Mr. Provost conceded that the economy is “still rotten, but I think things have bottomed out somewhat and are a little more predictable.”

The captives formed, he said, comprise “a little of everything.” So far, four risk retention groups have been licensed–one a re-domestication from South Carolina; another company moved from the Caymans to Vermont; and “we are talking to others that are moving from other states.”

He said he is seeing movement to the state, “and we've lost two ourselves–they moved to Arizona.” The reasons for the loss of these captives, he said, were taxes and location–noting that in both cases, most of the members were already located in the Southwest.

Those moving to Vermont have similar reasons, except for the taxes, he said. “They're not feeling welcome where they are, or it's just not right, or there's no good reason to be there anymore,” Mr. Provost explained.

Others, he said, would “rather have the expense of going to Vermont than the expense of going to the [offshore] islands–and there are some appearance issues there as well.” That's because of the Obama administration's focus on tax havens.

“It's such a broad brush,” that even those who are offshore for the right reasons are cautious, he explained.

The rest of the ART facilities formed in Vermont were pure captives, Mr. Provost said–including one small risk retention group that made the decision to break up into individual pure captives.

“It was a small RRG, and they operated it in a silo fashion,” he explained. “Once you lose one member in a five-member group, the rest take a look, and it made more sense for them to be individuals.”

Coverages being placed into captives include “a little of everything–real estate management, trucking, energy, finance, education,” he reported. “If somebody asked me for a trend, I couldn't name one, other than we have a fair amount of health care–that's the only coverage where there's more than one captive.”

The sizes of companies forming captives ran the gamut as well, “ranging from large to quite small,” he said.

One of the more unusual captives was for one high-profile exposure–the Empire State Building–which formed a captive for property coverage, he said, citing a single-parent captive formed by a company whose sole duty is managing one of New York City's biggest tourist attractions.

Mr. Provost surmised that part of the move toward increased captive formations this year could be that “the word is the [commercial insurance] market is firming up. It's gone past the bottom, and if the prices aren't going up, then maybe terms and conditions are getting tougher.”

He added that the property and casualty insurance market is “hardening in different ways for different lines. That doesn't seem to be a real driver yet–it seems to be one more factor.”

The bottom line is “it's just nice and normal–nobody's panicking and saying, 'we've got to do this tomorrow,” he reported. “Things are moving very smoothly.”

Vermont isn't the only U.S. captive domicile feeling upbeat about the market's direction. In Washington, D.C., Dana Sheppard, associate commissioner of the Risk Finance Bureau for the Department of Insurance, Securities and Banking, observed that activity is looking up in the nation's capital as well. “We're getting more calls, applications and proposals than we would have otherwise,” he said.

He also noted the domicile is getting calls from people previously considering a formation in Delaware, looking at other options in the wake of Captive Administrator William P. White's departure on July 31.

Mr. Sheppard said some domiciles have been hit hard by the economic recession, meaning staff cuts and furlough days for captive departments–a factor people shopping domiciles are considering, he said.

He noted that one re-domestication to D.C. had planned to re-domicile in Arizona from Bermuda, but gave up after a long wait for the application to be reviewed.

He said he also is getting more applications from captive managers on the West Coast, who would normally have gravitated to domiciles in the vicinity.

With all the fluctuations and changes in some domiciles, he said Vermont and D.C. are among the most stable. “It's like running a marathon. You have to hang in there and it's starting to pay off.”

Mr. Sheppard said 19 companies were licensed last year, and he expects to see 20 to 25 this year. So far six companies have been licensed–all pure captives, except for one association captive. A few cell captives also have been licensed, and currently three applications are pending.

As far as trends, Mr. Sheppard said the domicile is seeing more interest in cell captives. For example, he said, Marsh set up a cell facility in D.C. in April, which he said is similar to a rent-a-captive. “They decided to put it here because we have the best cell law,” he said.

There also is some activity with employee benefits captives, and he is having discussions with a few life insurers about securitizations.

“I think people have a lot of things ready to go and I think in the second half–certainly in the last quarter–activity will start to pick up. If the [insurance] market starts to harden like everyone predicts, it will be even better,” he surmised.

In Kentucky–which had a phenomenal year in 2008 with 37 captives formed– Russell Coy II, the state's captive coordinator for financial standards and examinations, said he believes Kentucky was helped by the economic downturn last year. But while activity has slowed down, he said, they haven't stopped.

So far in 2009, he said Kentucky has licensed seven pure captives, two group captives, one RRG and there are half-a-dozen formations in process.

His department has not been spared the impact of the recession, which has starved most states of crucial tax dollars. “We're having a budget crisis like everyone else,” he said, noting the department had cut back early on some expenses, such as travel, and thus was able to add some necessary staff this year.

“I think we are good to handle our growth for the foreseeable future,” he said, observing that while the numbers of examinations will be rising because of the number of captives in the domicile, he is focused on seeing that things run efficiently.