Mr. White noted that Vermont is still seeing general liability, workers' compensation and professional liability–especially medical malpractice–driving the captive market, but he added that “property is close behind that. It's our third most popular line right now.”

Meanwhile, the property captives from around the country are not limited to coastal and earthquake-prone areas, he noted.

He added that Vermont is also seeing more life insurance “Triple-X” programs. These are life insurance companies that have to post “triple-x reserves (actuarial guideline 830)” he said. “So this is our second, and I expect to see four more by year-end.”

Mr. White explained that laws passed in 2000 and 2001 require life insurance companies to set up “redundant reserves.” The reserves will grow over time as the policy ages, which will create a “real hit on surplus for these traditional life insurance companies,” he said.

So now the companies are forming captives, ceding the business to the captive, “and they can take credit for the reinsurance,” he explained.

He noted that the Triple-X captives could lead to securitization in captives in Vermont.

“It's being done offshore now, and we might do our first before year end,” he said. “It's allowed in Vermont, but our law doesn't specifically state it, so we are going to adjust our statute in 2007 to include securitization.”

New legislation, he said, should bring in even more captives, and “these are big-dollar captives–the programs are in the hundreds of millions of dollars.”

Mr. White said that medical malpractice captives are still being formed, noting that Vermont now has almost 90 captives writing professional liability for hospitals and doctors.

“I can tell you that premium for that was almost $1.4 billion in 2005, which will increase this year,” he said. “So I've heard rumors that Vermont doesn't do med mal–but it's not the case.”

Mr. White added that Vermont licensed two risk retention groups this year, and has a total of 78 active RRGs.

Dennis P. Harwick, president of the Captive Insurance Companies Association, said the soft market doesn't seem to be an issue with captive owners and managers.

“I've been at [captive] conferences, and that has not been an issue of significant discussion.” He said that although the soft market is a hot topic in the insurance industry press, “it hasn't been a big deal, at least in the captive conference circles.”

Molly Lambert, president of the Vermont Captive Insurance Association, agreed that the softening market seems to be having little effect on captive formations.

She said that at a recent captive insurance seminar in Atlanta–held for captive owners and those interested in forming a captive–a captive owner stated that, “If I didn't have my captive already, this is the time I would be forming it. Your decision-making [for forming a captive] should be affected by the long-term risk management strategy for your company. And the volatility of the market, though it plays in your decision-making, shouldn't be the dominant factor.”

William P. White, who became administrator for the captive insurance program at the Delaware Department of Insurance on Aug. 1, said that in the past, the primary motivating factor for forming a captive was tightening coverage terms and conditions.

“Captives were looked at as a way to do things in the marketplace that couldn't be done in the traditional market, at the desired terms and conditions,” he said. But now, he added, captives are being viewed as a “vehicle for transactions that may be needed to take advantage of any market cycle.”

While coverage is still an issue, he said, “it's now price, coverage and capacity issues. So the need to be in a position to take advantage of opportunities as they come about–to have the right capacity to take care of it–is one of the primary motivators now.”

Mr. White said he expected the captive market to begin heating up in Delaware in 2007. “I'd like to make sure that Delaware is very much on the minds of people who are forming captives, to think of us along with the other domiciles,” he said.

Delaware has had captive statutes on the books for 20 years, but revamped its captive law in June of this year.

Rod Morris, captive insurance administrator with the Captive Insurance Division of the Arizona Department of Insurance in Phoenix, said interest in captives in his state remains high. The domicile, which began accepting captives in 2002, now has 78 captives and “may have another half-dozen by the end of the year,” he said.

Mr. Morris said Arizona's focus is in cleaning up its statute language. “There is a proposal for a cleanup,” he said, adding that there is also a proposal to allow branch captives, initiated by the Arizona Captive Insurance Association, which will try to find a sponsor in the legislature.

Mr. Morris said that although most of the captives are from California and Arizona companies, other states represented include Florida, Illinois, Indiana, New Hampshire, New Jersey, Ohio, Rhode Island and Texas.

The majority of captives in Arizona are being used mostly for professional liability coverage, he noted, although he also sees entities forming for contractors, homebuilders liability and construction defect coverage. “We have about a half-dozen contractors and homebuilders,” he noted. “We see quite a few. This is a trend–there will be more of these.”

Michael R. Mead, a member of the board of the Arizona Captive Insurance Association, observed that he has not seen a slowdown in inquiries or formations of captives despite the softening commercial market.

During a soft market, “you can often get a better deal from your risk-transfer partners for risk sharing, policy issuance, and excess and reinsurance, and your better deal carries over, hopefully into the hard market,” said Mr. Mead, who is also president of Crusader Captive Services in Chicago, Potomac Captive Managers in Washington, D.C., Meeting Street Management in South Carolina, and Sonora Captive Managers in Arizona.

He noted that captives are being formed, not necessarily for lower premiums, “but for cost-efficiency and to control the use of your dollars, and you're likely to get more cooperation in a soft market than a hard market.”