Code of Vermont Rules › Agency 21 - DEPARTMENT OF FINANCIAL REGULATION › Sub-Agency 020 - INSURANCE DIVISION › Chapter 005 - CAPTIVE INSURANCE FINANCIAL REGULATION (C-81-2) › Section 21 020 005 - CAPTIVE INSURANCE FINANCIAL REGULATION (C-81-2)

Current through June,
				2024
Section 1 Purpose
				and Authority
The purpose of this regulation is to set forth the financial
				  and reporting requirements which the commissioner deems necessary for the
				  regulation of captive insurance companies, as authorized by the Captive
				  Insurance Company Act,
				  8 V.S.A., Section
				  6015. Reference hereunder to "company" shall
				  mean captive insurance company or companies, unless otherwise
				  specified.
Section 2 Annual
				Reporting Requirements
A risk retention group domiciled in this state shall annually
				  submit to the commissioner a report of its financial condition, verified by
				  oath of two of its executive officers. The report shall be that required by
				  8 V.S.A., Section
				  3561.
A pure, branch, sponsored, association, or industrial insured
				  captive insurance company domiciled in this state shall annually submit to the
				  commissioner a report of its financial condition, verified by oath of two of
				  its executive officers. The report shall be that prescribed by the commissioner
				  as "Vermont Captive Insurance Company Annual Report".
A special purpose financial insurance company domiciled in
				  this state shall annually submit to the commissioner a report of its financial
				  condition, verified by oath of two of its executive officers. The report shall
				  be that required by
				  8 V.S.A., Section
				  6048k. A special purpose financial insurance
				  company domiciled in this state shall annually submit to the commissioner a
				  material variances letter explaining any material differences between the
				  company's actual results and its projections on file. For the purposes of this
				  regulation, materiality shall be defined as 10% of surplus as regards
				  policyholders as of the prior year-end.
Section 3 Annual Audited Financial Statements
All companies shall have an annual audit by an independent
				  certified public accountant, authorized by the commissioner and shall file such
				  audited financial report with the commissioner on or before June 30 for the
				  year ending December 31 immediately preceding. Companies that have received
				  approval to report on other than a calendar year basis shall file such
				  statements within 180 days after the end of their fiscal year. Risk retention
				  groups must also consider applicability of regulation C-2012-1.
The annual audit report shall be considered part of the
				  company's annual report of financial condition except with respect to the date
				  by which it must be filed with the commissioner.
The annual audit shall consist of the following:
(A) Opinion of Independent Certified Public
				Accountant
Financial statements furnished pursuant to this section shall
				  be audited by independent certified public accountants in accordance with
				  generally accepted auditing standards as determined by the American Institute
				  of Certified Public Accountants.
The opinion of the independent certified public accountant
				  shall cover all years presented.
The opinion shall be addressed to the company on stationery
				  of the accountant showing the address of issuance, and shall be signed and
				  dated.
(B) Report of
				Evaluation of Internal Controls
This report shall include an evaluation of the internal
				  controls of the company relating to the methods and procedures used in the
				  securing of assets and the reliability of the financial records, including but
				  not limited to such controls as the system of authorization and approval and
				  the separation of duties.
The review shall be conducted in accordance with generally
				  accepted auditing standards and the report filed with the
				  commissioner.
(C)
				Accountant's Letter of Qualifications
The accountant shall furnish the company, for inclusion in
				  the filing of the audited annual report, a letter stating:
(a) That he is independent with respect to
				the company and conforms to the standards of his/
her profession as contained in the Code of Professional
				  Ethics and pronouncements of the American Institute of Certified Public
				  Accountants and pronouncements of the Financial Accounting Standards
				  Board.
(b) The general
				background and experience of the staff engaged in audit including the
				experience in auditing captives or other insurance companies.
(c) That the accountant understands that the
				audited annual report and his/her opinions thereon will be filed in compliance
				with this regulation with the Department of Financial Regulation
(d) That the accountant consents to the
				requirements of Section
				6 of this
				regulation and that the accountant consents and agrees to make available for
				review by the commissioner, his/her designee or his/her appointed agent, the
				work papers as defined in Section
				6.
(e) That the accountant is property licensed
				by an appropriate state licensing authority and that he/she is a member in good
				standing in the American Institute of Certified Public Accountants.
(D) Financial Statements
The financial statements included in the audited financial
				  report shall be prepared on the same basis of accounting as the annual
				  statement and shall be comparative, presenting the amounts as of December 31,
				  or fiscal year end, of the current year and the amounts as of the immediately
				  preceding December 31, or fiscal year end.
Statements required shall be as follows:
(a) Balance sheets reporting assets,
				liabilities, capital and surplus
(b) Statements of operations
(c) Statements of cash flow
(d) Statements of changes in capital and
				surplus
(e) Notes to financial
				statements
The notes to financial statements shall be those required by
				  generally accepted accounting principles, or as required by any other
				  comprehensive basis of accounting in use by the company and approved by the
				  commissioner, and shall include:
(1) A
				reconciliation of differences, if any, between the audited financial report and
				the report of its financial condition filed with the commissioner in accordance
				with Section
				2
				hereof.
(2)
A summary of
				ownership and relationship of the company and all affiliated corporations or
				companies insured by the captive.
(3) A narrative explanation of all material
				transactions and balances with the company.