1 Vermont Department of Financial Regulation Together...Working for Vermont
3 PROTECTS, LICENSES, AND REGULATES T he Department of Financial Regulation (DFR) is a state agency that touches the lives of every Vermonter through the regulation and monitoring of a broad spectrum of financial services. The Department s job is to protect consumers against unfair and unlawful business practices in the areas of banking, securities (investments) and insurance, while ensuring that licensed entities are financially healthy. The ongoing work of the Department on behalf of Vermonters helps consumers access financial services with confidence that: Consumers are treated fairly, according to the terms of contracts and laws. Regulated companies, institutions and individuals operate within the law. Regulated entities operate in a financially sound manner, and remain able to deliver on consumers earnings, benefits, claims, or other services. Costs and services are reasonable for the marketplace. Because of its current structure, the Department is able to serve a unique role within state government by providing a single point of access for consumer complaint resolution, enforcement authority and legislative contact on issues affecting financial services in Vermont. The synergies created through its shared staff expertise combined with a centralized administrative and business infrastructure enable the department to effectively provide: Timely, consistent consumer protection and enforcement. Access to affordable, high quality financial services in Vermont. Quick and appropriate responses to important legislative matters. Increased efficiencies that keep operating expenses low through the elimination of duplicate operational systems and staff positions.
4 Banking Division The mission of the Banking Division is to protect consumers, regulate banking activities in Vermont, ensure soundness and stability of financial services providers, promote competition and availability of financial services, and educate the public. It regulates all state chartered banks, trust companies and credit unions, and licenses entities or individuals engaged in lending, residential mortgage brokering, mortgage loan origination, purchasing retail installment contracts, money transmitting, check cashing, currency exchange, and debt adjusting in Vermont. In early 2008, the Banking Division launched a Mortgage Assistance Program that helps homeowners who are facing foreclosure contact their lenders and provides information about the availability of relief programs and counseling services. Insurance Division The Insurance Division oversees insurance companies and the products that the sell to Vermonters. The division works to protect Vermont consumers and help guarantee that companies with which Vermonters do business treat them fairly and pay claims in a timely manner. The division does this by enforcing solvency and consumer protection laws, monitoring insurance company finances and reserves, licensing insurance agents and companies, approving rates and forms and providing education and assistance to consumers. Captive Insurance Division The Captive Insurance Division regulates insurance that allows corporations and groups to establish a subsidiary to take financial control and manage risks by underwriting their own insurance, rather than paying premiums to third-party insurers. Vermont is the third largest captive insurance domicile in the world and is the number one domicile in the United States. More than $16.6 billion in premiums flowed through Vermont-based captive insurers in The captive insurance industry generates an estimated 1,400 jobs for Vermonters. Securities Division The Securities Division regulates entities and individuals who offer, buy, sell, and for provide advice on securities, such as stocks and bonds, or mutual funds. The mission of the Securities Division is to protect Vermonters and promote the legitimate formation of capital in this state.
5 The Divisions of the Department of Financial Regulation Administration and General Counsel Division The Administration Division includes the Offices of the Commissioner and the General Counsel and supports the other four divisions of DFR. 1 The Administration Division's mission is to provide the best possible tools, infrastructure and operations expertise to all DFR divisions. This is achieved through organizational management, financial and technological support and effective, professional communications. The range of services that the Administration Division provides to the Department covers such things as internal budgeting and business management, public records, internal and external communications, web site design, content management, IT support and executive and administrative assistance. The General Counsel s Office mission is to maintain high quality legal and enforcement services to DFR, characterized as timely, competent, clearly communicated, independent, and effective as an advocate for the client. The General Counsel s Office, within the Administration Division, consists of all of the Department s attorneys. The office is responsible for providing legal services and enforcement support for each of the Divisions, and for the Department as a whole. Banking Division The Banking Division s mission is to promote the safety, soundness, and stability of financial services providers; to promote competition in and availability of financial services; to provide consumer protection; and to provide education. The Banking Division pursues this mission by: Chartering and licensing financial service providers Proposing appropriate bulletins, regulations, and statutes Enforcing laws and regulation Examining and monitoring financial services providers Providing information and education services Assisting the public and financial service providers Cooperating with other supervisory authorities Training for Examiners The Banking Division activities are organized around three broad program areas: 1) Supervision which includes issuing charters and licenses as well as conducting examinations and investigations of all regulated entities in such areas as safety and soundness, trust, electronic data processing, e-banking, business practices, and compliance. These organizations are supervised by the Commissioner in a manner to assure the solvency, liquidity, stability and efficiency of all such 1 Remaining personnel and programs from the Health Care Administration will be moved out of DFR by FY2014 but some financial entries will remain in the budget detail.
6 organizations to assure reasonable and orderly competition thereby encouraging the availability of financial services to the public. 2) Consumer services are available to assist any consumer who has questions or concerns about an institution chartered or regulated by the Commissioner. Efforts are made to assist a consumer through problem resolution and mortgage foreclosure intervention with regulated institutions. Examinations and investigations may be initiated where needed. 3) Education that centers on providing the public with valuable information through public speaking engagements, brochures, and surveys which can be used when making a decision regarding choice of institution or product. Survey results and other information about chartered and licensed entities are available on the Department s web site. Insurance Division The Insurance Division s mission is to keep insurance affordable and available to Vermont policyholders through orderly competition, ensure that insurers are able to meet their contractual obligations, and to protect consumers against unfair and unlawful business practices. The Division accomplishes this mission by: Licensing and overseeing the financial stability of the insurance companies doing business in Vermont; Licensing individuals involved in Vermont s insurance industry; Providing consumer protection, education and outreach; Overseeing rates and forms used by insurers; Monitoring the competitiveness of Vermont s insurance markets; and Participating at a national level of state regulation as an accredited member of the National Association of Insurance Commissioners. The Insurance Division's activities are organized around six broad program areas: 1) The Financial Examination and Company Licensing Section monitors insurers for solvency and capital adequacy through rigorous licensing requirements, on-going financial analysis, on-site financial examinations and the approval of insurance company transactions. 2) The Producer Licensing Section licenses insurance professionals and administers their appointments as agents by various licensed companies. Licenses are issued to insurance producers, adjusters, appraisers, consultants, public adjusters, managing general agents, reinsurance intermediaries, surplus lines brokers and life settlement brokers. Producer licenses and company appointments are granted on a biennial basis in odd numbered years. Adjusters and all other individual license types renew in even numbered years.
7 3) The Consumer Services Section resolves consumer complaints as well as provides consumer education and guidance across all lines of insurance. For year-ending 2012, the section handled more than 4,817 consumer complaints and inquiries resulting in more than $492,000 recovered for consumers in direct benefits. 4) The Rate & Forms Section reviews and approves filed insurance policy forms and certain filed premium rates for insurance companies licensed to do business in Vermont. As part of Vermont's health care reform initiative, the section is responsible for major medical health insurance rate recommendations to the Green Mountain Care Board. 5) The Market Regulation Section combines the market conduct function with a trend analysis approach. The section ensures that insurance companies are in compliance with Vermont law and regulations. Examiners conduct periodic investigations to identify non-compliant activities resulting in enforcement actions by the Department's Legal Department to recover appropriate restitution for policyholders. 6) The Health Insurance Policy Section is responsible for the insurance regulation aspects of the state s new Health Exchange program financed by federal grant money. Captives Insurance Division The Captive Insurance Division is charged with licensing and examining captive insurance companies domiciled in Vermont. A captive insurer is a company which is owned and managed by its policyholders, thereby enhancing the company's desire and ability to control costs and tailor its insurance program to suit its individual needs. The number of captives in Vermont continues to grow. The mission of the Captive Insurance Division is to maintain a regulatory system that ensures the solvency of captive insurers while recognizing the special purpose for which they were created. The Division pursues this mission by: Performing thorough, skeptical review of applications for admission Performing ongoing financial surveillance Performing periodic financial examinations Implementing and enforcing laws and regulations Developing effective and reasonable policies and procedures Advancing the growth of Vermont's captive industry
8 Currently there are approximately 590 active captive insurance companies licensed in this state. Vermont remains the country's premier domicile for captive insurance. The Captive Insurance Division is charged with licensing and examining these insurers to ensure their financial solvency. The Division collects fees for its licensing and examination activities that offset the cost of staffing the examination section. Captive insurers create an estimated 1,400 jobs in Vermont and generate premium taxes for the state; in FY2011, the Captive insurance industry paid approximately $23.4 million in Vermont premium taxes, and over $2.3 million in license and examination fees. Securities Division The mission of the Securities Division is to protect Vermont investors and to help promote the legitimate formation of capital in this state. This is achieved by enforcing and administering the securities laws of the State of Vermont, including: Registering securities broker/dealers, investment advisors, and their representatives Examining/auditing the above for compliance with the law Investigating violations of the securities laws Responding to investor complaints Reviewing and approving securities offered to Vermont investors Bringing administrative or civil actions against violators of the securities laws Educating investors and industry participants about the securities laws Granting exceptions from registration, where appropriate Creating policy and regulations that further the mission
9 Vermont Department of Financial Regulation DFR Office: Main Number: Website: Banking: Main Number: Consumer/Mortgage Assistance: Insurance: Main Number: Consumer Assistance: Captives: Main Number: Securities: Main Number: Investor Protection/Education:
10 DFR Receipt Summary Page 1 of 9 DFR Receipt Summary Estimated 2014 Estimated Estimated Estimated Excess Receipts to General Division Receipts Expenditures Fund Banking Division $1,771,500 $1,673,670 $97,830 Insurance Division* $10,696,256 $6,686,699 $4,009,557 Captive Insurance Division $5,417,500 $4,278,475 $1,139,025 Securities Division $5,775,000 $714,505 $5,060,495 Health Care Admin Division $1,516,840 $132,172 $1,384,668 Administration Division $0 $1,840,251 ($1,840,251) Total $25,177,096 $15,325,772 $9,851,324 Transfers to Other State Departments/Programs $3,493,701 Total Estimated Excess Receipts FY 2014 $6,357,623 *includes Global Commitment funds and Federal Funds Updated 2/2/2013
11 DFR Receipt Summary Page 2 of 9 Other Revenue from Regulated Entities - FY 2012 Actuals DFR Direct General Fund Deposits FY 2012 Actual Securities Division Securities Dealers $625,250 Securities Registrations $13,942,700 Securities Branch Offices $73,600 DFR Fines $1,858,841 Total DFR Direct General Fund Deposits $16,500,391 General Fund Receipts from Entities Regulated by DFR FY 2012 Actual Captive Insurance Premium Taxes $24,127,685 Insurance Premium Taxes $34,872,215 Banks Franchise Tax $10,658,134 Total General Fund Receipts from Entities Regulated by DFR $69,658,034 FY 2012 Total $86,158,425 Updated 01/16/2013
12 DFR Receipt Summary Page 3 of 9 DFR Transfers to State Government FY 2014 Insurance Fund Captives Fund Securities Fund Health Care Regulatory Fund Economic Development $505,350 Fire Training Council $30,000 Global Commitment Fund $863,847 Green Mountain Care Board $589, VT Department of Health (VPQHC Contract) Total $1,482,956 $505,350 $0 $1,505,395 DFR Total Transfers $3,493,701 Updated 2/2/2013
13 DFR Receipt Summary Page 4 of 9 Financial Institution Supervision Fund (Banking) FY 2012 FY 2013 FY 2014 NAME OF Actual Estimated Estimated RECEIPTS SOURCE Receipts Receipts Receipts Debt Adjusters $11,150 $10,750 $11,000 Licensed Lender (Lic) $454,600 $445,200 $490,000 Licensed Lender (Inv) $77,500 $32,600 $55,000 Mortgage Broker Fee (Lic) $104,800 $109,000 $100,000 Mortgage Broker (Inv) $27,650 $15,000 $43,000 Mortgage Loan Originator (Lic) $89,000 $93,100 $110,000 Mortgage Loan Originator (Inv) $12,300 $10,600 $10,000 Banks & Trusts $0 $0 $0 Credit Unions $1,250 $2,500 $500 Develop Credit Corps $7,200 $15,000 $5,000 Sales Finance (Inv) $7,025 $3,700 $7,000 Sales Finance (Lic) $37,300 $37,450 $40,000 Money Services (Lic) $10,000 $10,000 $30,000 Money Services (Inv.) $35,925 $27,500 $30,000 Money Servicers (Assesment) $42,485 $45,000 $50,000 Special Purpose & Indep. Trust (App $12,650 $0 $0 Special Purpose & Indep. Trust (Inv.) $0 $10,500 $100,000 Loan Servicer (Lic) $130,600 $137,500 $150,000 Loan Servicer (Inv.) $35,000 $40,000 $60,000 Abandoned Property $112 Total: $1,096,547 $1,045,400 $1,291,500 Fund Carryforward $0 $0 $0 Other Income Carryforward Prior Year Assessment $100,000 March Assessment $511,510 $509,301 $350,000 Money Servicers Assessment $35,000 $60,000 $30,000 Total Other Income $546,510 $569,301 $480,000 Total Banking Available Funds $1,643,057 $1,614,701 $1,771,500 Updated 2/2/2013
14 DFR Receipt Summary Page 5 of 9 Insurance Regulatory and Supervision Fund FY 2012 FY 2013 FY 2014 NAME OF Actual Estimated Estimated RECEIPTS SOURCE Receipts Receipts Receipts Brokers & Agents $6,314,970 $15,628,000 $4,100,000 Company Licensing $477,300 $550,000 $550,000 Company Examination $431,856 $250,000 $150,000 Rate & Form Filing $392,045 $400,000 $400,000 Market Conduct Exams $181,068 $250,000 $200,000 Misc. (Abandoned prop., travel) $31,251 $0 $0 Retaliatory Fees $2,920,912 $2,200,000 $3,200,000 Total Insurance Fund: $10,749,402 $19,278,000 $8,600,000 Other Global Commitment Fund $615,700 $165,946 IDT from DVHA (Health Care Exchange) $187,972 $426,027 Federal Revenue Fund $13,500 $1,104,420 $1,504,283 Total Other $13,500 $1,908,092 $2,096,256 Carryforward $226,174 $0 $0 Total Funds Available $10,762,902 $21,186,092 $10,696,256 Updated 2/2/2013
15 Captive Insurance Regulatory & Supervision Fund DFR Receipt Summary Page 6 of 9 FY 2012 FY 2013 FY 2014 Actual Estimated Estimated Receipts Receipts Receipts Registrations $402,462 $422,500 $455,000 Examinations $2,138,706 $2,342,000 $2,350,000 Dept Share of Premium Tax $2,654,045 $2,612,500 $2,612,500 Total: $5,195,213 $5,377,000 $5,417,500 Prior Fiscal Year Carryforward $0 $0 $0 Total Available Receipts $5,195,213 $5,377,000 $5,417,500 Updated 2/2/2013
16 DFR Receipt Summary Page 7 of 9 Securities Regulatory and Supervision Fund FY 2012 FY 2013 FY 2014 Actual Estimated Estimated Receipts Receipts Receipts Salepersons $6,478,415 $5,800,000 $5,750,000 Investigations $0 $25,000 $25,000 Total Available Funds $6,478,415 $5,825,000 $5,775,000 Updated 2/2/2013
17 DFR Receipt Summary Page 8 of 9 Health Care Regulatory and Supervision Fund FY 2012 FY 2013 FY 2014 Actual Estimated Estimated Receipts Receipts Receipts Medicaid $0 $0 $100,000 Hlth Care Admin $0 $0 $0 Certif of Need $62,422 $56,091 $53,840 VPQHC $661,385 $660,000 $660,000 Industry Assessment $498,217 $498,000 $500,000 Quality Assurance $165,727 $165,000 $150,000 Medicare Supp $35,000 $38,000 $38,000 Mental Health U/R Lic. $5,200 $4,000 $4,000 Mental Health U/R $0 $30,000 $0 External Appeals $14,628 $12,000 $10,000 Hca Investigation Costs $0 $0 $0 HCA Provider Network Reg. Fee $800 $1,000 $1,000 Total HCA Fund: $1,443,379 $1,464,091 $1,516,840 Other Income Carryforward $225,497 $252,484 $0 Global Commitment Fund $1,897,997 $432,966 $0 GC moved to GMCB Transfers (DVHA) $0 $370,000 $0 Moved to GMCB Federal Grants $422,321 $236,136 $0 Moved to Insurance Total Other Income $2,545,815 $1,291,586 $0 Total Funds Available $3,989,194 $2,755,677 $1,516,840 Updated 2/2/2013
18 DFR Receipt Summary Page 9 of 9 Transfers of Excess Revenue to General Fund from DFR FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 Insurance Fund $2,262,363 $15,085,828 $2,504,802 $15,115,558 $4,396,406 Captives Fund $240,939 $810,051 $557,996 $577,217 $813,524 Securities Fund $3,507,188 $3,949,720 $3,723,741 $4,749,807 $4,844,854 Total $6,010,490 $19,845,598 $6,786,539 $20,442,582 $10,054,784