The Vermont Captive Insurance Association (VCIA) believes that US captives do not need to be as broadly regulated as proposed by the International Association of Insurance Supervisors (IAIS).
The IAIS is updating its guidance to insurance supervisors on their application of regulation and supervision of captive insurers.
The association prepared and published a paper outlining its plans and sought public feedback, which was published in August. The updates reflect the 2011 IAIS insurance core Principles (ICPs) and highlight matters specifically relevant to captive supervision.
The VCIA said that as most captives in the US primarily insure the risks of their owners and/or affiliates and represent the lowest level of regulatory risk, it does not make sense to impose a burdensome supervisory scheme on them, particularly when their insureds can otherwise self-insure, without any regulatory authority being imposed.
The VCIA added that while it does not believe certain ICPs should apply to captives at all, its interpretation of the paper is that flexibility and discretion exist in applying them to captives.
The paper also initially recognises that the risks inherent in a captive insurer can vary substantially, according to the VICA, but it does not encourage supervisory approaches that match the inherent risk of the varying risks of the captives with the marketplace, and instead treats them all captives the same.
The paper should be modified to reflect that the regulation of captives must vary from captive to captive, argued the VCIA.
