In the United States, 2007 saw a wider variety of ART vehicles formed compared to previous years, which were dominated by medical malpractice risk retention groups and contractors liability captives for home builders, said Ms. Gray.

"Last year was more of a mixed bag," she noted. "We saw the traditional property-casualty risks from a few Fortune 500 companies; we saw securitization captives for life insurance companies."

There were also branch captives and traditional captives established to write employee benefits, as well as a combination of contractors liability captives and med mal risk retention groups, she added.

Ms. Gray said that because insurance prices are falling, "we don't see the spikes in formations that we've seen in past years during the hard market cycles." She observed that ART growth over the past few years can be attributed to med mal liability RRGs for physician groups and hospital groups.

She added that companies looking to form a captive have become more involved in the decision-making process. Part of that scrutiny is due to Sarbanes Oxley disclosure rules, as well as "the post-Enron environment that most companies operate under," she said. "It's also become more politically correct to be located in the U.S. than some of the offshore domiciles."

A trend she expects to escalate in 2008 is employee benefits captive formations, which had a slow start--noting that so far, 12 companies have completed the process to form a benefits captive, with more than 20 formations anticipated by year's end.

Although risk managers have more choices than ever when looking for a domicile, she said ultimately "there is only capacity for 10 large U.S. domiciles--the others will remain relatively small."

So far, she said, those 10 appear to be Vermont, South Carolina, Washington, D.C., and New York on the East Coast; Hawaii, Arizona, Nevada, Utah and Montana on the West Coast; and one wild card still to be determined.

The following is a roundup of some of the leading domestic domiciles, listed in order of the number of 2007 formations. (See stories on page 22 for updates on offshore options Bermuda and the Cayman Islands.)

o Vermont:

Len Crouse, Vermont's deputy commissioner of captive insurance, who is retiring from the position on June 1, said his state licensed 32 new captives in 2007 compared with 37 in 2006. "I've always said that anything over 30 is good quality, steady growth. The programs we have received are quality, long term."

He added that Vermont also licensed a few RRGs last year. "We've had the reputation that we don't like RRGs, but that's not true," he said. "We have the best RRGs in the country here, and we have close to 80 of them. It's just that we're more particular than some states are with RRGs."

o South Carolina:

In South Carolina, 27 captives were licensed in 2007, compared with 29 in 2006, said Jeff Kehler, the state program manager for Alternative Risk Transfer Services.

"It's interesting that it's the same as last year, when you consider the industry and market rate declines," he said, noting that 2007 also saw the deactivation of 12 companies. The 27 new captives include 18 single-parent; three RRGs; five special-purpose financial captives or securitizations; and one group captive.

"Securitizations continue to be strong for us," he said. "We've done 27 of them so far, which accounts for over $27 billion in premium and reinsurance."

o Arizona:

Stephanie Lefkowski, chief analyst of the state's captive division (serving in the interim following the exit of Captive Administrator Rod Morris to the private sector), said 25 captives were licensed in 2007. In 2006, Mr. Morris reported 22.

She noted the domicile has licensed a total of 106 captives over the last five years, with 94 still active. So far this year, she said two applications are pending, nine are in various stages of review, and four are considering Arizona.

One of the four prospects is a Mexican insurer considering creating a reinsurance vehicle that would be recognized by the Mexican government.

o Nevada:

In 2007, Nevada, which has welcomed ART vehicles since 2001, licensed 22 captives, according to the state's Web site. Of those, half were captives and half were RRGs.

Gary Cooper, deputy commissioner of captive programs with the Nevada Division of Insurance, told National Underwriter in 2006 that the number of licensed captives was 36--with nine being RRGs.

o Delaware:

Delaware, which had captive legislation rewritten in 2005, licensed 10 captives in 2007, giving it a total of 16. "We're most pleased because the majority of the captives were in the sponsored-cell and protected-cell area, which means multiple payers in a single license," said William P. White, administrator of the state's captive program.

He said there has also been substantial interest in securitizations--which is more broad-based under the Delaware law.

Mr. White added that he expects to have six-to-nine captives licensed by the end of the fiscal year, June 30.

o Hawaii:

Craig Watanabe, captive insurance administrator and deputy insurance commissioner with the Insurance Division at Hawaii's Department of Commerce and Consumer Affairs, said that overall, 2007 was a "relatively slow year compared to previous years." Hawaii saw 10 new licenses but also had seven deleted during the year, putting the active license count at 163 at the end of 2007.

"There is a lot more competition, more choice of domiciles, and the commercial market is softening, so I think the combination of those factors has slowed the growth rate of each domicile," he said.

He said Hawaii continues to license Japanese companies, adding one new one in 2007. As of December, Hawaii had a total of 16 Japanese companies licensed, including "large companies such as Nissan, Sanyo and Denso," Mr. Watanabe noted.

o Montana:

Steve Matthews, chief financial examiner, who was also recently named captive coordinator, said that the state licensed 10 captives in 2007, compared with eight in 2006 and three in 2005. The state has a total of 30. (Former captive coordinator John Huth remains in Montana with a different department within the state government.)

Last year, five of the 10 captives licensed were RRGs. Other than that, "there doesn't seem to be any kind of trend," he noted. The new entities included auto warranty, med mal and contractor liability. Geographically, he said, companies forming captives were predominately from the West, including California and Washington.

o Washington, D.C.:

There were seven captives formed in 2007, compared with 11 in 2006, said Dana Sheppard, associate commissioner of the Risk Finance Bureau for the Department of Insurance Securities and Banking in Washington, D.C.

Although the District of Columbia has licensed 36 RRGs--the second-largest number--captive growth has slowed down for several reasons. Part of that is the softening market, but the domicile also is looking harder at applications--especially those for RRGs, he noted.

He explained that as the market has softened, some captive managers are taking on clients with less than solid business plans. "We could have gotten up to 15 if we had taken all the companies that applied to us," he said. "We put the brakes on; we're being more selective."

In some cases, he said, program managers or managing general agents operating RRGs "have more control than the captive managers." This can present a problem if business plans are changed without the department's knowledge or a market conduct issue if people don't know where to file a claim, he noted.

o New York:

Jody Wald, coordinator of the captive group for the New York Department of Insurance, reported six new captives in the Empire State in 2007, compared to the same number in 2006, for a total of 45.

"The trend we're seeing in New York is TRIA captives [covering terrorism exposures]--they're the majority," Mr. Wald said.

He added that New York is attempting once again to get captive legislation passed that would lower the financial threshold for parents, allowing more companies to open up captives. "We have our fingers crossed, we hope and pray," he said.