The Vermont House of Representatives has passed legislation, H.438 (the “Bill”), that would allow for the incorporation of protected cells.  Under current Vermont law (Title 8, Section 6034) protected cells may be formed, but they are not officially recorded as existing legal entities with the Secretary of State.  These protected cells then combine to form a single sponsored captive insurance company and they are accounted for separately on the books and records of the sponsored captive insurance company.  By allowing for the incorporation of protected cells, the expectation is that there will be increased protections for the sponsored captive insurance company in the event of a bankruptcy of one or more protected cells, because the bankruptcy courts will be more likely to treat each protected cell as a separate legal entity.

The Bill has been reviewed by the Senate Committee on Finance, which has issued a favorable report with proposal of amendment.  Vermont is already experiencing its strongest start since 2005 with the licensing of 7 new captives in the first quarter of 2011, and will likely see this trend continue if the Bill is enacted into law.

Please click here for a complete copy of the Bill.