Vermont officials, who licensed 16 new captive insurers last year, about half the number in 2007, said they are focused on “aggressively” growing the sector this year.
David Provost, Vermont's deputy commissioner of captive insurance, said 2008 “was a slower year for captive growth due to economic conditions.” He added, “We continue to see interest in forming quality captives with activity across all lines of business.”
The soft market, the uncertainty created by proposed financially burdensome IRS regulations (since withdrawn), and the current economic conditions were the drivers that slowed formations in 2008, officials said.
New captive formations include 11 pure captives, two special purpose financial captives (SPFC), one new risk retention group, one sponsored captive and one branch captive, bringing the total number of licenses issued in Vermont to 839, according to figures from the Vermont Department of Banking, Insurance, Securities and Health Care Administration (BISHCA).
Some of the companies in the class of 2008 include: Microsoft, Wells Fargo, Boston Properties, Swiss Re, Thermo Fisher Scientific, Darden Restaurants and Winthrop University Hospital.
The state said it is continuing its promotion of and innovation in the captive industry, proposing several new initiatives, including:
o A Premium Tax Holiday ($7,500 reduction in premium tax for captives licensed in 2009 and 2010).
o Increasing the special funds budget to support captives.
o Several technical amendments that affect sponsored captives, letters of credit and accounting standards.
“We will continue to take steps to maintain our reputation as the gold standard of domiciles,” said Governor Jim Douglas. “Even during these tough economic times Vermont recognizes the importance of the captive insurance industry to our state and the need to continue investing in our infrastructure and innovating in our regulation.”
Dan Towle, state director of financial services, said, “At a time when many of our domestic competitors are reducing their resources toward captives, Vermont is making more of an investment to grow this valuable industry.”
Mr. Towle told National Underwriter that captive legislation now in the works maintains its priority status with the Vermont Legislature.
In additional remarks, Gov. Douglas said his administration “remains committed to keeping Vermont the 'Gold Standard' of captive domiciles.” He added, “We held a retail sales tax holiday this past July and saw increased activity; it's our goal to stimulate the formation of new captives in Vermont with this Premium Tax Holiday.”
He noted that the captive insurance industry creates valuable jobs and revenues, providing more than 1,400 full- and part-time jobs for Vermonters.
Interest has continued in health care facility captives. Vermont has nearly 100 captives writing over $1 billion in premiums in medical malpractice coverage. Interest in smaller companies forming captives has also continued.
“Nearly half of our captives in Vermont write $5 million or less annually in gross written premium, and half of those write $1 million or less,” Mr. Towle said.
This trend, he advised, opens the doors for smaller companies looking to take advantage of the captive insurance option.
Vermont is the largest U.S. captive insurance domicile and second largest in the world in terms of gross written premium, with $15.2 billion in 2007. Vermont is the domiciliary state to 44 of the companies that make up the Fortune 100 and 21 of the companies that make up the Dow 30.
More information is on Vermont's captive Web site at www.VermontCaptive.com.
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