In Delaware and Washington D.C., growth was driven by cell-captive activity, he says.

Young says that formation of 831(b) captives was a driver in some domiciles. These are small captives formed for investment purposes. Their growth in new formations was strongest in Utah, from 54 in 2010 to 69 in 2011.

Young explains that 831(b) captives have been aggressively sold by promoters working through audit firms or estate planners, promising that “'if you have money you should have a captive. Don't worry, we'll find some risk to insure in it,' and I think the numbers reflect that.”

John Lochner, director, Towers Watson, says several issues raised questions among captive owners, including the Dodd-Frank financial-services reform act and, contained within it, the Nonadmitted and Reinsurance Reform Act, designed to focus on the regulation and collection of premium taxes for surplus-lines insurance.

Questions that emerged were whether the act applies to captives and also how might the reform act, directly or indirectly, affect independently procured insurance laws of individual states. While uncertainty remains, he says, the prevailing view of legal and tax experts is that captives are not likely to be impacted.

He adds that state budgetary issues have had some impact on the captive industry, especially in those states where it lessened state captive department staff. He points out that several states have either decided to become captive domiciles or refocus on their existing programs. New Jersey, Connecticut and Tennessee were states that adopted new legislation, he says.

Other issues, he says, are increased scrutiny and regulation, including Solvency II and more focus on enterprise risk management in some domiciles.

“But despite all the headwinds to captive formations or the use of captives,” he says, “these challenges really did not slow down the formation of captives or the expansion of existing captives.”

Young notes that in spite of the economic environment, “The numbers are up substantially.” The total number of active captives increased 5.1 percent from 3,272 in 2010 to 3,440 in 2011.

Young says that mature captives saw strong licensing activity in 2011, which offset dissolutions and re-domestications.

All captive domiciles, he adds, had either positive growth or their numbers were flat. None saw declines in the number of active captives.

Among captive activity for the year:

• Bermuda saw no change.
• Cayman increased 0.1 percent.
• Vermont increased 3.1 percent.
• Utah increased 27.1 percent.
• Hawaii increased 2.4 percent.
• South Carolina increased 2.6 percent.
• Delaware increased 55.6 percent.
• Kentucky increased 7.9 percent.
• Nevada increased 0.8 percent.
• D.C. increased 13.1 percent.
• Arizona increased 1 percent.
• Montana increased 23.9 percent.