) of this chapter, each registered insurer shall report to the Commissioner all dividends and other distributions to shareholders within 15 business days following the declaration thereof. (f) Information of insurers. Any person within an insurance holding company system subject to registration shall be required to provide complete and accurate information to an insurer where the information is reasonably necessary to enable the insurer to comply with the provisions of this section. (g) Amendments to registration statements. Each registered insurer shall keep current the information required to be disclosed in its registration statement by reporting all material changes or additions on amendment forms provided by the Commissioner within 15 business days after the end of the month in which it learns of each such change or addition; provided, however, that subject to subsection 3685(c) of this chapter, each registered insurer shall so report all dividends and other distributions to shareholders within two business days following the declaration thereto. (h) Termination of registration. The Commissioner shall terminate the registration of any insurer that demonstrates that it no longer is a member of an insurance holding company system. (i) Consolidated filing. The Commissioner may require or allow two or more affiliated insurers subject to registration under this section to file a consolidated registration statement or consolidated reports amending their consolidated registration statement or their individual registration statements. (j) Alternative registration. The Commissioner may allow an insurer that is authorized to do business in this State and that is part of an insurance holding company system to register on behalf of any affiliated insurer that is required to register under subsection (a) of this section and to file all information and material required to be filed under this section. (k) Exemptions. The provisions of this section shall not apply to any insurer, information, or transaction if and to the extent that the Commissioner by rule or order shall exempt the same from the provisions of this section. (l) Disclaimer. Any person may file with the Commissioner a disclaimer of affiliation with any authorized insurer, or such a disclaimer may be filed by such insurer or any member of an insurance holding company system. The disclaimer shall fully disclose all material relationships and bases for affiliation between such person and such insurer as well as the basis for disclaiming such affiliation. After a disclaimer has been filed, the insurer shall be relieved of any duty to register or report under this section that may arise out of the insurer’s relationship with such person unless and until the Commissioner disallows such a disclaimer. The Commissioner shall disallow such a disclaimer only after furnishing all parties in interest with notice and opportunity to be heard and after making specific findings of fact to support such disallowance. (m) Enterprise risk filings. (1) Enterprise risk report. The ultimate controlling person of every insurer subject to registration shall also file an annual enterprise risk report. The report shall identify, to the best of the ultimate controlling person’s knowledge and belief, the material risks within the insurance holding company system that could pose enterprise risk to the insurer. The report shall be filed with the lead state commissioner of the insurance holding company system as determined by the procedures within the Financial Analysis Handbook adopted by the NAIC. (2) Group capital calculation. Except as further provided in this subdivision, the ultimate controlling person of every insurer subject to registration shall concurrently file with the registration an annual group capital calculation as directed by the lead state commissioner. The report shall be completed in accordance with the NAIC group capital calculation instructions, which may permit the lead state commissioner to allow a controlling person that is not the ultimate controlling person to file the group capital calculation. The report shall be filed with the lead state commissioner of the insurance holding company system as determined by the Commissioner in accordance with the procedures within the Financial Analysis Handbook adopted by the NAIC. The following insurance holding company systems are exempt from filing the group capital calculation: (A) An insurance holding company system that has only one insurer within its holding company structure, only writes business and is only licensed in its domestic state, and assumes no business from any other insurer. (B) An insurance holding company system that is required to perform a group capital calculation specified by the U.S. Federal Reserve Board. The lead state commissioner shall request the calculation from the Federal Reserve Board under the terms of information sharing agreements in effect. If the Federal Reserve Board cannot share the calculation with the lead state commissioner, the insurance holding company system is not exempt from the group capital calculation filing. (C) An insurance holding company system whose non-U.S. groupwide supervisor is located within a reciprocal jurisdiction as described in subdivision 3634a(b)(6)(A) of this chapter that recognizes the U.S. state regulatory approach to group supervision and group capital. (D) An insurance holding company system: (i) that provides information to the lead state that meets the requirements for accreditation under the NAIC financial standards and accreditation program, either directly or indirectly through the groupwide supervisor, who has determined such information is satisfactory to allow the lead state to comply with the NAIC group supervision approach, as detailed in the NAIC Financial Analysis Handbook; and (ii) whose non-U.S. groupwide supervisor that is not in a reciprocal jurisdiction recognizes and accepts, as specified in a rule adopted by the Commissioner, the group capital calculation as the worldwide group capital assessment for U.S. insurance groups who operate in that jurisdiction. (E) Notwithstanding the provisions of subdivisions (C) and (D) of this subdivision (m)(2), a lead state commissioner shall require the group capital calculation for U.S. operations of any non-U.S. based insurance holding company system where, after any necessary consultation with other supervisors or officials, it is deemed appropriate by the lead state commissioner for prudential oversight and solvency monitoring purposes or for ensuring the competitiveness of the insurance marketplace. (F) Notwithstanding the exemptions from filing the group capital calculation stated in subdivisions (A)–(D) of this subdivision (m)(2), the lead state commissioner has the discretion to exempt the ultimate controlling person from filing the annual group capital calculation or to accept a limited group capital filing or report in accordance with criteria as specified in a rule adopted by the Commissioner. (G) If the lead state commissioner determines that an insurance holding company system no longer meets one or more of the requirements for an exemption from filing the group capital calculation under this subdivision (m)(2), the insurance holding company system shall file the group capital calculation at the next annual filing date unless given an extension by the lead state commissioner based on reasonable grounds shown. (3) Liquidity stress test. (A) The ultimate controlling person of every insurer subject to registration and also scoped into the NAIC liquidity stress test framework shall file the results of a specific year’s liquidity stress test. The filing shall be made to the lead state insurance commissioner of the insurance holding company system as determined by the procedures within the Financial Analysis Handbook adopted by the NAIC. (B) The NAIC liquidity stress test framework includes scope criteria applicable to a specific data year. These scope criteria are reviewed at least annually by the Financial Stability Task Force or its successor. Any change to the NAIC liquidity stress test framework or to the data year for which the scope criteria are to be measured shall be effective on January 1 of the year following the calendar year when such changes are adopted. Insurers meeting at least one threshold of the scope criteria are considered scoped into the NAIC liquidity stress test framework for the specified data year unless the lead state insurance commissioner, in consultation with the NAIC Financial Stability Task Force or its successor, determines the insurer should not be scoped into the framework for that data year. Similarly, insurers that do not trigger at least one threshold of the scope criteria are considered scoped out of the NAIC liquidity stress test framework for the specified data year, unless the lead state insurance commissioner, in consultation with the NAIC Financial Stability Task Force or its successor, determines the insurer should be scoped into the framework for that data year. (C) Regulators shall avoid having insurers scoped in and out of the NAIC liquidity stress test framework on a frequent basis. The lead state insurance commissioner, in consultation with the Financial Stability Task Force or its successor, will assess this concern as part of the determination for an insurer. (D) The performance of, and filing of the results from, a specific year’s liquidity stress test shall comply with the NAIC liquidity stress test framework’s instructions and reporting templates for that year and any lead state insurance commissioner determinations, in conjunction with the Financial Stability Task Force or its successor, provided within the Framework. (n) Violations. The failure to file a registration statement or any amendment to a registration statement required by this section within the time specified for such filing shall be a violation of this section. Added 1971, No. 72, § 2; amended 1991, No. 101, § 13; 1993, No. 235 (Adj. Sess.), §§ 2, 3, eff. June 21, 1994; 2013, No. 29, § 30, eff. May 13, 2013; 2023, No. 110 (Adj. Sess.), § 25, eff. July 1, 2024.

8 V.S.A. § 3685 Standards and management of an insurer within an insurance holding company system

3685. Standards and management of an insurer within an insurance holding company system (a) Transactions within an insurance holding company system. (1) Transactions within an insurance holding company system to which an insurer subject to registration is a party shall be subject to the following standards: (A) The terms shall be fair and reasonable. (B) Agreements for cost-sharing services and management shall include such provisions as required by rule adopted by the Commissioner. (C) Charges or fees for services performed shall be reasonable. (D) Expenses incurred and payment received shall be allocated to the insurer in conformity with customary insurance accounting practices consistently applied. (E) The books, accounts, and records of each party to all such transactions shall be maintained so as to clearly and accurately disclose the precise nature and details of the transactions, including such accounting information as is necessary to support the reasonableness of the charges or fees to the respective parties. (F) The insurer’s surplus as regards policyholders following any dividends or distributions to shareholder affiliates shall be reasonable in relation to the insurer’s outstanding liabilities and adequate to its financial needs. (G) If an insurer subject to this subchapter is deemed by the Commissioner to be in a hazardous financial condition as defined by Regulation I-1993-02, Defining Standards and Commissioner’s Authority for Companies Deemed to be in Hazardous Financial Condition, or a condition that would be grounds for supervision, conservation, or a delinquency proceeding, then the Commissioner may require the insurer to secure and maintain either a deposit, held by the Commissioner, or a bond, as determined by the insurer at the insurer’s discretion, for the protection of the insurer for the duration of a contract or agreement, or the existence of the condition for which the Commissioner required the deposit or the bond. In determining whether a deposit or a bond is required, the Commissioner shall consider whether concerns exist with respect to the affiliated person’s ability to fulfill a contract or agreement if the insurer were to be put into liquidation. Once the insurer is deemed to be in a hazardous financial condition or a condition that would be grounds for supervision, conservation, or a delinquency proceeding, and a deposit or bond is necessary, the Commissioner has discretion to determine the amount of the deposit or bond, not to exceed the value of a contract or agreement in any one year, and whether such deposit or bond should be required for a single contract or agreement, multiple contracts or agreements, or a contract or agreement only with a specific person or persons. (H) All records and data of the insurer held by an affiliate are and remain the property of the insurer, are subject to control of the insurer, are identifiable, and are segregated or readily capable of segregation, at no additional cost to the insurer, from all other persons’ records and data. This includes all records and data that are otherwise the property of the insurer, in whatever form maintained, including claims and claim files, policyholder lists, application files, litigation files, premium records, rate books, underwriting manuals, personnel records, financial records, or similar records within the possession, custody, or control of the affiliate. At the request of the insurer, the affiliate shall provide that the receiver can obtain a complete set of all records of any type that pertain to the insurer’s business; obtain access to the operating systems on which the data is maintained; obtain the software that runs those systems either through assumption of licensing agreements or otherwise; and restrict the use of the data by the affiliate if it is not operating the insurer’s business. The affiliate shall provide a waiver of any landlord lien or other encumbrance to give the insurer access to all records and data in the event of the affiliate’s default under a lease or other agreement. (I) Premiums or other funds belonging to the insurer that are collected by or held by an affiliate are the exclusive property of the insurer and are subject to the control of the insurer. Any right of offset in the event an insurer is placed into receivership shall be subject to chapter 145 of this title. (2) The following transactions involving a domestic insurer and any person in its holding company system, including amendments or modifications of affiliate agreements previously filed under this section, that are subject to any materiality standards contained in subdivisions (A)–(G) of this subdivision, shall not be entered into unless the insurer has notified the Commissioner in writing of its intention to enter into such transaction at least 30 days prior to the transaction, or such shorter period as the Commissioner may permit, and the Commissioner has not disapproved it within such period. The notice for amendments or modifications shall include the reasons for the change and the financial impact on the domestic insurer. Within 30 days following a termination of a previously filed agreement, informal notice shall be reported to the Commissioner for determination of the type of filing required, if any. Nothing in this subdivision shall be deemed to authorize or permit any transactions that, in the case of an insurer not a member of the same holding company system, would otherwise be contrary to law. (A) Sales, purchases, exchanges, loans, or extensions of credit or investments, provided such transactions are equal to or exceed: (i) with respect to nonlife insurers, the lesser of three percent of the insurer’s admitted assets or 25 percent of surplus as regards policyholders as of the 31st day of December next preceding; or (ii) with respect to life insurers, three percent of the insurer’s admitted assets; each as of the 31st day of December next preceding. (B) Loans or extensions of credit to any person who is not an affiliate, where the insurer makes such loans or extensions of credit with the agreement or understanding that the proceeds of such transactions, in whole or in substantial part, are to be used to make loans or extensions of credit to purchase assets of or to make investments in any affiliate of the insurer making such loans or extensions of credit, provided such transactions are equal to or exceed: (i) with respect to nonlife insurers, the lesser of three percent of the insurer’s admitted assets or 25 percent of surplus as regards policyholders as of the 31st day of December next preceding; or (ii) with respect to life insurers, three percent of the insurer’s admitted assets; each as of the 31st day of December next preceding. (C) Reinsurance agreements or modifications of reinsurance agreements, including: (i) all reinsurance pooling agreements; and (ii) agreements in which the reinsurance premium or a change in the insurer’s liabilities or the projected reinsurance premium or a change in the insurer’s liabilities in any of the next three years equals or exceeds five percent of the insurer’s surplus as regards policyholders, as of the 31st day of December next preceding, including those agreements that may require as consideration the transfer of assets from an insurer to a nonaffiliate, if an agreement or understanding exists between the insurer and nonaffiliate that any portion of such assets will be transferred to one or more affiliates of the insurer. (D) All management agreements, service contracts, tax allocation agreements, guarantees, and all cost-sharing arrangements. (E) Guarantees when made by a domestic insurer; provided, however, that a guarantee that is quantifiable as to amount is not subject to the notice requirements of this subdivision (2) unless it exceeds the lesser of one-half of one percent of the insurer’s admitted assets or 10 percent of surplus as regards policyholders as of the 31st day of December next preceding. All guarantees that are not quantifiable as to amount are subject to the notice requirements of this subdivision. (F) Direct or indirect acquisitions or investments in a person that controls the insurer or in an affiliate of the insurer in an amount that together with its present holdings in such investments exceeds two and one-half percent of the insurer’s surplus to policyholders. Direct or indirect acquisitions or investments in subsidiaries acquired pursuant to section 3682 of this subchapter or authorized under any other Vermont insurance law or in nonsubsidiary insurance affiliates that are subject to the provisions of this subchapter, are exempt from the notice requirement of this subdivision (2). (G) Any material transactions, as specified in a rule adopted by the Commissioner, that the Commissioner determines may adversely affect the interests of the insurer’s policyholders. (H) Nothing in this subdivision (2) shall be deemed to authorize or permit any transaction that, in the case of an insurer not a member of the same insurance holding company system, would otherwise be contrary to law. (3) A domestic insurer shall not enter into transactions that are part of a plan or series of like transactions with persons within the insurance holding company system if the purpose of those separate transactions is to avoid the statutory threshold amount and thus avoid the review that would otherwise occur. If the Commissioner determines that such separate transactions were entered into over any 12-month period for such purpose, the Commissioner may exercise the Commissioner’s authority under this title. (4) The Commissioner, in reviewing transactions pursuant to subsection (b) of this section, shall consider whether the transactions comply with the standards established in this subsection (a) and whether they may adversely affect the interests of policyholders. (5) The Commissioner shall be notified within 30 days following any investment of the domestic insurer in any one corporation if the total investment in such corporation by the insurance holding company system exceeds 10 percent of such corporation’s voting securities. (6)(A) Any affiliate that is party to an agreement or contract with a domestic insurer that is subject to subdivision (2)(D) of this subsection (a) shall be subject to the jurisdiction of any supervision, seizure, conservatorship, or receivership proceedings against the insurer and to the authority of any supervisor, conservator, rehabilitator, or liquidator for the insurer appointed pursuant to chapter 145 of this title for the purpose of interpreting, enforcing, and overseeing the affiliate’s obligations under the agreement or contract to perform services for the insurer that: (i) are an integral part of the insurer’s operations, including management, administrative, accounting, data processing, marketing, underwriting, claims handling, investment, or any other similar functions; or (ii) are essential to the insurer’s ability to fulfill its obligations under insurance policies. (B) The Commissioner may require that an agreement or contract for the provision of services described in subdivisions (2)(A)(i) and (ii) of this subsection specify that the affiliate consents to the jurisdiction as set forth in this subdivision (a)(6). (b) Adequacy of surplus. For purposes of this subchapter, in determining whether an insurer’s surplus as regards policyholders is reasonable in relation to the insurer’s outstanding liabilities and adequate to its financial needs, the following factors, among others, shall be considered: (1) The size of the insurer as measured by its assets, capital and surplus, reserves, premium writings, insurance in force, and other appropriate criteria. (2) The extent to which the insurer’s business is diversified among the several lines of insurance. (3) The number and size of risks insured in each line of business. (4) The extent of the geographical dispersion of the insurer’s insured risks. (5) The nature and extent of the insurer’s reinsurance program. (6) The quality, diversification, and liquidity of the insurer’s investment portfolio. (7) The recent past and projected future trend in the size of the insurer’s surplus as regards policyholders. (8) The surplus as regards policyholders maintained by other comparable insurers. (9) The adequacy of the insurer’s reserves. (10) The quality and liquidity of investments in affiliates. The Commissioner may treat any such investment as a disallowed asset for purposes of determining the adequacy of surplus as regards policyholders whenever in the Commissioner’s judgment such investment so warrants. (c) Dividends and other distributions. (1) A domestic insurer shall not pay any extraordinary dividend or make any other extraordinary distribution to its shareholders until: (A) 30 days after the Commissioner has received notice of the declaration of the dividend or distribution and has not within such period disapproved such payment; or (B) the Commissioner shall have approved such payment within such 30-day period. (2) For purposes of this subsection, an extraordinary dividend or distribution includes any dividend or distribution of cash or other property whose fair market value together with that of other dividends or distributions made within the preceding 12 months exceeds the lesser of: (A) 10 percent of such insurer’s surplus as regards policyholders as of the 31st day of December next preceding; or (B) the net gains from operations of such insurer, if such insurer is a life insurer, or the net income, if such insurer is not a life insurer, not including realized capital gains, for the 12-month period ending the 31st day of December next preceding, but shall not include pro rata distributions of any class of the insurer’s own securities. (3) In determining whether a dividend or distribution is extraordinary, an insurer other than a life insurer may carry forward net income from the previous two calendar years that has not already been paid out as dividends. This carry-forward shall be computed by taking the net income from the second and third preceding calendar years, not including realized capital gains, less dividends paid in the second and immediate preceding calendar years. In determining whether a dividend or distribution is extraordinary, a life insurer may exclude dividends or distributions paid only from unassigned surplus that do not exceed the greater of subdivision (2)(A) or (B) of this subsection, provided that a life insurer relying on this provision shall notify the Commissioner of such dividend or distribution within five business days following declaration and at least 10 days, commencing from the date of receipt by the Commissioner, prior to the payment thereof. (4) Notwithstanding any other provision of law to the contrary, an insurer may declare an extraordinary dividend or distribution that is conditional upon the Commissioner’s approval, and such a declaration shall not confer any rights upon shareholders until the Commissioner has: (A) approved the payment of such dividend or distribution; or (B) not disapproved such payment within the 30-day period referred to in subdivision (1) of this subsection (c). (d) Management of domestic insurers subject to registration. (1) Notwithstanding the control of a domestic insurer by any person, the officers and directors of the insurer shall not thereby be relieved of any obligation or liability to which they would otherwise be subject by law, and the insurer shall be managed so as to ensure its separate operating identity consistent with this section. (2) Nothing in this subsection shall preclude a domestic insurer from having or sharing a common management or cooperative or joint use of personnel, property, or services with one or more other persons under arrangements meeting the standards of subdivision (a)(1) of this section. (3) Not less than one-third of the directors of a domestic insurer and not less than one-third of the members of each committee of the board of directors of any domestic insurer shall be persons who are not officers or employees of the insurer or of any entity controlling, controlled by, or under common control with the insurer and who are not beneficial owners of a controlling interest in the voting stock of the insurer or entity. At least one such person shall be included in any quorum for the transaction of business at any meeting of the board of directors or any committee thereof. (4) The board of directors of a domestic insurer shall establish one or more committees composed solely of directors who are not officers or employees of the insurer or of any entity controlling, controlled by, or under common control with the insurer and who are not beneficial owners of a controlling interest in the voting stock of the insurer or any such entity. The committee or committees shall have responsibility for nominating candidates for director for election by shareholders or policyholders, evaluating the performance of officers deemed to be principal officers of the insurer, and recommending to the board of directors the selection and compensation of the principal officers. For purposes of this subsection, principal officers shall mean the chief executive officer, the president, and any chief operating officer. (5) The provisions of subdivisions (3) and (4) of this subsection shall not apply to a domestic insurer if the person controlling the insurer, such as an insurer, a mutual insurance holding company, or a publicly held corporation, has a board of directors and committees thereof that meet the requirements of subdivisions (3) and (4) of this subsection with respect to such controlling entity. (6) An insurer may make application to the Commissioner for a waiver from the requirements of this subsection if the insurer’s annual direct written and assumed premium, excluding premiums reinsured with the Federal Crop Insurance Corporation and Federal Flood Program, is less than $300,000,000.00. An insurer may also make application to the Commissioner for a waiver from the requirements of this subsection based upon unique circumstances. The Commissioner may consider various factors, including the type of business entity, volume of business written, availability of qualified board members, or the ownership or organizational structure of the entity. Added 1971, No. 72, § 2; amended 1991, No. 101, §§ 14-16; 1991, No. 249 (Adj. Sess.), § 16; 1993, No. 12, § 10, eff. April 26, 1993; 2013, No. 29, § 31, eff. May 13, 2013; 2015, No. 70 (Adj. Sess.), § 1, eff. April 8, 2016; 2021, No. 139 (Adj. Sess.), § 1, eff. May 27, 2022; 2023, No. 110 (Adj. Sess.), § 26, eff. July 1, 2024.

8 V.S.A. § 3686 Examination

3686. Examination (a) Power of Commissioner. Subject to the limitation contained in this section and in addition to the powers that the Commissioner has under subchapter 7 of this chapter relating to the examination of insurers, the Commissioner shall also have the power to examine any insurer registered under section 3684 of this chapter and its affiliates to ascertain the financial condition of the insurer, including the enterprise risk to the insurer by the ultimate controlling party or by any entity or combination of entities within the insurance holding company system or by the insurance holding company system on a consolidated basis. (b) Access to books and records. (1) The Commissioner may order any insurer registered under section 3684 of this chapter to produce such records, books, or papers in the possession of the insurer or its affiliates as are reasonably necessary to determine compliance with this chapter. (2) To determine compliance with this chapter, the Commissioner may order any insurer registered under section 3684 of this chapter to produce information not in the possession of the insurer if the insurer can obtain access to such information pursuant to contractual relationships, statutory obligations, or other method. In the event the insurer cannot obtain the information requested by the Commissioner, the insurer shall provide the Commissioner a detailed explanation of the reason that the insurer cannot obtain the information and the identity of the holder of information. Whenever it appears to the Commissioner that the detailed explanation is without merit, the Commissioner may require, after notice and hearing, the insurer to pay a penalty of up to $1,000.00 for each day’s delay or may suspend or revoke the insurer’s license. (c) Purpose and limitation of examination. The Commissioner shall exercise his or her power under subsections (a) and (b) of this section only if the examination of the insurer under subchapter 7 of this chapter is inadequate or the interests of the policyholders of such insurer may be adversely affected. (d) Use of consultants. The Commissioner may retain at the registered insurer’s expense such attorneys, actuaries, accountants, and other experts not otherwise a part of the Commissioner’s staff as shall be reasonably necessary to assist in the conduct of the examination under subsection (a) of this section. Any persons so retained shall be under the direction and control of the Commissioner and shall act in a purely advisory capacity. (e) Expenses. Each registered insurer producing for examination records, books, and papers pursuant to subsection (a) of this section shall be liable for and shall pay the expense of such examination in accordance with section 3563 of this title. (f) Compelling production. In the event the insurer fails to comply with an order, the Commissioner shall have the power to examine the affiliates to obtain the information. The Commissioner also shall have the power to issue subpoenas, to administer oaths, and to examine under oath any person for purposes of determining compliance with this section. Upon the failure or refusal of any person to obey a subpoena, the Commissioner may petition a court of competent jurisdiction, and upon proper showing, the court may enter an order compelling the witness to appear and testify or produce documentary evidence. Failure to obey the court order shall be punishable as contempt of court. Every person shall be obliged to attend as a witness at the place specified in the subpoena, when subpoenaed, anywhere within the State. He or she shall be entitled to the same fees and mileage, if claimed, as a witness in the Superior Court of this State, which fees, mileage, and actual expense, if any, necessarily incurred in securing the attendance of witnesses and their testimony shall be itemized and charged against and be paid by the company being examined. Added 1971, No. 72, § 2; amended 2013, No. 29, § 32, eff. May 13, 2013.

8 V.S.A. § 3687 Confidential treatment

3687. Confidential treatment (a) Documents, materials, or other information in the possession or control of the Department that are obtained by or disclosed to the Commissioner or any other person in the course of an examination or investigation made pursuant to section 3686 of this title and all information reported pursuant to subdivisions 3683(b)(12) and (13), section 3684, and section 3685 of this chapter are recognized by this State as being proprietary and to contain trade secrets and shall be given confidential treatment, shall not be subject to subpoena, shall not be subject to public inspection and copying under the Public Records Act, shall not be subject to discovery or admissible in evidence in any private civil action, and shall not be made public by the Commissioner or any other person. However, the Commissioner is authorized to use the documents, materials, or other information in the furtherance of any regulatory or legal action brought as a part of the Commissioner’s official duties. The Commissioner shall not otherwise make the documents, materials, or other information public without the prior written consent of the insurer to which it pertains unless the Commissioner, after giving the insurer and its affiliates who would be affected thereby notice and opportunity to be heard, determines that the interests of policyholders, shareholders, or the public will be served by the publication thereof, in which event the Commissioner may publish all or any part thereof in such manner as the Commissioner may deem appropriate. (1) For purposes of the information reported and provided to the Department pursuant to subdivision 3684(m)(2) of this chapter, the Commissioner shall maintain the confidentiality of the group capital calculation and group capital ratio produced within the calculation and any group capital information received from an insurance holding company supervised by the Federal Reserve Board or any U.S. groupwide supervisor. (2) For purposes of the information reported and provided to the Department pursuant to subdivision 3684(m)(3) of this chapter, the Commissioner shall maintain the confidentiality of the liquidity stress test results and supporting disclosures and any liquidity stress test information received from an insurance holding company supervised by the Federal Reserve Board and non-U.S. groupwide supervisors. (b) Neither the Commissioner nor any person who received documents, materials, or other information while acting under the authority of the Commissioner or with whom such documents, materials, or other information are shared pursuant to this chapter shall be permitted or required to testify in any private civil action concerning any confidential documents, materials, or information subject to subsection (a) of this section. (c) In order to assist in the performance of the Commissioner’s duties, the Commissioner: (1) May share documents, materials, or other information, including the confidential and privileged documents, materials, or information subject to subsection (a) of this section, including proprietary and trade secret documents and materials, with other state, federal, and international regulatory agencies, with the NAIC, with third-party consultants designated by the Commissioner, and with state, federal, and international law enforcement authorities, including members of any supervisory college described in section 3695 of this title, provided that the recipient agrees in writing to maintain the confidentiality and privileged status of the document, material, or other information and has verified in writing the legal authority to maintain confidentiality. (2) Notwithstanding subdivision (1) of this subsection, may only share confidential and privileged documents, material, or information reported pursuant to subdivision 3684(m)(1) of this chapter with commissioners of states having statutes or regulations substantially similar to subsection (a) of this section and who have agreed in writing not to disclose such information. (3) May receive documents, materials, or information, including otherwise confidential and privileged documents, materials, or information, including proprietary and trade-secret information, from the NAIC and its affiliates and subsidiaries and from regulatory and law enforcement officials of other foreign or domestic jurisdictions and shall maintain as confidential or privileged any document, material, or information received with notice or the understanding that it is confidential or privileged under the laws of the jurisdiction that is the source of the document, material, or information. (4) Shall enter into written agreements with the NAIC and any third-party consultant designated by the Commissioner governing sharing and use of information provided under this chapter consistent with this subsection that shall: (A) Specify procedures and protocols regarding the confidentiality and security of information shared with the NAIC or a third-party consultant designated by the Commissioner pursuant to this subchapter, including procedures and protocols for sharing by the NAIC with other state, federal, or international regulators. The agreement shall provide that the recipient agrees in writing to maintain the confidentiality and privileged status of the documents, materials, or other information and has verified in writing the legal authority to maintain such confidentiality. (B) Specify that ownership of information shared with the NAIC or a third-party consultant pursuant to this section remains with the Commissioner and the NAIC’s use of the information is subject to the direction of the Commissioner. (C) Excluding documents, materials, or information reported pursuant to subdivision 3684(m)(3) of this title, prohibit the NAIC or third-party consultant designated by the Commissioner from storing the information shared pursuant to this subchapter in a permanent database after the underlying analysis is completed. (D) Require prompt notice be given to an insurer whose confidential information in the possession of the NAIC or third-party consultant designated by the Commissioner under this subchapter is subject to a request or subpoena to the NAIC or a third-party consultant designated by the Commissioner for disclosure or production. (E) Require the NAIC or a third-party consultant designated by the Commissioner to consent to intervention by an insurer in any judicial or administrative action in which the NAIC or third-party consultant designated by the Commissioner may be required to disclose confidential information about the insurer shared with the NAIC or third-party consultant designated by the Commissioner pursuant to this section. (F) For documents, materials, or information report pursuant to subdivision 3684(b)(3) of this chapter, in the case of an agreement involving a third-party consultant, provide for notification of the identity of the consultant to the applicable insurers. (d) The sharing of information by the Commissioner pursuant to this section shall not constitute a delegation of regulatory authority or rulemaking, and the Commissioner is solely responsible for the administration, execution, and enforcement of the provisions of this section. (e) No waiver of any applicable privilege or claim of confidentiality in the documents, materials, or information shall occur as a result of disclosure to the Commissioner under this section or as a result of sharing as authorized in subsection (c) of this section. (f) Documents, materials, or other information in the possession or control of the NAIC or third-party consultant designated by the Commissioner pursuant to this subchapter shall be confidential by law and privileged, shall not be subject to public inspection and copying under the Public Records Act, shall not be subject to subpoena, shall not be subject to discovery or admissible in evidence in any private civil action, and shall not be made public by the Commissioner or any other person. (g) The group capital calculation and resulting group capital ratio required under subdivision 3684(m)(2) of this subchapter and the liquidity stress test along with its results and supporting disclosures required under subdivision 3684(m)(3) of this subchapter are regulatory tools for assessing group risks and capital adequacy and group liquidity risks, respectively, and are not intended as a means to rank insurers or insurance holding company systems, generally. Therefore, except as otherwise may be required under the provisions of this chapter, the making, publishing, disseminating, circulating or placing before the public, or causing directly or indirectly to be made, published, disseminated, circulated, or placed before the public in a newspaper, magazine, or other publication, or in the form of a notice, circular, pamphlet, letter, or poster, or over any radio or television station or any electronic means of communication available to the public, or in any other way as an advertisement, announcement, or statement containing a representation or statement with regard to the group capital calculation, group capital ratio, the liquidity stress test results, or supporting disclosures for the liquidity stress test of any insurer or any insurer group, or of any component derived in the calculation by any insurer, broker, or other person engaged in any manner in the insurance business would be misleading and is therefore prohibited. However, if any materially false statement with respect to the group capital calculation, resulting group capital ratio, an inappropriate comparison of any amount to an insurer’s or insurance group’s group capital calculation or resulting group capital ratio, liquidity stress test result, supporting disclosures for the liquidity stress test, or an inappropriate comparison of any amount to an insurer’s or insurance group’s liquidity stress test result or supporting disclosures is published in any written publication and the insurer is able to demonstrate to the Commissioner with substantial proof the falsity of such statement or the inappropriateness, as the case may be, then the insurer may publish announcements in a written publication if the sole purpose of the announcement is to rebut the materially false statement. Added 1971, No. 72, § 2; amended 2013, No. 29, § 33, eff. May 13, 2013; 2023, No. 110 (Adj. Sess.), § 27, eff. July 1, 2024.

8 V.S.A. § 3688 Rules and regulations

3688. Rules and regulations The Commissioner may, upon notice and opportunity for all interested persons to be heard, issue such rules, regulations, and orders as shall be necessary to carry out the provisions of this subchapter. Added 1971, No. 72, § 2.

8 V.S.A. § 3689 Injunctions; prohibitions against voting securities; sequestration of voting securities

3689. Injunctions; prohibitions against voting securities; sequestration of voting securities (a) Injunctions. Whenever it appears to the Commissioner that any insurer or any director, officer, employee, or agent thereof has committed or is about to commit a violation of this subchapter or of any rule, regulation, or order issued by the Commissioner hereunder, the Commissioner may apply to the Superior Court for the county in which the principal office of the insurer is located or if such insurer has no such office in this State then to the Superior Court for Washington County for an order enjoining such insurer or such director, officer, employee, or agent thereof from violating or continuing to violate this subchapter or any such rule, regulation, or order, and for such other equitable relief as the nature of the case and the interests of the insurer’s policyholders, creditors, and shareholders or the public may require. (b) Voting of securities, when prohibited. No security that is the subject of any agreement regarding acquisition, or that is acquired or to be acquired, in contravention of the provisions of this subchapter or of any rule, regulation, or order issued by the Commissioner hereunder may be voted at any shareholders’ meeting, or may be counted for quorum purposes, and any action of shareholders requiring the affirmative vote of a percentage of shares may be taken as though such securities were not issued and outstanding; but no action taken at any such meeting shall be invalidated by the voting of such securities, unless the action would materially affect control of the insurer or unless the courts of this State have so ordered. If an insurer or the Commissioner has reason to believe that any security of the insurer has been or is about to be acquired in contravention of the provisions of this subchapter or of any rule, regulation, or order issued by the Commissioner hereunder the insurer or the Commissioner may apply to the Superior Court for the county in which the insurer has its principal place of business or to the Superior Court for Washington County to enjoin any offer, request, invitation, agreement, or acquisition made in contravention of section 3685 of this title or any rule, regulation, or order issued by the Commissioner thereunder to enjoin the voting of any security so acquired, to void any vote of such security already cast at any meeting of shareholders, and for such other equitable relief as the nature of the case and the interests of the insurer’s policyholders, creditors, and shareholders or the public may require. (c) Sequestration of voting securities. In any case where a person has acquired or is proposing to acquire any voting securities in violation of this subchapter or any rule, regulation, or order issued by the Commissioner hereunder, the Superior Court for the county in which the insurer has its principal place of business or the Superior Court of Washington County may, on such notice as the court deems appropriate, upon the application of the insurer or the Commissioner, seize or sequester any voting securities of the insurer owned directly or indirectly by such person, and issue such orders with respect thereto as may be appropriate to effectuate the provisions of this subchapter. Notwithstanding any other provisions of law, for the purposes of this subchapter, the situs of the ownership of the securities of domestic insurers shall be deemed to be in this State. Added 1971, No. 72, § 2; amended 1973, No. 193 (Adj. Sess.), § 3, eff. April 9, 1974.

8 V.S.A. § 3690 Sanctions

3690. Sanctions (a) Any insurer failing, without just cause, to file any registration statement as required in this subchapter shall be required, after notice and hearing, to pay a penalty of not more than $1,000.00 for each day’s delay, to be recovered by the Commissioner of Financial Regulation, and the penalty so recovered shall be paid into the General Revenue Fund of this State. The maximum penalty under this section is $150,000.00. The Commissioner may reduce the penalty if the insurer demonstrates to the Commissioner that the imposition of the penalty would constitute a financial hardship to the insurer. (b) Every director or officer of an insurance holding company system who knowingly violates, participates in, or assents to, or who knowingly shall permit any of the officers or agents of the insurer to engage in transactions or make investments that have not been properly reported or submitted pursuant to subsection 3684(a), 3685(c), or 3685(f) of this subchapter, or which violate this subchapter, shall pay, in their individual capacity, an administrative penalty of not more than $5,000.00 per violation, after notice and hearing before the Commissioner. In determining the amount of the penalty, the Commissioner shall take into account the appropriateness of the penalty with respect to the gravity of the violation, the history of previous violations, and such other matters as justice may require. (c) Whenever it appears to the Commissioner that any insurer subject to this subchapter or any director, officer, employee, or agent thereof has engaged in any transaction or entered into a contract that is subject to section 3685 of this subchapter and that would not have been approved had such approval been requested, the Commissioner may order the insurer to cease and desist immediately any further activity under that transaction or contract. After notice and hearing, the Commissioner may also order the insurer to void any such contracts and restore the status quo if such action is in the best interest of the policyholders, creditors, or the public. (d) Any person who willfully violates any section of this subchapter shall be fined not more than $25,000.00 or imprisoned not more than three years, or both. (e) Any insurer, officer, director, or employee of an insurance holding company system who willfully subscribes to, makes, or causes to be made any false statement, report, or filing under this subchapter shall be imprisoned for not more than three years or fined not more than $25,000.00, or both. Any fines imposed shall be paid by the officer, director, or employee in his or her individual capacity. (f) Whenever it appears to the Commissioner that any person has committed a violation of section 3681 of this chapter that prevents the full understanding of the enterprise risk to the insurer by affiliates or by the insurance holding company system, the violation may serve as an independent basis for disapproving dividends or distributions and for placing the insurer under an order of supervision under section 7041 of this title. Added 1971, No. 72, § 2; amended 1991, No. 249 (Adj. Sess.), § 17; 1995, No. 180 (Adj. Sess.), § 38(a); 2011, No. 78 (Adj. Sess.), § 2, eff. April 2, 2012; 2013, No. 29, § 34, eff. May 13, 2013.

8 V.S.A. § 3691 Receivership

3691. Receivership Whenever it appears to the Commissioner that any person has committed a violation of this subchapter that so impairs the financial condition of a domestic insurer as to threaten insolvency or make the further transaction of business by it hazardous to its policyholders, creditors, shareholders, or the public, then the Commissioner may proceed as provided in chapter 145 of this title. Added 1971, No. 72, § 2; amended 1993, No. 12, § 7, eff. April 26, 1993.

8 V.S.A. § 3692 Revocation, suspension, or nonrenewal of insurer’s license

3692. Revocation, suspension, or nonrenewal of insurer’s license Whenever it appears to the Commissioner that any person has committed a violation of this subchapter that makes the continued operation of an insurer contrary to the interests of policyholders or the public, the Commissioner may, after giving notice and an opportunity to be heard, determine to suspend, revoke, or refuse to renew such insurer’s license or authority to do business in this State for such period as he or she finds is required for the protection of policyholders or the public. Any such determination shall be accompanied by specific findings of fact and conclusions of law. Added 1971, No. 72, § 2.

8 V.S.A. § 3693 Judicial review

3693. Judicial review (a) Any person aggrieved by any act, determination, rule, regulation, or order or any other action of the Commissioner pursuant to this subchapter may appeal therefrom to the Superior Court. The Court shall conduct its review without a jury and by trial de novo, except that if all parties, including the Commissioner, so stipulate, the review shall be confined to the record. Portions of the record may be introduced by stipulation into evidence in a trial de novo as to those parties so stipulating. (b) The filing of an appeal pursuant to this section shall stay the application of any such rule, regulation, order or other action of the Commissioner to the appealing party unless the Court, after giving such party notice and an opportunity to be heard, determines that such a stay would be detrimental to the interests of policyholders, shareholders, creditors, or the public. (c) Any person aggrieved by any failure of the Commissioner to act or make a determination required by this subchapter may file a complaint in the Superior Court for an order directing the Commissioner to act or make such determination forthwith. Added 1971, No. 72, § 2; amended 1973, No. 193 (Adj. Sess.), § 3, eff. April 9, 1974.

8 V.S.A. § 3694 Recovery

3694. Recovery (a) If an order for liquidation or rehabilitation of a domestic insurer has been entered, the receiver appointed under such order shall have a right to recover on behalf of the insurer where the distribution or payment pursuant to subdivision (1) or (2) of this subsection is made at any time during the one year preceding the petition for liquidation, conservation, or rehabilitation, as the case may be, subject to the limitations of subsections (b), (c), and (d) of this section: (1) from any parent corporation or holding company or person or affiliate who otherwise controlled the insurer, the amount of distributions (other than distributions of shares of the same class of stock) paid by the insurer on its capital stock; or (2) any payment in the form of a bonus, termination settlement, or extraordinary lump sum salary adjustment made by the insurer or its subsidiaries to a director, officer, or employee. (b) No such distribution shall be recoverable if the parent or affiliate shows that when paid such distribution was lawful and reasonable, and that the insurer did not know and could not reasonably have known that such distribution might adversely affect the ability of the insurer to fulfill its contractual obligations. (c) Any person who was a parent corporation or holding company or a person who otherwise controlled the insurer or affiliate at the time such distributions were paid shall be liable up to the amount of distributions or payments under subsection (a) of this section received by such person. Any person who otherwise controlled the insurer at the time such distributions were declared shall be liable up to the amount of distributions he or she would have received if they had been paid immediately. If two or more persons are liable with respect to the same distributions, they shall be jointly and severally liable. (d) The maximum amount recoverable under this section shall be the amount needed in excess of all other available assets of the impaired or insolvent insurer to pay the contractual obligations of the impaired or insolvent insurer and to reimburse any guaranty funds. (e) To the extent that any person liable under subsection (c) of this section is insolvent or otherwise fails to pay claims due from it pursuant to such subsection, its parent corporation or holding company or person who otherwise controlled it at the time the distribution was paid, shall be jointly and severally liable for any resulting deficiency in the amount recovered from the person liable under subsection (c) of this section. Added 1991, No. 101, § 17.

8 V.S.A. § 3695 Supervisory colleges

3695. Supervisory colleges (a) Power of Commissioner. With respect to any insurer registered under section 3684 of this title and in accordance with subsection (c) of this section, the Commissioner shall also have the power to participate in a supervisory college for any domestic insurer that is part of an insurance holding company system with international operations in order to determine compliance by the insurer with this chapter. The powers of the Commissioner with respect to supervisory colleges include the following: (1) initiating the establishment of a supervisory college; (2) clarifying the membership and participation of other supervisors in the supervisory college; (3) clarifying the functions of the supervisory college and the role of other regulators, including the establishment of a group-wide supervisor; (4) coordinating the ongoing activities of the supervisory college, including planning meetings, supervisory activities, and processes for information sharing; and (5) establishing a crisis management plan. (b) Expenses. Each registered insurer subject to this section shall be liable for and shall pay the reasonable expenses of the Commissioner’s participation in a supervisory college in accordance with subsection (c) of this section, including reasonable travel expenses. For purposes of this section, a supervisory college may be convened as either a temporary or permanent forum for communication and cooperation between the regulators charged with the supervision of the insurer or its affiliates, and the Commissioner may establish a regular assessment on the insurer for the payment of these expenses. (c) Supervisory college. In order to assess the business strategy, financial position, legal and regulatory position, risk exposure, risk management, and governance processes and as part of the examination of individual insurers in accordance with section 3686 of this chapter, the Commissioner may participate in a supervisory college with other regulators charged with supervision of the insurer or its affiliates, including other state, federal, and international regulatory agencies. The Commissioner may enter into agreements in accordance with subsection 3687(c) of this chapter providing the basis for cooperation between the Commissioner and the other regulatory agencies and the activities of the supervisory college. Nothing in this section shall delegate to the supervisory college the authority of the Commissioner to regulate or supervise the insurer or its affiliates within its jurisdiction. Added 2013, No. 29, § 35, eff. May 13, 2013, eff. May 13, 2013.

8 V.S.A. § 3696 Groupwide supervisor; internationally active insurance group

3696. Groupwide supervisor; internationally active insurance group (a)(1) The Commissioner is authorized to act as the groupwide supervisor for any internationally active insurance group. The Commissioner, however, may acknowledge another regulatory official as the supervisor, provided the group: (A) does not have substantial insurance operations in the United States; (B) has substantial insurance operations in the United States, but not in Vermont; or (C) has substantial insurance operations in the United States and in Vermont, but the Commissioner has determined, pursuant to the factors in subsections (b) and (g) of this section, that such other regulatory official is the appropriate supervisor. (2) An insurance holding company system that does not otherwise qualify as an internationally active insurance group under subdivision 3681(9) of this subchapter may request that the Commissioner make a determination or acknowledgment as to a supervisor pursuant to this section. (b)(1) In cooperation with other state, federal, and international regulatory agencies, the Commissioner shall identify a single groupwide supervisor for a group. The Commissioner may determine that he or she is the appropriate supervisor for a group if the group conducts substantial insurance operations in Vermont, or the Commissioner may acknowledge that a regulatory official from another jurisdiction is the appropriate supervisor for such group. The Commissioner shall consider the following factors when making a determination or acknowledgment under this subsection: (A) the place of domicile of the insurers within the group that hold the largest share of the group’s written premiums, assets, or liabilities; (B) the place of domicile of the top-tiered insurers in the insurance holding company system of the group; (C) the location of the executive offices or largest operational offices of the group; (D) whether another regulatory official is acting or is seeking to act as the supervisor under a regulatory system the Commissioner determines to be: (i) substantially similar to the system of regulation provided under Vermont law; or (ii) otherwise sufficient in terms of providing for supervision, enterprise risk analysis, and cooperation with other regulatory officials; and (E) whether another regulatory official acting or seeking to act as the supervisor provides the Commissioner with reasonably reciprocal recognition and cooperation. (2) A commissioner identified under this subsection as the groupwide supervisor may determine that it is appropriate to acknowledge another supervisor to serve as the groupwide supervisor. The acknowledgment of the supervisor shall be made after consideration of the factors listed in subdivisions (1)(A) through (E) of this subsection, and shall be made in cooperation with and subject to the acknowledgment of other regulatory officials involved with supervision of the members of the group, and in consultation with the group itself. (c) Notwithstanding any other provision of law to the contrary, when another regulatory official is acting as the groupwide supervisor of an internationally active insurance group, the Commissioner shall acknowledge such official as the supervisor. However, the Commissioner shall make a determination or acknowledgment as to the appropriate supervisor for such group pursuant to subsection (b) of this section in the event of a material change in the group that results in: (1) the group’s insurers domiciled in Vermont holding the largest share of the group’s premiums, assets, or liabilities; or (2) Vermont’s becoming the place of domicile of the top-tiered insurers in the insurance holding company system of the group. (d) Pursuant to section 3686 of this subchapter, the Commissioner is authorized to collect from any insurer registered under section 3684 of this subchapter all information necessary to determine whether the Commissioner shall act as the groupwide supervisor of an internationally active insurance group or, instead, acknowledge another regulatory official to act as supervisor. (e) Prior to issuing a determination that a group is subject to supervision by the Commissioner, the Commissioner shall notify the insurer registered pursuant to section 3684 of this subchapter of the pending determination, including the ultimate controlling person within the group. The group shall have not less than 30 days to provide the Commissioner with any additional information it deems relevant to the determination. The Commissioner shall publish on its website the identity of internationally active insurance groups subject to supervision by him or her. (f) If the Commissioner is the supervisor for a group, the Commissioner is authorized to engage in any of the following groupwide supervision activities: (1) Assess the enterprise risks within the group to ensure that: (A) the material financial condition and liquidity risks to the members of group engaged in the business of insurance are identified by management; and (B) reasonable and effective mitigation measures are in place. (2) Request, from any member of a group subject to the Commissioner’s supervision, information necessary and appropriate to assess enterprise risk, including information about the members of the group regarding: (A) governance, risk assessment, and management; (B) capital adequacy; and (C) material intercompany transactions. (3) Coordinate and, through the authority of the regulatory officials of the jurisdictions where members of the group are domiciled, compel development and implementation of reasonable measures designed to ensure that the group is able to timely recognize and mitigate enterprise risks to members of the group engaged in the business of insurance. (4) Communicate with other state, federal, and international regulatory agencies of members within group and share relevant information, subject to the confidentiality provisions of section 3687 of this subchapter, through supervisory colleges as provided in section 3695 of this subchapter or otherwise. (5) Enter into agreements with or obtain documentation from any insurer registered under section 3684 of this subchapter, any member of the group, and any other state, federal, and international regulatory agencies of members of the group, providing the basis for or otherwise clarifying the Commissioner’s role as groupwide supervisor, including provisions for resolving disputes with other regulatory officials. Such agreements or documentation shall not serve as evidence in any proceeding that any insurer or person within an insurance holding company system not domiciled or incorporated in Vermont is doing business in Vermont or is otherwise subject to Vermont jurisdiction. (6) Engage in other groupwide supervision activities, consistent with this subsection, as deemed necessary by the Commissioner. (g) If the Commissioner acknowledges another regulatory official from a jurisdiction not accredited by the NAIC as the groupwide supervisor, the Commissioner is authorized to reasonably cooperate, through supervisory colleagues or otherwise, with groupwide supervision undertaken by the supervisor, provided: (1) The Commissioner’s cooperation is in compliance with Vermont law. (2) The regulatory official acknowledged as the supervisor also recognizes and cooperates with the Commissioner’s activities as a groupwide supervisor for other internationally active insurance groups where applicable. When such recognition and cooperation is not reasonably reciprocal, the Commissioner is authorized to refuse recognition and cooperation. (h) The Commissioner is authorized to enter into agreements with or obtain documentation from any insurer registered under section 3684 of this subchapter, any affiliate of the insurer, and other state, federal, and international regulatory agencies for members of the internationally active insurance group that provide the basis for or otherwise clarify a regulatory official’s role as groupwide supervisor. (i) The Commissioner may adopt rules necessary for the administration of this section. (j) A registered insurer subject to this section is liable for and shall pay the reasonable expenses of the Commissioner’s participation in the administration of this section, including the engagement of attorneys, actuaries, and any other professionals, as well as all reasonable travel expenses. Added 2015, No. 15, § 4, eff. May 1, 2015.

Source: Vermont General Assembly (legislature.vermont.gov)URL: https://legislature.vermont.gov/statutes/chapter/08/101Fetched: 10/21/2026