Vermont Department of Financial Regulation

Transcription

1 Vermont Department of Financial Regulation Together Working for Vermont Proposed Fiscal Year 2015 Information Commissioner Susan L. Donegan Deputy Commissioner of Banking Thomas J. Candon Deputy Commissioner of Captive Insurance David F. Provost Deputy Commissioner of Insurance Crosby L. Sherman Deputy Commissioner of Securities Michael S. Pieciak

2 For consumer assistance: Department of Financial Regulation [Banking] Main Street [Insurance] Montpelier, VT [Securities] January 27, 2014 Dear Legislative Leaders and Vermonters: It is my pleasure to provide you with information about the Vermont Department of Financial Regulation (DFR). DFR protects consumers by regulating financial and insurance industries that have an impact on each of our lives. These industries are part of an ever-changing landscape of consumer choices, regulations, business practices, and costs that can sometimes be a challenge to navigate. Ensuring Vermonters have access to fair and sound financial and insurance services requires a dedicated team of professionals. That is where the work of DFR s administrators, analysts, legal experts and regulators comes into play. We work on behalf of all Vermonters, making it possible for everyone to access financial and insurance services with confidence that the products or services we purchase are backed by solid companies. By working together, we are able to provide the most comprehensive, responsive and efficient level of service possible to consumers, state government, and industry. This brochure provides only an overview of the work we do so we are happy to answer your questions by phone, or please visit our office in Montpelier to learn more. Please visit our web site at On behalf of everyone in the department, I thank you for taking the time to learn more about DFR. Sincerely, Susan L. Donegan Commissioner Banking Insurance Captive Insurance Securities

3 PROTECTS, LICENSES, AND REGULATES The 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 and health industry activities. 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 and insurance-related 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, legislative contact on issues affecting financial and insurance services in Vermont. The synergies created through its shared staff expertise in the financial and insurance industries, shared legal and enforcement expertise, and a centralized administrative and business infrastructure enable the department to effectively provide: Timely, consistent consumer protection and enforcement; Access to affordable, high quality financial and insurance 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 all companies who sell policies to Vermonters, no matter what state the company calls home. The division works to protect Vermont consumers and help guarantee that companies with whom Vermonters do business treat them fairly, can be counted on to pay claims when they occur, and will pay those claims in a timely manner. The division does this through the enforcement of solvency and consumer protection laws, monitoring insurance company finances and reserves, licensing insurance agents and companies, approving all life insurance and property casualty policies sold in Vermont, and by providing education and assistance to consumers.

5 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. In 2013, Vermont licensed its 1,000th captive company! In 2013, captive insurance companies generated more than $24.8 million in premium taxes to Vermont and paid $2.3 million in examination and licensing fees. The captive insurance industry also generates an estimated 1,400 jobs for Vermonters. Securities Division The Securities Division regulates entities and individuals who offer, buy, sell, and/or provide advice on securities, such as stocks and bonds, or mutual funds. The mission of the Securities Division is to protect Vermonters while providing opportunities for investment and capital formation in this state.

6 Fiscal Year 2015 Department Strategic Overview Department of Financial Regulation (DFR) DFR Mission/Vision Statement The mission of the Department of Financial Regulation is to promote and assure the financial health, stability, quality and integrity of Vermont financial service providers. The Department also strives to secure full access for Vermonters to financial services and to protect the public through the consistent enforcement of the laws and regulations necessary to the operation of a safe, sound and responsible marketplace and through consumer outreach and education programs. The Department achieves its mission through activities including: Licensing, registering, and chartering individuals and entities under the supervision of the Commissioner; Conducting examinations and audits of Vermont regulated individuals and entities; Providing consumer protection, assistance and education; Requiring industry regulatory filings for evaluation, response and approval; Investigating violations and enforcing Vermont law and regulation; Providing data and analysis to advance public policy discussions at state and federal level; Cooperating with other state, federal and international regulators and law enforcement agencies; Responding to evolving markets, trends and legislative initiatives through implementation of efficient and responsible regulation.

7 Fiscal Year 2015 Department Strategic Overview Department of Financial Regulation (DFR) Page 2 of 23 Administration Division: Division Overview The Administration Division, including the Commissioner s and General Counsel s offices, supports the other four divisions of DFR, which are Banking, Captives, Insurance and Securities. Specifically, the Administration Division provides internal budgeting and business management services, consumer education and public information services including producing consumer publications, consumer outreach and assistance, media liaison, internal and external communications, including in-house web site design, content management and publishing. The Administration Division also provides IT support and executive and administrative assistant services for the entire Department. The General Counsel s office provides legal services to all divisions of DFR and legal analysis for legislative proposals. The mission of the Administration Division is to provide the best possible tools, infrastructure and operations expertise to all the divisions of DFR. This is achieved through organizational management, financial and technological support, and effective, professional communications. The Administration Division is comprised of the Commissioner, Administrative Services Director, Information Management Officer, Systems Developer, IT Specialists, Statistics and Data Analyst, Executive Assistant, Administrative Assistants and a Program Services Clerk. The vision of the Administration Division is to provide timely, accurate and responsive administrative services at all times to internal and external customers. Employees throughout the Department look to the Administration team as the experts in administrative support, department finances, information technology, statistical and data analysis, human resources and communication services. The mission of the General Counsel s Office 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 vision of the General Counsel s Office is to ensure that clients will be satisfied with the high quality of the legal and enforcement services provided by the office. The General Counsel s Office is comprised of the general counsel and eight attorneys. The office is responsible for providing legal services and enforcement support for each of the Divisions and the Department as a whole.

8 Fiscal Year 2015 Department Strategic Overview Department of Financial Regulation (DFR) Page 3 of Division-wide Goals and Objectives Administration Division: 1. Improve flow of information and communication. Outcome Indicators: Administration team will have clear direction from the Commissioner and members will have a good understanding of individual and team responsibilities. Success Measures: Achieve a stable, informed, engaged workforce with a clear sense of contribution to the department; Employees will be invested in a team effort to sustain and revitalize programs and services to both internal and external customers. 2. Provide the Department with support and information in response to the growing and diversified DFR operations. Addition of new Director of Statistics and Data Analysis to drive substantive projects relating to DFR s collection and use of data. Outcome Indicators: DFR Divisions will have strong IT support across all areas including training, equipment, software, systems and document management strategies; Continued updated DFR web site with embedded Visit DFR program; Published new and statutory reports relating to financial services regulatory sector to indicate trends, product development, consumer protection, competitive markets.

9 Fiscal Year 2015 Department Strategic Overview Department of Financial Regulation (DFR) Page 4 of Web site and technology enhancements. The Division is required as of January 2012 to post a wider range of insurance information on its web site including such things as health insurance rates filings. While most of the Division s operations have already been digitized (such as electronic producer licensing and mandatory electronic rate and form filing), there are additional improvements that are planned for 2014, including: Enhancements to the consumer service section s web site in order to provide more information in a better format, and; Greater number of information resources for the public, industry and government. Outcome Indicators: Consumers will have more information about purchasing and owning insurance. Industry will have more information about rates and form filings and other resources. Success Measures: Improved quality and effectiveness of internal and external communications; Success will be measured by increased information available to consumers and greater transparency for the public, the industry and government. General Counsel s Office: 1. Maximize the productivity and effectiveness of the General Counsel s Office. Outcome indicators: Resources are developed to enhance administrative and litigation support; The Department s records retention policies are updated; A legal documents management system is created; Public records request production is timely. Measure of success: Recommendations are proposed for the Commissioner s approval.

10 Fiscal Year 2015 Department Strategic Overview Department of Financial Regulation (DFR) Page 5 of Strengthen attorney/client relationships within the Department. Outcome indicator: Maintain frequent, open communications between the Department s attorneys and officials and staff members. Measure of success: Increased coordination on legal matters involving legal and substantive expertise between attorneys and subject-matter staff members. 3. Enhance the professionalism and stability of the General Counsel s Office. Outcome indicators: Provide cross-training between substantive areas of the law within DFR s jurisdiction; Promote collegiality and cooperation. Measure of success: Improved stability of General Counsel s Office staff.

11 Fiscal Year 2015 Department Strategic Overview Department of Financial Regulation (DFR) Page 6 of 23 Banking Division: The mission of the Banking Division 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 education. The Banking Division pursues this mission by: Examining and monitoring financial services providers; Proposing appropriate bulletins, regulations, and statutes; Enforcing laws and regulation; Chartering and licensing financial service providers; Providing information and education services; Assisting the public and financial service providers; Cooperating with other supervisory authorities; Training for examiners. The vision of the Division of Banking is that all Vermonters will have access to fair, equitable, and competitive financial services and products at a reasonable price offered by financially stable and ethical providers. It also strives to be respected by the general public, the financial services industry, and other regulatory agencies for operating in an efficient, fair, effective, and professional manner. Division Overview Banking Division activities are organized around three broad program areas: Examination and Enforcement, Regulatory and Consumer Affairs, and Consumer Education. The Division charters Vermont financial institutions, credit unions and trust companies, and, licenses, supervises, and investigates entities engaged in the business of lending, mortgage brokering, loan securing, debt adjustment, sales finance, money services, check cashing, and currency exchange. The Division oversees financial service providers, promulgates financial regulation, investigates consumer complaints, conducts data research and analysis, educates consumers, and compiles information to inform the industry, policymakers, and the general public.

12 Fiscal Year 2015 Department Strategic Overview Department of Financial Regulation (DFR) Page 7 of 23 Division wide Goals and Objectives The Banking Division has identified three division-wide goals for : 1. Enhance the State Charter for Financial Institutions to promote job growth and state revenue. Outcome Indicators: Legislation signed by the Governor that encourages state-chartered entities. Success Measures: Increase in the number of state-chartered financial institutions. 2. Utilize the Nationwide Mortgage Licensing System (NMLS) to optimize operational efficiencies. Outcome Indicators: NMLS functionality expanded to other functions including consumer complaints, examinations, data analytics. Success Measures: Process all consumer complaints through NMLS; Schedule and monitor examination of licenses through NMLS; Monitoring system through data analytics.

13 Fiscal Year 2015 Department Strategic Overview Department of Financial Regulation (DFR) Page 8 of Implement a best practice for record retention of all files and records retained in the Banking Division to provide for more efficient storage of files and to make files readily accessible by all Division personnel. Outcome Indicators: Banking Division develops a repository with Microdea; Division staff prepares files for scanning. Division staff scans and indexes licensee files, complaint files, credit union files, and bank files. Success Measures: Scanning equipment purchased and installed; All files scanned, indexed, and available in readily accessible format. Banking Division: Major Functions by Unit Examination and Enforcement: The Banking Division conducts 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 in a manner to ensure the solvency, liquidity, stability and efficiency of all such organizations, and to ensure reasonable and orderly competition thereby encouraging the availability of financial services to the public. Outcome Indicators: Legal authority to charter, examine, supervise and regulate all state-chartered banks consistent with basic principles of safety and soundness, and protection of the public interest; Statutory authority to carry out its duties and responsibilities independently, including authority to take formal enforcement action(s); Division staff is well trained and qualified with expertise to charter, examine, supervise and regulate all state-chartered entities; Division staff monitors, reviews, and periodically examines regulated entities in a manner consistent with state statutes, safety and soundness and the public interest; Adequate funding to achieve all above-mentioned criteria.

14 Fiscal Year 2015 Department Strategic Overview Department of Financial Regulation (DFR) Page 9 of 23 Success measures: All state chartered financial institutions and credit unions are financially solvent and well capitalized; All regulated entities comply with Parts 2, 5, and 6 of Title 8, V.S.A., and applicable state and federal laws and regulations; Financial service providers offer fair and competitive financial products to meet the needs of the general public. Regulatory and Consumer Affairs The Banking Division is responsible for licensing and chartering entities under Parts 2, 5 and 6 of Title 8, V.S.A., and to ensure all such entities are supervised in such a way as to protect consumers against unfair and unconscionable practices. The Division responds to consumers who have questions or concerns about an institution chartered or regulated by the Commissioner, and assists consumers with complaints through problem resolution and intervention with regulated institutions. The Division provides assistance to consumers facing or in foreclosure by facilitating communication between the borrower and lender/servicer to reach an amenable resolution. Outcome Indicators: Applications are received and reviewed in a timely, consistent and efficient manner; Applications approved or denied for licensure or charter; Enforcement action is taken against unlicensed entities; Consumer complaints processed and monitored for timely and mutual resolution; Division staff compiles data, analyzes industry practices, prepares reports, and makes recommendations to Examination and Enforcement, administration and policymakers; Efficient database for responding to inquiries and complaints is maintained; Division staff monitors foreclosure data, and home retention programs to assist consumers; Entities comply with applicable state and federal laws and regulations.

15 Fiscal Year 2015 Department Strategic Overview Department of Financial Regulation (DFR) Page 10 of 23 Success Measures: All entities subject to regulation are properly licensed or otherwise authorized to engage in business and comply with applicable laws and regulations. Consumer complaints are acknowledged within 24 hours and a resolution, if applicable, is reached within 30 days. Consumers in foreclosure are able to remain in their home. Vermont consumers consider the Banking Division a valuable resource and responsive to matters involving entities under its jurisdiction. Industry considers the Banking Division an efficient, fair, effective, and professional organization. Consumer Education The Banking Division provides the public with valuable information through brochures, surveys, and public speaking engagements. Survey results and other information about financial products, chartered entities, and licensed entities are available on the Department s web site Consumers can use this information when making a decision regarding a choice of institution or product. Public speaking presentations are available on a wide range of topics such as identify theft and fraud prevention and are applicable for a wide variety of audiences. The Banking Division participates in financial literacy programs to promote the education of the general public. Outcome Indicators: Consumers have access to financial education and financial services related information in a variety of formats; Division staff compiles surveys and design brochures addressing public need, and use terms and product descriptions that are easily understood by the general public; Banking Division works with the industry and public organizations to ensure consumers have ready access to information. Success Measures: New brochures are developed and published; Banking Division web site is updated in a timely and accurate manner; Periodic public service announcements are delivered.

16 Fiscal Year 2015 Department Strategic Overview Department of Financial Regulation (DFR) Page 11 of 23 Presentations given upon request. Banking Division collaborates with the industry and public organizations to provide financial literacy programs via its web site and in schools.

17 Fiscal Year 2015 Department Strategic Overview Department of Financial Regulation (DFR) Page 12 of 23 Insurance Division The mission of DFR s Insurance Division is to maintain affordability and availability for Vermont consumers, to ensure that insurers are able to meet their contractual obligations, to ensure reasonable and orderly competition among insurers, and to protect Vermont consumers against unfair and unlawful business practices. The Division accomplishes this mission by: Licensing and overseeing the financial stability of insurers doing business in Vermont; Reviewing and approving the rates and policy forms used by insurers and monitoring the competitiveness of Vermont s insurance markets; Licensing individuals involved in the insurance industry; Assisting Vermonters with insurance complaints and providing consumer education; Enforcing Vermont s insurance laws and regulations through investigations and examinations, and; Participating at a national level of regulation as an accredited member of the National Association of Insurance Commissioners (NAIC). The vision of the Insurance Division is that insurance will be available and affordable to all Vermont consumers, even in specialty markets such as workers compensation and medical malpractice insurance. Vermont will be an attractive market for insurers to do business while providing a high level of access and protection to Vermont s policyholders. Division Overview The Insurance Division regulates persons and companies engaged in providing insurance to Vermont consumers. The Division regulates the insurance industry through ongoing financial analysis, periodic financial and market conduct examinations, rate and policy form reviews, producer licensing and educational requirements for insurance agents, as well as consumer education and consumer complaint resolution.

18 Fiscal Year 2015 Department Strategic Overview Department of Financial Regulation (DFR) Page 13 of Division Goals The Insurance Division s main goals for 2015 are: 1. Health-related Insurance functions: The transition of various major medical health insurance-related functions that were housed at the former BISHCA Division of Health Care Administration to the Green Mountain Care Board (GMCB), Department of Vermont Health Access, Health Department and other offices is complete. DFR continues to approve forms, submit solvency opinions to GMCB, resolve consumer complaints and regulate the two insurance companies licensed to write major medical. However, DFR is now turning significant attention to the regulation of other allied health-related insurance products including long-term care, disability, Medicare supplement, accident, specific disease, college plans and medical part of workers compensation insurance. Outcome Indicators: Review of forms will meet Health Benefit Exchange (Vermont Health Connect) deadlines; Meaningful data will be collected and analyzed in support of mandated programs; Review of forms, rates and products relating to products beyond major medical will be enhanced. Success Measures: Consumer access to products that are affordable and underwritten by strong solvency insurance companies. 2. NAIC Accreditation Preparation. The mission of the NAIC accreditation program is to establish and maintain standards that promote sound insurance company financial solvency regulation. For Vermont to maintain its accreditation, it must adopt adequate solvency laws and regulations to protect consumers and guaranty funds as prescribed by the NAIC s model laws and regulations standards committee. Outcome Indicators: In anticipation of its 2015 comprehensive accreditation audit, the Insurance Division will review all insurance laws and regulations to determine whether any changes need to be made to be in compliance with updated NAIC requirements.

19 Fiscal Year 2015 Department Strategic Overview Department of Financial Regulation (DFR) Page 14 of 23 Success Measures: Adoption of new statutes and regulations in the 2014/2015 Legislative sessions will maintain Vermont s accreditation. 3. Establish Legacy Insurance Management Act (LIMA) licensing program. LIMA law creates new Vermont insurance companies that specialize in managing closed blocks of commercial non-admitted insurance. Outcome Indicators: The new LIMA law will require the Company Licensing section to establish application procedures to accept, review, license and monitor these new companies. Success Measures: Licensing of new companies. Major Functions by Section Company Licensing and Examinations: The purpose of insurance company licensing, examination and financial analysis is to ensure that consumers purchase insurance from companies that are fiscally responsible. The Insurance Division s Company Licensing Section oversees approximately 1,200 licensed insurers doing business in Vermont. Of these, 17 traditional insurers are domiciled in Vermont. The Division maintains a financial examination program under which the 17 insurers domiciled in Vermont are reviewed on-site every three to five years. Routine financial analysis of the insurance companies is also conducted by the Division and involves the review and monitoring of the financial statements routinely submitted to the Division, as well as other information. Impact/Outcome Indicators: The availability of all insurance coverages to Vermonters from financially stable companies plus the collection of the required licensing fees. Staff Members: Six full-time classified staff members.

20 Fiscal Year 2015 Department Strategic Overview Department of Financial Regulation (DFR) Page 15 of 23 Market Regulation Section: The purpose of the Market Regulation function is to ensure that licensed insurance companies and individuals conduct business in accordance with Vermont s laws and regulations. To accomplish this, periodic investigations and market conduct examinations aimed at insurance trade practices are conducted. The cost of the investigations and examinations are billed back to the insurance companies. Impact/Outcome Indicators: Timely completion of all investigation and examination; The correction of identified areas of non-compliance with Vermont s laws and regulation and appropriate referral to the legal department for enforcement. Staff Members: Three full-time classified staff members. Individual/Producer Licensing Section: The Producer Licensing Section has the responsibility of licensing insurance professionals. Licenses are issued to various categories of insurance professionals including producers/salesmen, adjusters, appraisers, consultants, public adjusters, managing general agents, reinsurance intermediaries, surplus lines brokers and life settlement brokers. Most of the section s operations have transitioned to the digital age in recent years, which is more efficient for the Division and the industry alike. Impact/Outcome Indicators: Professional licenses issued and the related fees collected. Staff Members: Three full-time classified staff members.

21 Fiscal Year 2015 Department Strategic Overview Department of Financial Regulation (DFR) Page 16 of 23 Consumer Services Section: Consumer assistance provided by the Division centers on resolving complaints from Vermont s citizens and business in one-on-one fashion. The Division s staff also provides consumer education and guidance of various types to consumers including comparative information about insurance rates and products in the marketplace. Impact/Outcome Indicators: Complaint issues resolved promptly and refunds arranged for consumers; Referrals to Market Conduct when appropriate. Staff Members: Five full-time classified staff members. (One limited service position under recruitment under the federal exchange grant.) NOTE: The Producer Licensing and Consumer Sections are supervised by the same director who also has an administrative assistant reporting to him; there are two additional full-time classified staff members.

22 Fiscal Year 2015 Department Strategic Overview Department of Financial Regulation (DFR) Page 17 of 23 Nature of Complaint by Coverage Level Consumer Assistance Section Annual Statistics January 1, 2013 December 31, 2013 Summary of Written Inquiries and Complaints Totals Inquiries Opened 3702 Written Complaints Opened 448 Dollar Amount Recovered for Consumers $662,757 Average Days to Close Complaint 31 4% Liability 14% Homeowner 11% Life & Annuity 5% Miscellaneous 33% Auto 30% Health 3% Fire Nature of Complaint by Percentage 14% Policyholder Service 11% Underwriting 4% Marketing and Sales 71% Claim Handling

23 Fiscal Year 2015 Department Strategic Overview Department of Financial Regulation (DFR) Page 18 of 23 Division of Insurance Consumer Assistance Section Summary of Average Processing time by Coverage Type Comparisons for 2010, 2011, 2012 and 2013 Miscellaneous* Life Liability Home Fire Auto Health * Includes Workers Compensation, Bail Bond, Travel, Warranty etc.

24 Fiscal Year 2015 Department Strategic Overview Department of Financial Regulation (DFR) Page 19 of 23 Rate/Form Filing Review Section: The function of the Rates and Forms Section is to review and approve policy forms and certain rate filings for insurance companies licensed to do business in Vermont. The Rate and Forms Section also monitors and analyzes the insurance market in Vermont relating to most lines of Property and Casualty insurance, maintains statistical reporting of the industry provides technical data support to the Consumer Complaints Section and reports and testifies on a wide range of insurance issues to the legislature. As of January 2014, the Rates Section no longer reviews major medical health insurance but rather submits a solvency opinion to the Green Mountain Care Board. Impact/Outcome Indicators: Rate and forms filings reviewed and the related fees collected. Staff Members: Ten full-time classified staff members. Health Insurance Policy Section: This section interfaces with the Office of Health Care Reform, Health Insurance Exchange and other state agencies in the development of operational and policy analysis concerning health insurance reform. This is a federallyfunded program. Impact/Outcome Indicators: Meet Health Insurance Exchange deadlines for January 1, 2014/15, operations. Staff Members: Four full-time limited service staff members; one full-time classified staff members. NOTE: The Deputy Commissioner of Insurance supervises an executive assistant. Staff members: One full-time exempt position. One full-time classified position.

25 Fiscal Year 2015 Department Strategic Overview Department of Financial Regulation (DFR) Page 20 of 23 Captive Insurance Division: The mission of the Captive Insurance Division is to maintain a regulatory system that attracts quality business to Vermont, promotes our reputation in the industry, and ensures the solvency of captive insurers while recognizing the special purpose for which they were created. The Division pursues this mission by: Attracting and licensing quality programs whose primary purpose is risk management or risk financing; 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. The vision of the Captive Insurance Division is to ensure that Vermont captive insurance laws and regulations are upheld, while maintaining flexible and fair policies and procedures. The Division will license quality insurance programs, and monitor the regulatory compliance and financial solvency of captive insurance companies licensed in Vermont. The Division will maintain a visible presence in the Captive Insurance community while promoting and defending Vermont s status as the premier captive insurance domicile in the United States. Division Overview A captive insurer is a company owned and managed by its policyholders, thereby enhancing their ability to control costs and tailor an insurance program to suit their individual needs. The number of captives in Vermont continues to grow. More than 1,000 captives have been formed in Vermont since 1981, and there are nearly 590 captive insurance companies active today. The Division collects fees for their licensing and examination activities. Captive insurers create an estimated 1,400 jobs and generate premium taxes for the state. In FY2013, captive insurance companies paid approximately $24.8 million in premium taxes to Vermont, and paid $2.3 million in examination and licensing fees.

26 Fiscal Year 2015 Department Strategic Overview Department of Financial Regulation (DFR) Page 21 of 23 The Captive Insurance Division strives to carry out its regulatory responsibilities and respond to inquiries from the Governor, the Legislature and the public in a timely, efficient and effective manner. The Division licenses new captive insurers, oversees captive insurer regulation, performs annual and quarterly captive insurer financial analysis, and performs statutory financial examinations. The following describes the Divisions strategic goals for 2015: 2015 Division-Wide Goals and Objectives The Captive Insurance Division has identified three division-wide goals to focus on in 2015: 1. Improve the Division s ability to respond to data requests, increase security of data, improve reporting capabilities through the replacement of PARADOX database. Identify the Division s needs for data and information storage, use, and security; Identify interests parties data needs/wants; Identify potential new tools that could be used by replacing PARADOX and other tools currently in use. Success Measures: PARADOX and other systems will be replaced. 1. Update the Vermont Captive Annual Report. Develop summary information input form for electronic filing of data. Enable electronic filing of data to eliminate transcription hours and improve accuracy; Reduce time to market of industry data. Success Measures: Electronic filing of 2015 annual statement summary data will be rolled out.

27 Fiscal Year 2015 Department Strategic Overview Department of Financial Regulation (DFR) Page 22 of 23 Securities Division: The Securities Division administers the Vermont Uniform Securities Act (9 VSA Chapter 150) (the Securities Act ), which is designed to protect Vermont investors and to assist in the legitimate formation of capital. 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, including: Reviewing and registering securities offered to Vermont investors; Registering securities broker/dealers, investment advisors, and their representatives; Examining/auditing the above for compliance with the law; Granting exceptions from registration, where appropriate; Investigating potential violations of the securities laws; Bringing administrative or civil actions against violators of the securities laws; Responding to investor complaints; Educating investors and industry participants about the securities laws, and; Creating policy and regulations that further the mission. The Securities Division s vision is to ensure that Vermont investors will have increased confidence in the securities markets and will become more likely to participate, because they will know that: They receive the most governmental protection possible from fraudulent or illegal securities activity which enjoying opportunities to invest in worthy projects in the Vermont market; Investment professionals in their community are being routinely examined; They can seek assistance from the Securities Division, if they have been harmed and be assured that the Division will effectively assist them, and; They can learn about securities and investing through the Division s comprehensive educational outreach and excellent Consumer service.

28 Fiscal Year 2015 Department Strategic Overview Department of Financial Regulation (DFR) Page 23 of Division-wide Goals and Objectives The Securities Division is being reorganized through the addition a fully-dedicated Deputy Commissioner of Securities (as of February 2014). For the past six years, the Division was supervised by the Deputy of the Banking Division. It is important for this Division to have its own deputy again, so that greater attention to active management and industry trends are possible. Therefore the only goal for the Securities Division is to complete its reorganization. This will result in success measures such as: Proper alignment and number of staff job descriptions with actual work, Continued upgrade and use of technology, Modernization of law and regulations, Participation in economic development initiatives including investment and capital needs of Vermont businesses, Participation in pilot DFR Elder Financial Abuse initiative.

29 DFR Receipt Summary Transfers of Excess Revenue to General Fund from DFR FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 Insurance Fund $15,085,828 $2,504,802 $15,115,558 $4,396,406 $15,901,411 Captives Fund $810,051 $557,996 $577,217 $813,524 $0 Securities Fund $3,949,720 $3,723,741 $4,749,807 $4,844,854 $4,818,258 Total $19,845,598 $6,786,539 $20,442,582 $10,054,784 $20,719,669

30 DFR Receipt Summary DFR Receipt Summary Estimated 2015 Estimated Estimated Estimated Excess Division Receipts Expenditures Receipts to General Fund Banking Division $1,811,500 $1,807,092 $4,408 Insurance Division* $22,594,886 $6,906,858 $15,688,028 Captive Insurance Division $5,162,125 $4,311,639 $850,486 Securities Division $6,200,000 $671,042 $5,528,958 Health Care Admin Division $2,067,645 $0 $2,067,645 Administration Division $0 $1,957,584 ($1,957,584) Total $37,836,156 $15,654,215 $22,181,941 Transfers to Other State Departments/Programs $3,546,242 Total Estimated Excess Receipts FY 2015 $18,635,699 *includes Global Commitment funds, State Healthcare Fund and Federal Funds Updated 1/21/2014

31 DFR Receipt Summary Other Revenue from Regulated Entities - FY 2013 Actuals DFR Direct General Fund Deposits FY 2013 Actual Securities Division Securities Dealers $616,000 Securities Registrations $14,298,900 Securities Branch Offices $73,600 DFR Fines $1,034,512 Total DFR Direct General Fund Deposits $16,023,012 General Fund Receipts from Entities Regulated by DFR FY 2013 Actual Captive Insurance Premium Taxes $24,840,953 Insurance Premium Taxes $32,676,544 Banks Franchise Tax $10,684,266 Total General Fund Receipts from Entities Regulated by DFR $68,201,763 FY 2013 Total $84,224,775

32 DFR Receipt Summary DFR Transfers to State Government FY 2014 Insurance Fund Captives Fund Securities Fund Health Care Regulatory Fund Economic Development $630,350 Fire Training Council $30,000 Global Commitment Fund $863,847 Green Mountain Care Board VT Department of Health (VPQHC Contract) Total $893,847 $630,350 $0 $2,022,045 DFR Total Transfers $3,546,242 updated 1/21/2014

33 DFR Receipt Summary Page 1 of 9 Financial Institution Supervision Fund (Banking) FY 2013 FY 2014 FY 2015 NAME OF Actual Estimated Estimated RECEIPTS SOURCE Receipts Receipts Receipts Debt Adjusters $15,900 $11,000 $11,000 Licensed Lender (Lic) $545,300 $490,000 $540,000 Licensed Lender (Inv) $137,737 $55,000 $55,000 Mortgage Broker Fee (Lic) $110,100 $100,000 $100,000 Mortgage Broker (Inv) $27,575 $43,000 $43,000 Mortgage Loan Originator (Lic) $109,750 $110,000 $110,000 Mortgage Loan Originator (Inv) $17,800 $10,000 $10,000 Banks & Trusts $0 $0 Credit Unions $950 $500 $500 Develop Credit Corps $3,600 $5,000 $5,000 Sales Finance (Inv) $9,800 $7,000 $7,000 Sales Finance (Lic) $48,750 $40,000 $40,000 Money Services (Lic) $13,025 $30,000 $30,000 Money Services (Inv.) $33,500 $30,000 $30,000 Special Purpose & Indep. Trust (App) $18,550 $0 $0 Special Purpose & Indep. Trust (Inv.) $0 $100,000 $100,000 Loan Servicer (Lic) $201,000 $150,000 $150,000 Loan Servicer (Inv.) $81,800 $60,000 $60,000 Abandoned Property $0 Total: $1,375,137 $1,241,500 $1,291,500 Fund Carryforward $200,000 $0 $0 Other Income Carryforward Prior Year Assessment $100,000 $100,000 March Assessment $575,560 $350,000 $370,000 Money Servicers Assessment $43,624 $30,000 $50,000 Total Other Income $619,184 $480,000 $520,000 Total Banking Available Funds $2,194,321 $1,721,500 $1,811,500 1/21/2014

34 DFR Receipt Summary Insurance Regulatory and Supervision Fund FY 2013 FY 2014 FY 2015 NAME OF Actual Estimated Estimated RECEIPTS SOURCE Receipts Receipts Receipts Brokers & Agents $16,093,956 $4,100,000 $16,020,000 Company Licensing $486,500 $550,000 $550,000 Company Examination $259,998 $150,000 $150,000 Rate & Form Filing $416,975 $400,000 $400,000 Market Conduct Exams $128,576 $200,000 $200,000 Misc. (Abandoned prop., travel) $0 $0 $0 Retaliatory Fees $4,806,621 $3,200,000 $3,580,000 Total Insurance Fund: $22,192,625 $8,600,000 $20,900,000 Other Global Commitment Fund $234,017 $0 $0 IDT from DVHA (Health Care Exchange) $452,707 $426,027 $286,076 VT Healthcare Fund $38,821 Federal Revenue Fund $1,268,147 $1,504,283 $1,369,989 Total Other $1,954,871 $1,930,310 $1,694,886 Carryforward $0 $0 $0 Total Funds Available $24,147,496 $10,530,310 $22,594,886 Updated 1/21/2014

35 DFR Receipt Summary Captive Insurance Regulatory & Supervision Fund FY 2013 FY 2014 FY 2015 Actual Estimated Estimated Receipts Receipts Receipts Registrations $468,234 $455,000 $455,000 Examinations $1,804,042 $2,150,000 $1,975,000 Dept Share of Premium Tax $2,494,113 $2,732,505 $2,732,125 Total: $4,766,389 $5,337,505 $5,162,125 Prior Fiscal Year Carryforward $0 $0 $0 Total Available Receipts $4,766,389 $5,337,505 $5,162,125 1/21/2014

36 DFR Receipt Summary Securities Regulatory and Supervision Fund FY 2012 FY 2014 FY 2015 Actual Estimated Estimated Receipts Receipts Receipts Salepersons $6,496,100 $6,100,000 $6,175,000 Investigations $0 $25,000 $25,000 Total Available Funds $6,496,100 $6,125,000 $6,200,000 1/21/2014

37 DFR Receipt Summary Health Care Regulatory and Supervision Fund FY 2013 FY 2014 FY 2015 Actual Estimated Estimated Receipts Receipts Receipts Medicaid $0 $100,000 $100,000 Hlth Care Admin $0 $0 $0 Certif of Need $80,684 $56,091 $53,840 VPQHC $573,094 $660,000 $660,000 Industry Assessment $315,937 $498,000 $1,050,805 Quality Assurance $148,939 $165,000 $150,000 Medicare Supp $0 $38,000 $38,000 Mental Health U/R Lic. $5,400 $4,000 $4,000 Mental Health U/R $0 $30,000 $0 External Appeals $8,142 $12,000 $10,000 Hca Investigation Costs $0 $0 $0 HCA Provider Network Reg. Fee $0 $1,000 $1,000 Total HCA Fund: $1,132,196 $1,564,091 $2,067,645 Other Income Carryforward $80,521 $0 $0 Global Commitment Fund $425,527 $0 $0 Transfers (DVHA) $370,000 $0 $0 Federal Grants $236,136 $0 $0 Total Other Income $1,112,184 $0 $0 Total Funds Available $2,244,380 $1,564,091 $2,067,645 1/21/2014

38 Fiscal Year 2015 Development Form - Department of Financial Regulation General $$ s Special $$ Misc. Grant Federal $$ Interdept'l Global Total $$ Transfer $$ Commitment Approp #1 Banking Division: FY 2014 Appropriation 1,673,670 1,673,670 Personal Services 21,222 21,222 Proposed Financial Examiner II position 69,792 69,792 Operating for proposed examiner 3,500 3,500 Internal Service Funds (VISION, DII, Risk Management) 1,080 1,080 Operating increase (accredidations, travel, registratrations for 29,204 29,204 training) Rental increase 8,624 8,624 Subtotal of increases/decreases 0 133, ,422 FY 2015 Governor Recommend 0 1,807, ,807,092 Approp #2 Insurance Division: FY 2014 Appropriated 4,590,443 1,504, , ,946 6,686,699 Personal Services 212,814 (51,007) (131,936) 29,871 reduction of 2 positions (83,287) (67,962) (151,249) 4 new positions - approved in SFY13 221,425 99, ,372 2 positions moved to Admin (152,456) (152,456) Paying for AoA position - moved from Health Care Appropriation 132, ,712 GC being used in GMCB (165,946) (165,946) Funding of position in VDH as IDT 76,000 76,000 Exchange Contract 85,000 85,000 Internal Service Funds (VISION, DII, Risk Management) 24,826 24,826 Rental increase 20,029 20,029 Rental funded with Insurance fund when Exchange ends 125,000 (125,000) 0 Subtotal of increases/decreases 0 660,350 0 (134,294) (139,951) (165,946) 220,159 FY 2015 Governor Recommend 0 5,250, ,369, , ,906,858 Approp #3 Captive Insurance Division: FY 2014 Appropriated 4,278,475 4,278,475 Personal Services 9,355 9,355 Internal Service Funds (DII, Risk Management) 10,840 10,840 Rental increase 12,969 12,969 Subtotal of increases/decreases 0 33, ,164 FY 2015 Governor Recommend 0 4,311, ,311,639 Approp #4 Securities Division: FY 2014 Appropriated 714, ,505 Personal Services (vacancy savings, health ins. Increase, etc) (48,690) (48,690) Internal Service Funds (VISION, DII, Risk Management) Rental increase 4,300 4,300 Subtotal of increases/decreases 0 (43,463) (43,463) FY 2015 Governor Recommend 0 671, ,042 Approp #5 Health Care Administration Division FY , ,172 Appropriated Personal Services moved to Insurance (127,672) (127,672) Operating for AoA position moved to Insurance (4,500) (4,500) $0 Subtotal of increases/decreases 0 (132,172) (132,172) FY 2015 Governor Recommend Approp #6 Administration Division: FY 2014 Appropriated 1,840,251 1,840,251 Personal services 58,579 58,579 2 positions from Insurance - net 0 152, ,456 Robert Wood Johnson grant ended (66,131) (66,131) Internal Service Funds (HR) (27,571) (27,571) Subtotal of increases/decreases 117, ,333 FY 2015 Governor Recommend 0 1,957, ,957,584 DFR FY 2014 Appropriated 0 13,229, ,504, , ,946 15,325,772 TOTAL INCREASES/DECREASES 768,634 0 (134,294) (139,951) (165,946) 328,443 DFR FY 2015 Governor Recommend 0 13,998, ,369, , ,654,215 15,654,215

39 FISCAL YEAR 2015 BUDGET DEPARTMENT PROGRAM PROFILE DEPARTMENT: DFR Financial Regulation Name and brief narrative description of program (not to exceed 2 sentences for each) GF $$ Spec F (incl tobacco) $$ Fed F $$ Global Commitment All other funds $$ Total funds $$ Authorized Positions Banking Division Exams & Investigations all regulated Entities FY 2013 expenditures Examinations and investigations for: safety and soundness, trusts, EDP, and regulatory $1,080,375 $1,080, FY 2014 estimated expenditures compliance for all entities $961,995 $961, FY 2015 budget request $1,084,255 $1,084, Legislative/Legal/ Enforcement Legislative support; legal services; and legal FY 2013 expenditures $108,038 $108, support of enforcement actions. FY 2014 estimated expenditures $96,200 $96, FY 2015 budget request $144,567 $144, Regulatory/Licensing FY 2013 expenditures $248,573 $248, Licensing of regulated entities. FY 2014 estimated expenditures $235,208 $235, FY 2015 budget request $289,135 $289, Regulation/Insitution Changes Chartering and institutional changes submitted by FY 2013 expenditures $75,540 $75, regulated entities. FY 2014 estimated expenditures $53,391 $53, FY 2015 budget request $48,249 $48, Consumer Services FY 2013 expenditures Resolving consumer complaints, and providing $216,075 $216, FY 2014 estimated expenditures financial education $256,532 $256, FY 2015 budget request $240,885 $240, Total Banking FY 2013 expenditures $1,728,600 $1,728, FY 2014 estimated expenditures $1,603,325 $1,603, FY 2015 budget request $1,807,092 $1,807,