Concerning the impact of Mr. MacKay's arrest, Mr. Provost, interviewed at the Captive Insurance Companies Association conference here, said, “There are bound to be changes in what we do as a result.”

Brian Donovan, president of STICO Mutual, a risk retention group (RRG) domiciled in Vermont, said he was concerned with the affect the alleged embezzlement might have on captives.

He explained that the Vermont legislature, which has backed the industry there, could as a result be more hesitant to pass captive regulations in the future.

He also is concerned that the National Association of Insurance Commissioners (NAIC)–still looking into the Government Accountability Office (GAO) report on RRGs–and state legislators could sharpen their focus on captives.

Other ramifications, he said, might be that captive domiciles that currently don't get involved in approving, testing and certifying captive managers could tighten their controls. This could result in a rise in the cost of audits and in management companies spending more time with auditors to justify their numbers.

“What this amounts to,” Mr. Donovan said, “is that captive owners aren't guilty, but we will have to pay for it.”

He said another issue that could arise is that directors of the captive boards might be seen as liable, bringing directors and officers liability insurance coverage into play. The result could be more pressure applied to captive owners by their boards, he said.

Mr. Donovan added: “And if Vermont is the strongest captive domicile, what about the smaller domiciles that don't have [Vermont's] infrastructure? Do we need to worry about them?”

A spokesperson for Willis said Mr. MacKay is no longer working for the firm and released the following statement: “Willis discovered financial irregularities involving [Mr.] MacKay and undertook an immediate internal investigation. The company contacted federal law enforcement authorities and is working with them to resolve the matter.

“The amount of financial exposure for Willis is not material. Willis has a zero tolerance policy for any kind of unlawful, fraudulent behavior by its associates.” (NU Online News Service, March 5.)

Willis Management (Vermont) manages captive programs and is a subsidiary of Willis North (America), a unit of London-headquartered Willis Group Holdings.

Mr. MacKay is accused of diverting funds deposited into Willis accounts to a shell corporation he created from 2004-2008. He appeared on Monday in federal court and was released after surrendering his passport.

He is alleged to have diverted more than $2.2 million into RCM Financial and to have laundered the money by building a residence in Williston and purchasing a condominium in Orlando, Fla.

The U.S. Attorney's Office said after Willis discovered the scheme the brokerage contacted the FBI.