Vermont Department of Financial Regulation Proposed Budget Information Fiscal Year 2019 Michael S. Pieciak, Commissioner David F. Provost, Deputy Commissioner of Captive Insurance Christina Rouleau, Deputy Commissioner of Insurance William R. Carrigan, Deputy Commissioner of Securities Molly Dillon, Deputy Commissioner of Banking
Department of Financial Regulation FY 2019 SUMMARY & HIGHLIGHTS FY 2019 Governor’s Recommend Budget • Strong leadership team in place to maintain Department’s reputation for excellence • Employees: engaged/experienced/proactive Governor's Recommend Budget FY 2019 ($ millions) • National recognition for the strength of our insurance and captive insurance divisions ISF, $15.1, 100% • Maintained staffing levels despite workload increase through cost effective IT solutions • More revenue generated in FY2017 than ever before in the Department's history • Reduction of two positions in FY2019 • No new funding requests in FY2019 • 1.5% budget increase due to contractual obligations
Fiscal Year 2019 Department Strategic Overview Department of Financial Regulation (DFR) DFR Mission and Overview Facilitate strong, stable and competitive financial markets within the state while protecting the financial welfare of Vermont consumers and investors. Commissioner's Office Captive Securities Banking Insurance Insurance Division Division Division Division 3
Fiscal Year 2019 Department Strategic Overview Department of Financial Regulation (DFR) Department Head Count Vermont Department of Financial Regulation Division Total Positions FY2018 FY 2019 Administration Division 9 9 * Commissioner's Office 9 9 General Counsel's Office 16 16 Banking Division 34 33 Captive Insurance Division 31 30 Insurance Division 8 8 Securities Division 107 105 Total * 2 IT professionals report to ADS but will be paid by DFR 4
Fiscal Year 2019 Department Strategic Overview Department of Financial Regulation (DFR) Captive Insurance Division Mission (1) maintain and continually improve regulatory regime; (2) promote Vermont’s “gold standard” reputation; and (3) ensure solvency while recognizing a captive’s unique purpose $24 million premium tax 24 new captive formations in 2017 $2.5 million exam and registration fees Including Barclays moving from New York Awarded top US domicile 3 rd year running 19 approved captive managers 566 active captive insurers #1 domicile in the world by premium volume 5
Fiscal Year 2019 Department Strategic Overview Department of Financial Regulation (DFR) Insurance Division Mission (1) maintain affordable and available insurance; (3) facilitate reasonable and orderly competition (2) ensure insurers meet their promises; (4) prevent unfair and unlawful business practices Last five years consumer services received: 21 Vermont domiciled insurance companies 17,381 inquires & 2,301 complaints 1453 licensed insurers doing business in Vermont Returned $1,544,600 to Vermonters Paid $35 million in premium tax in FY2017 210 Vermont insurance agencies & 3,383 agents Last five years market conduct investigations: 3,398 foreign agencies & 124,643 foreign agents $1.3 million in penalties returned over $8 million to Vermonters 6
Fiscal Year 2019 Department Strategic Overview Department of Financial Regulation (DFR) Securities Division Mission (1) protect Vermonters from fraud (2) promote the development of Vermont’s capital markets Investigations led to: 1,256 BD Firms & 105,096 BD Agents $2,327,043 in penalties 998 IA Firms & 1,521 IA Representatives $5,119,887 in restitution Annual desk examination for all IA Firms Jay Peak Settlement (working with federal 14 firms received follow up regarding receiver) - $150 million cybersecurity procedures Paid $8.9 million to vendors and contractors $19 million to complete Jay Peak Projects 7
Fiscal Year 2019 Department Strategic Overview Department of Financial Regulation (DFR) Banking Division Mission (1) promote the safety, soundness, and stability of Vermont’s Banks, Credit Union and Licensees (2) encourage competition and availability of financial services (3) provide consumer protection and education 6 state chartered banks 13 state chartered 260 companies hold 1,675 licenses 2,537 individuals hold licenses 3 state trust companies credit unions Last five years consumer services received: Completed 134 examinations in 2017 6,604 inquires & 1,100 complaints 3 banks, 7 CUs, 2 trust co, 122 licensees Returned $353,966 to Vermonters 8
Fiscal Year 2019 Department Strategic Overview Department of Financial Regulation (DFR) FY2018 Department Goals Measuring Success: • Established working group with Department-wide FY 2018 Goal: representation • Conducted internal cyber assessment of the Department Establish Cybersecurity Working Group • Department will host inaugural industry roundtable on May 17, 2018 • Hiring Champlain College intern majoring in cybersecurity to assist Working Group to develop and deliver employee training Measuring Success: FY 2018 Goal: • Established working group with Department-wide Establish Senior Safe Task Force representation • Held or participated in 39 outreach events directly reaching 4,976 elderly Vermonters • Released 6 consumer alerts regarding new scams • Successful passage of enhanced financial penalties for fraud against older Vermonters 9
Fiscal Year 2019 Department Strategic Overview Department of Financial Regulation (DFR) FY2018 Department Goals Measuring Success: FY 2018 Goal: • Established working group with Department-wide Establish Economic Development through representation Regulatory Innovation Working Group • One of five states participating in national pilot program incorporating RegTech into Department operations • Commissioner chairing national FinTech Committee • Identified insurance linked securities as possible growth area and examining feasibility Measuring Success: FY 2018 Goal: • Established working group with Department-wide Establish DFR Operations Working Group representation • Improved internal communications – established monthly newsletter & internal circulation of press releases • Identified facility needs – carpet replacement in insurance and banking division underway • Analyzing potential efficiencies in Department-wide vs divisional operations 10
Fiscal Year 2019 Department Strategic Overview Department of Financial Regulation (DFR) FY2018 Captive Insurance Division Goals Measuring Success: FY 2018 Goal: • Goal to complete and issue exam within 180 days Improved: 288 days (2010) to 172 days (2017) Conduct efficient, timely and effective examinations o • Goal to complete 100 examinations and surveillance of licensed captives and their parent companies. Continue implementation of reduced Completed 124 examinations in 2017 o • examination program and examination report for pure Goal to decrease examination costs captives; Re-design and fully document procedures Provide the most cost-efficient examinations in nation o for pure captive surveillance (financial monitoring); by premium volume Continually amend examination processes and Examination costs have decreased considerably over o statutes/regulations to conform to NAIC standards. past 5 years: 2012 o Average RRG exam 424 hours, $43,500 o Average Pure exam 135 hours, $11,500 2017 o Average RRG exam 329 hours, $36,200 (22% hours decrease) o Average Pure exam 114 hours, $11,000 (16% hours decrease) 11
Fiscal Year 2019 Department Strategic Overview Department of Financial Regulation (DFR) FY2018 Insurance Division Goals Measuring Success: FY 2018 Goal: 5 th least expensive – personal auto insurance • Improvement from 7 th least expensive Ensure Vermonters Have Access to High o 11 th least expensive – homeowners’ insurance • Quality Insurance Products Maintained competitive positioning o • 7.9% rate decrease - workers’ compensation insurance First rate decrease in two years and largest rate decrease in o more than eight years • A+ awarded Vermont insurance regulation – R Street Institute Only state to receive A+ in 2017 & 2016 o Fourth straight year to receiving highest score in the country o Measuring Success: FY 2018 Goal: • Completed 7 financial examinations in 2017 surpassing the goal of 4 examinations Timely Complete NAIC Mandated • Completed 5 multi-state market conduct examinations in Examinations 2017 surpassing the goal of 2 examinations • Completed 14 other market conduct examinations in 2017 and opened 17 new market conduct examinations • Timely completed all quarterly and annual surveillance monitoring • Timely completed annual NAIC pre-accreditation filing 12
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