Variable speed limit systems are used to improve the traffic conditions on specific road stretches. This is done by adjusting the speed limits according to current traffic situations. A variable speed limit system usually consist of stationary detectors to estimate the traffic state and variable message signs at predefined locations for the application of new speed limits. Advances in vehicle technology have made it possible to use connected vehicles to improve existing variable speed limit systems. Connected vehicles can continuously transmit information about speed and location. This can be used to get more detailed information about the traffic state. By including information from connected vehicles in a variable speed limit system there is a potential to identify bottlenecks also in between stationary detectors. Further, it is possible to use direct control of the connected vehicles to adjust vehicle speeds towards the new traffic situation. In this study, we propose such a variable speed limit system based on connected vehicles. The aim is to allow for application of variable speed limits in connection with non-recurrent bottlenecks. The proposed system is evaluated with respect to traffic efficiency using microscopic traffic simulation. An incident is simulated as an example of a non-recurrent bottleneck. The traffic performance when the proposed VSL system is applied is compared to the performance without the system. The results indicate that the VSL system manage to improve traffic efficiency in a majority of the simulated cases.