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Vermont Captive in the News

From time to time we'll add to the list - and if you have any you'd like to share, send them along. To begin viewing any of these articles, just click on the icon below. Please note, you will need Adobe Acrobat installed on your computer to download some of these files. Click below to download/install Acrobat for free.

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A.M. Best Interview - Dan Towle at the Cayman Captive Forum

AM Best graphic

Dan Towle, Cayman Captive Forum

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Captive Insurance Times: August 11, 2016

We'd like to thank our friends at Captive Insurance Times for the use of this article.


VCIA: Industry Stalwarts Recognised in Awards

By: Becky Butcher

Burlington, Vermont - Stephanie Mapes, Michael Bemi and Dennis Silvia were presented VCIA industry awards by Richard Smith, president of the Vermont Captive Insurance Association (VCIA) during the VCIA Conference keynote session.

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Captive Insurance Times: August, 10 2016

We'd like to thank our friends at Captive Insurance Times for the use of this article.


VCIA: Companies must Re-evaluate Captives

By: Becky Butcher

Burlington, Vermont Captives should re-evaluate risk appetite and exposure at least every five years, according to a panel at the Vermont Captive Insurance Conference.

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Vermont Business Magazine: August 2016

We'd like to thank our friends at Vermont Business Magazine for the use of this article.


Vermont wins top US Domicile for captive insurance for Fourth Year

Burlington, Vermont - The State of Vermont has again been awarded the top US Domicile for “Vermont’s inability to stand still and its continued desire to lead the captive industry.” 

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Captive Insurance Times: August 9, 2016

We'd like to thank our friends at Captive Insurance Times for the use of this article.


VCIA: Group Captives Moving Onshore

By: Becky Butcher

Burlington, Vermont US onshore domiciles are the most popular choice for setting up a group captive, according to poll at this year’s Vermont Captive Insurance Association (VCIA) conference. 

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Vermont Business Magazine: July 2016

We'd like to thank our friends at Vermont Business Magazine for the use of this article.


Vermont celebrates 35th anniversary of captive insurance legislation

By: Becky Butcher

Montpelier, Vermont - Vermont Business Magazine Over the last 35 years, Vermont has grown to become known as the ‘Gold Standard’ of domiciles in the Captive Insurance industry and is held up as the model of sound regulation by other domiciles. This month marks the 35th anniversary of Vermont’s captive insurance legislation signed into law by Governor Richard Snelling.

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Captive Insurance Times: July 2016

We'd like to thank our friends at Captive Insurance Times for the use of this article.


Vermont celebrates 35 years of captive insurance

By: Becky Butcher

Montpelier, Vermont Vermont has marked the 35th anniversary of its captive insurance legislation being signed into law. The legislation was signed into law by the now late governor Richard Snelling in 1981.

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A.M. Best Interview - Dan Towle at the Bermuda Captive Conference 2016

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Dan Towle Bermuda Captive Conference

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A.M. Best Interview - Dave Provost at RIMS 2016

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Vermont's David Provost: Enactment of PBR Should Reduce Need for Life Captives

AM Best Interview with Dave Provost VCIA 2015

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Captive Insurance Times: April 2016

We'd like to thank our friends at Captive Insurance Times for the use of this article.


Vermont's Latest Captive Bill Signed into Law

By: Becky Butcher

BURLINGTON, VERMONT - The Vermont General Assembly is going through the final stages of passing the state's latest captive bill, according to the Vermont Captive Insurance Association.

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Insurance Journal: April 2016

We'd like to thank our friends at Insurance Journal for the use of this article.


Insurance Journal: April 2016 - Vermont Latest Captive Bill Signed into Law

Vermont Gov. Peter Shumlin has signed new legislation, H-538, that allows sponsored or industrial insured captives that are inactive to enter a dormant status.

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Risk & Insurance: Vermont Report - The Future is Now

We'd like to thank our friends at Risk & Insurance for the use of this article.


Risk & Insurance: Vermont Report 
The Future is Now

By Matthew Brodsky

 

Medical stop-loss captives might make a lot of sense, regardless of which way the political winds blow.

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Risk & Insurance: Vermont Report - The Cyber Captive Option

We'd like to thank our friends at Risk & Insurance for the use of this article.


Risk & Insurance: Vermont Report 
The Cyber Captive Option

By Alex Wright

Cyber attacks are a real threat, and captives may offer the best protection.

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Risk & Insurance: Vermont Report - Smart Parting

We'd like to thank our friends at Risk & Insurance for the use of this article.


Risk & Insurance: Vermont Report 
Smart Parting

By Matthew Brodsky

Be Clear about your goals before exiting your exiting your existing domicile.

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Business Insurance: February 28, 2016

We'd like to thank our friends at Business Insurance for the use of this article.

 


Captive Owners Review their Options as List of Domiciles Increases Costs, Ease of Doing Business Drives Surge in Redomestications

By Jerry Geisel

Two months after Innovative Physician Solutions Risk Retention Group moved to Vermont from Arizona, Chief Operating Officer Mark Tabler said he and the RRG's board of directors are “absolutely thrilled.”

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Business Insurance: February 5, 2016

We'd like to thank our friends at Business Insurance for the use of this article.

 


Domicile Regulators Get Final Say on Funding Risks Through Captives

By Jerry Geisel

“What counts is our statute. Our statute defines what you can and can't do,” said Dave Provost, Vermont's deputy commissioner of captive insurance. Speaking Wednesday at a 2016 World Captive Forum session in Boca Raton, Florida, Mr. Provost also said departmental regulators carefully scrutinize and check out information in captive filings.

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Vermont Biz, January 11, 2016

We'd like to thank our friends at Vermont Biz for the use of this article.

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Eleven redomestication and seven healthcare orgs drive new captive insurance formations

Vermont Business Magazine Vermont licensed 33 new captive insurance companies in 2015, according to data released by the Vermont Department of Financial Regulation. The new captives were made up of 12 pure captives, 7 Risk Retention Groups (RRGs), 7 sponsored captives, 4 special purpose financial insurers, 2 industrial insured captives, and 1 association captive. 

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Insurance Journal, January 22, 2016

We'd like to thank our friends at Insurance Journal for the use of this article.

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Vermont Captive Insurance Gross Written Premium Nears $30B

Vermont licensed 16 new captives in 2014 and the state’s captive insurance gross written premium is nearing $30 billion, according to data released today by the Vermont Captive Insurance Division. The new captives were made up of 10 pure captives, two sponsored, two special purpose financial insurers, one association and one Risk Retention Group. Two new captives were re-domesticated from Bermuda and Delaware.

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Captive Insurance Times, January 11, 2016

We'd like to thank our friends at Captive Insurance Times for the use of this article.

 


Vermont shows strong growth in 2015

Vermont licensed 33 new captive insurance companies in 2015, according to the Vermont Department of Financial Regulation. The new captives consisted of 12 pure captives, seven risk retention groups (RRGs), seven sponsored captives, four special purpose financial insurers, two industrial insured captives, and one association captive.

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Captive Insurance Times, January 15, 2016

We'd like to thank our friends at Captive Insurance Times for the use of this article.

 


Vermont proposes changes to captive statute

Legislative changes are being proposed to Vermont’s captive law today. The changes have been introduced as part of H.538, although they are still subject to change. The proposed changes include allowing sponsored or industrial captives to enter dormant status, so they remain in Vermont rather than dissolve.

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Business Insurance, January 12, 2016

We'd like to thank our friends at Business Insurance for the use of this article.

 


Risk Retention Groups Divided by House Bill's Focus on Nonprofits

By Donna Mahoney

Federal legislation that would allow only certain risk retention groups to expand the coverage they can provide for policyholder-owners is causing a rift in the industry. The measure, H.R. 3794, would allow RRGs to write property coverages for policyholders that are nonprofit organizations with tax-exempt status or educational and education-related institutions that are nonprofit organizations or governmental entities.

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Business Insurance, January 11, 2016

We'd like to thank our friends at Business Insurance for the use of this article.

 


Vermont Licenses 33 Captive Insurers in 2015

By Jerry Geisel

Aided by a record number of redomestications, captive insurer formations in Vermont surged in 2015, state officials said Monday. Vermont, the largest domestic domicile, licensed 33 captives last year, up sharply from 16 in 2014.

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Captive Review, February Edition


We'd like to thank Captive Review for the use of this article.


Captive Review February Edition

The results are in and Captive Review is able to reveal the 2015 Power 50. In its fifth year, the annual ranking of global captive professionals is a decent gauge on the state of the industry – where there is growth, what the hot topics are and who is leaving a lasting impression on their peers.

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Captive Review, December 2015


We'd like to thank Captive Review for the use of this article.


Solvency II Predictions: Dave Provost, Vermont

The implementation of Solvency II across the European Union (EU) may create opportunities for the American onshore domiciles, according to Dave Provost, deputy commissioner of captive insurance in Vermont. 

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A.M. Best Interview with Dan Towle at VCIA 2015 Conference

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VCIA Conference 2015, the State of Vermont’s Dan Towle, Director of Financial Services, said five of the state's 14 recent captive formations were of insurance captives once based elsewhere.

AM Best Interview with Dan Towle VCIA 2015

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A.M. Best Interview with Dave Provost at VCIA 2015 Conference

AM Best graphic


VCIA Conference 2015, the State of Vermont’s Dave Provost, Deputy Commissioner, said he hopes to see the NAIC adopt new corporate governance standards for risk retention groups.

AM Best Interview with Dave Provost VCIA 2015

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A.M. Best Interview with Sandy Bigglestone at VCIA 2015 Conference

AM Best graphic


VCIA Conference 2015, the State of Vermont’s Sandy Bigglestone, Director of Captive Insurance, said captive formations are up for the state, as are redomestications, many of captive insurers formerly based offshore.

AM Best Interview with Sandy Bigglestone VCIA 2015

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Business Insurance, October 2015

We'd like to thank our friends at Business Insurance for the use of this article.

 


Vermont Captive Association Backs Risk Retention Group Coverage Expansion
By Jerry Geisel

The Vermont Captive Insurance Association is backing newly introduced federal legislation to expand coverages that can be written by risk retention groups. Under the measure, H.R. 3794, RRGs could write property coverages for policyholders that are nonprofit organizations with tax-exempt status or educational institutions and educational-related institutions that are nonprofit organizations or governmental entities.

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VT Digger.org, August 2015

We'd like to thank our friends at VTDigger.org for the use of this article.

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Leahy Says Vermont Can Lead The Nation on Insuring Against Cyberterrorism

Vermont’s senior senator is hoping the state will lead the way in how companies protect themselves from cyberterrorism. U.S. Sen. Patrick Leahy, D-Vt., told a convention of 1,000 captive insurance industry executives Wednesday that he is working with U.S. Sen. Lindsey Graham, R-S.C., to pass a law that would help large companies put money aside as insurance for cyber attacks.

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Business Insurance, August 12, 2015

We'd like to thank our friends at Business Insurance for the use of this article.

 


Vermont Sen. Leahy touts state's standing among captive domiciles
By Jerry Geisel

BURLINGTON, Vt. — Vermont is the “gold standard” when it comes to captive insurance domiciles, Sen. Patrick Leahy, D-Vt., the state’s senior senator says.
Speaking at the opening general session Wednesday at the Vermont Captive Insurance Association annual conference in Burlington, Sen. Leahy told attendees to “think how this business” has evolved in the last three decades.

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Business Insurance, August 11, 2015

We'd like to thank our friends at Business Insurance for the use of this article.

 


Captive insurers fill variety of coverage needs for sponsors
By Jerry Geisel


BURLINGTON, Vt. — Forming a captive insurer can meet a wide variety of needs, especially as a reliable and cost-effective source of coverages for the captive’s owner, according to a panel of experts speaking Tuesday at the Vermont Captive Insurance Association’s annual conference in Burlington.

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Insurance Journal, May 2015

We'd like to thank our friends at Insurance Journal for the use of this article.

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Vermont’s New Captive Legislation to Revise Some Capital Requirement Rules

Vermont officials announced that Gov. Peter Shumlin will sign new legislation passed in April that would bring several changes to the state’s captive insurance rules — including changes to the investment guideline to allow “marketable securities” along with cash, trusts and letters of credit to meet the minimum capital requirement. 

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Insurance Journal, August 2015

We'd like to thank our friends at Insurance Journal for the use of this article.

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Vermont Licensed 14 New Captives So Far This Year 

The Vermont Department of Financial Regulation announced on July 31 that the state regulators licensed 14 new captives during the first seven months of 2015, already nearing the full-year 2014 total of 16.

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Captive Insurance Times, August 3 2015

We'd like to thank our friends at Captive Insurance Times for the use of this article.

 


Strong start to 2015 for Vermont captives 

The Vermont Department of Financial Regulation has licensed 14 new captives so far this year. The new entities include seven pure captives and three risk retention groups, as well as one special purpose financial captive, an industrial insured, a sponsored captive, and an association captive. Five on the new captives have been redomesticated from other domiciles and three of them are in the healthcare sector. 

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Captive Insurance Times, August 12 2015

We'd like to thank our friends at Captive Insurance Times for the use of this article.

 


VCIA: technology can influence captive formations

Burlington, Vermont | 12 August 2015

Discipline is key to maintaining a captive, according to a panellist at the Vermont Captive Insurance Association Annual Conference in Burlington.
The panel discussed the best practices that companies should use to maintain their captives.

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Risk & Insurance, Vermont Report 2015

We'd like to thank our friends at Risk & Insurance magazine for the use of the following article. This article is reprinted, with permission.

Risk & Insurance


Vermont Report 2015: Building an Engine for Global Risk Management Success.

A fully integrated captive brings risk management to the multiple arms of an organization.

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Insurance Journal, January 2015

We'd like to thank our friends at Insurance Journal for the use of this article.

Insurance Journal header


Vermont Captive Insurance Gross Written Premium Nears $30B
Vermont licensed 16 new captives in 2014 and the state’s captive insurance gross written premium is nearing $30 billion, according to data released today by the Vermont Captive Insurance Division.

The new captives were made up of 10 pure captives, two sponsored, two special purpose financial insurers, one association and one Risk Retention Group. Two new captives were re-domesticated from Bermuda and Delaware. 

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Business Insurance, October 2, 2014

We'd like to thank our friends at Business Insurance for the use of this article.

 


NRRA posthumously honors first Vermont captive director with visionary award.

The National Risk Retention Association has honored the late Ed Meehan, Vermont's first full-time director of captive insurance, with the Karen Cutts Visionary Award at its conference in Chicago on Wednesday.

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A.M. Best Interview with David Provost at VCIA 2014 Conference

AM Best graphic


From the VCIA 2014, the State of Vermont’s David Provost, Captive Review’s Most Influential Regulator, discusses 831(b) status and reaffirms Vermont’s commitment to licensing small captives.

AM Best Interview with David Provost VCIA 2014

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A.M. Best Interview with Les Boughner at VCIA 2014 Conference

AM Best graphic


From the VCIA 2014 Conference, Les Boughner, Executive Vice President of Willis, discusses how new health rules are spurring interest in captives.

AM Best Interview with David Provost VCIA 2013

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Captive Review, August 20, 2014

We'd like to thank Captive Review for the use of this article.

 


‘Cautious Optimism’ for NRRA Amendment, but ‘Political Gridlock’ a Threat

The Vermont Captive Insurance Association (VCIA) is ‘cautiously optimistic’ legislation proposed last week seeking to amend the Non-Admitted Reinsurance Reform Act (NRRA) will make its way through Washington in one piece.

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Business Insurance, August 17, 2014

We'd like to thank our friends at Business Insurance for the use of this article.

 


Captives Expand Focus to Other Domiciles as Legislation and Regulation Increase.

While captive insurers once could keep their legislative and regulatory attention on activities in their domicile, a growing number of domiciles — some looking to grow rapidly — along with actions from federal officials, the National Association of Insurance Commissioners and international regulators have forced those promoting captives’ interests to broaden their focus.

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Business Insurance, August 15, 2014

We'd like to thank our friends at Business Insurance for the use of this article.

 


IRS Scrutiny of 831(b) Tax Treatment for Microcaptives a VCIA 'Hot Topic'.

Among the “hot topics” discussed at the Vermont Captive Insurance Association's annual conference in Burlington was the Internal Revenue Service's scrutiny of so-called “microcaptives” opting for Internal Revenue Code Section 831(b) tax treatment and the potential impact of that scrutiny on the broader captive industry.

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Captive Review, August 15, 2014

We'd like to thank Captive Review for the use of this article.

 


Regulation Dominates VCIA Discussions—Smith

 

Regulation of the captive insurance industry, at state, federal and global levels, dominated the Vermont Captive Insurance Association (VCIA) conference discussions, according to Rich Smith, president of the association.

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Business Insurance, August 14, 2014

We'd like to thank our friends at Business Insurance for the use of this article.

 


Vermont Captive Insurance Association Presents 2014 Awards.

The Vermont Captive Insurance Association presented annual awards to several captive industry participants in recognition of their contributions to the industry and the association during the opening general session of this year's VCIA conference Wednesday in Burlington.

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Captive.com, August 14, 2014

We'd like to thank Captive.com for the use of this article.

 


Vermont Captive Industry Very Important to Its Economy

 

Patricia Moulton, Secretary of the VT Commerce and Community Development, stood in for VT Governor Peter Shumlin to help kick off VCIA conference. She cited a number of statistics that demonstrate the importance of the captive industry to VT’s economic development.

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Captive Review, August 13, 2014

We'd like to thank Captive Review for the use of this article.

 


New US Domiciles Won’t Remain in the Game – Provost

The Vermont Captive Insurance Association (VCIA) and the state’s regulator David Provost have expressed doubt over the quality and sustainability of the raft of new onshore domiciles.

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Captive Review, August 12, 2014

We'd like to thank Captive Review for the use of this article.

 


VT and SC Legislators Target NRRA Clarity for Captives

Cross-party politicians have introduced two pieces of legislation to the United States’ Senate and House of Representatives in a bid to clear up the confusion surrounding the implications on captives as an effect of the Non-Admitted Reinsurance Reform Act (NRRA).

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Risk & Insurance, April 2014

We'd like to thank our friends at Risk & Insurance for the use of this article.


Who’s Who in Montpelier


These five domicile stars can help risk managers learn about forming a captive in Vermont.

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PPEC Law Captive Newsletter June 2014

 

We'd like to thank our friends at Primmer Piper Eggleston & Cramer PC for the use of the following newsletter.

We are always interested in sharing relevant content about the Captive Insurance Industry. If you have an article to share send it to Dan Towle, dan.towle@state.vt.us.


Captive Insurance Newsletter June 2014

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Insurance Journal, April 23, 2014

We'd like to thank our friends at Insurance Journal for the use of this article.

Insurance Journal header


Vermont Regulators: Updated Law Offers ‘Welcome Option’ for Inactive Captives


Vermont’s updated captive insurance law now offers inactive captives in the state a chance to apply for a “dormant” status. Vermont regulators said this latest modification reflects the state’s ongoing effort to introduce new prudent legislation for the captive industry.

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Insurance Journal, April 17, 2014

We'd like to thank our friends at Insurance Journal for the use of this article.

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Vermont’s Updated Captive Law to Allow ‘Dormant’ Status for Inactive Captives


Vermont’s Gov. Peter Shumlin signed new legislation updating Vermont’s captive law, amending the reciprocal insurer section and creating a new “dormant” status for captives.

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Business Insurance, April 17, 2014

We'd like to thank our friends at Business Insurance for the use of this article.

 


Vermont Captive Insurer Law Updated to Allow 'Dormant' Status.

Vermont Gov. Peter Shumlin has signed a bill updating Vermont’s captive insurer law, including the creation of a “dormant” status for captives that have ceased operation but might be used to finance risk again in the future.

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PFC Law Captive Newsletter, April 2014

 

We'd like to thank our friends at Paul Frank + Collins for the use of the following newsletter.

We are always interested in sharing relevant content about the Captive Insurance Industry. If you have an article to share send it to Dan Towle, dan.towle@state.vt.us.


Captive Insurance Newsletter April 2014

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Risk & Insurance, Vermont Report 2014

Risk & Insurance

We'd like to thank our friends at Risk & Insurance magazine for the use of the following article. This article is reprinted, with permission.


 

Vermont Report 2014

Captive No. 1000. Eric Dethlefs and a health care risk retention group create a milestone in Vermont.

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Business Insurance, January 17, 2014

We'd like to thank our friends at Business Insurance for the use of this article.

 


Vermont licenses 29 captives in 2013

Vermont officials have reported licensing 29 new captives in 2013.

In a statement Thursday, the Vermont Captive Insurance Division reported that the captives licensed last year included 16 single-parent captives, two industrial insured captives, three risk retention groups, three sponsored captives and five special purpose financial insurers.

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Insurance Journal, January 2014

We'd like to thank our friends at Insurance Journal for the use of this article.

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Vermont Gov.: 2013 Was a Terrific Year for Captive Insurance


Last year was a banner year as Vermont celebrated the 1000th new captive, but there were plenty of other notable accomplishments as 29 new captives were licensed, according to data released by the Vermont Captive Insurance Division.

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A.M. Best, January 24, 2014

We'd like to thank A.M. Best for the use of this article.

AM Best graphic

 


Vermont Expects Growth of Licensed Captives to Continue in 2014


MONTPELIER, Vt. - After crossing the 1,000 licensed captives mark in 2013, Vermont captive regulators expect growth to continue in 2014, while new state legislation is pending that could ease the return of any captives that might wish to leave temporarily.

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VTDigger.org, October 2013

We'd like to thank our friends at VTDigger.org for the use of this article.

VT Digger.org website header

 


Captive Audience Celebrates a Milestone

Gov. Peter Shumlin marked a milestone Thursday in one of Vermont’s unique financial industries: captive insurance. The state’s 1,000th captive insurance company was announced in a Statehouse news conference, attended by state regulators, industry representatives and service providers.

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Vermont Public Radio, October 14, 2013

We'd like to thank our friends at Vermont Public Radio for the use of this interview.

Vermont Public Radio Header image


Captive Insurance Booming In Vermont
By Jane Lindholm

Dave Provost, Deputy Commissioner of Captive Insurance for the Department of Financial Regulation, spoke with Vermont Edition about why companies are drawn to Vermont for captive insurance.

VPR Interview with Dave Provost

 

 

 

 

 

 

 

 

 

 

 

 





Insurance Journal, October 2013

We'd like to thank our friends at Insurance Journal for the use of this article.

Insurance Journal header


Vermont Celebrates 1,000th Licensed Captive Insurance Company


Vermont Gov. Peter Shumlin and other state officials announced Thursday that the state’s Department of Financial Regulation (DFR) has licensed Vermont’s 1,000th captive insurance company.

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Captive International, October 2013

We'd like to thank our friends at Captive International for the use of this article.

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VCIA: Vermont’s Unwavering Support Made Captive Possible


According to Richard Smith of the Vermont Captive Insurance Association, the state’s unwavering support of the captive insurance industry is a major force behind the domicile’s success. Vermont announced recently that it has licensed its 1,000th captive.

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Boston.com, October 2013

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Vt. Celebrates 1,000th Captive Insurance Company


Vermont’s top financial regulator signed the license Thursday for the 1,000th captive insurance company to call the state home since it set out to attract these businesses more than three decades ago.

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Business Insurance, October 10, 2013

We'd like to thank our friends at Business Insurance for the use of this article.

 


Vermont Issues 1,000th Captive Insurer License

Vermont has issued its 1,000th captive insurer license, announcing Thursday that the state’s Department of Financial Regulation has licensed Cassatt Insurance Group Inc.

The new captive was formed by a group of nine independent nonprofit hospitals in southeastern Pennsylvania. The group will use the sponsored captive in sharing medical liability risk for 1,200 physicians.

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Burlington Free Press, October 2013

We'd like to thank our friends at the Burlington Free Press for the use of this article.

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Vermont Celebrates 1,000th Captive Insurance Company

Vermont’s top financial regulator signed the license Thursday for the 1,000th captive insurance company to call the state home since it set out to attract these businesses more than three decades ago.

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Captive Insurance Times, Sept 2013

We'd like to thank our friends at Captive Insurance Times for the use of this article.

 


Extra domiciles could cause slip in regulatory standards

According to a new report by Fitch ratings, domiciles might sacrifice practical regulatory oversight to attract and maintain a minimum number of captive registrations, as the number of active captive locations rises.

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A.M. Best Interview with David Provost at VCIA 2013 Conference

AM Best graphic

From the VCIA 2013 Conference, the State of Vermont's David Provost talks with A.M. Best's Meg Green about life insurance captives.

AM Best Interview with David Provost VCIA 2013

Click on image to play video clip.





A.M. Best Interview with Sandy Bigglestone at VCIA 2013 Conference

AM Best graphic

From the VCIA 2013 Conference, the State of Vermont's Sandy Bigglestone talks with A.M. Best's John Weber about captive formations in 2013 as the State nears its 1,000th captive license.

AM Best Interview with Sandy Bigglestone VCIA 2013

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A.M. Best Interview with Dan Towle at VCIA 2013 Conference

AM Best graphic

From the VCIA 2013 Conference, the State of Vermont's Dan Towle talks with A.M. Best's Meg Green about health care captive activity.

AM Best Interview with Dan Towle VCIA 2013

 

Click on image to play video clip.





Business Insurance, August 14, 2013

We'd like to thank our friends at Business Insurance for the use of this article.

 


New Vermont captive insurer licenses total 13 so far in 2013

Vermont has licensed 13 new captives so far this year, with signs of an active fourth quarter of formations ahead, David F. Provost, deputy commissioner of the Captive Insurance Division in the Vermont Department of Financial Regulation, said Tuesday.

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Business Insurance, August 25, 2013

We'd like to thank our friends at Business Insurance for the use of this article.

 


Captive domicile growth creates more choice than ever for owners

Prospective captive owners have more choice than ever in terms of available domiciles, but the key factors in their decisions typically remain regulatory quality and available captive infrastructure, according to many captive experts.

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CFO.com, March 2013

We'd like to thank our friends at CFO.com for the use of this article.

 


The CFO as Insurance Buyer

As CFO of United Educators, an insurance company formed in 1987 that focuses on the perils of colleges, universities, public school districts and the like, Michael F. Horning plays the traditional roles of a finance chief, heading up accounting, human resources and facility management. But besides those responsibilities, he assumes roles commonly assumed by risk managers at corporations whose main business isn't insurance.

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Captive Insurance Times, January 2013

We'd like to thank our friends at Captive Insurance Times for the use of this article.

 


Vermont sticks to ‘steady as they go’ adage

The State of Vermont soldiered on at a steady pace in 2012, licensing 32 new captives with strong showings by the construction and manufacturing sectors, which each had five new licensees.

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Captive Insurance Times, February 2013

We'd like to thank our friends at Captive Insurance Times for the use of this article.

 


Co-author of NRRA clarifies Dodd-Frank captive status

US Congressman and co-author of the Nonadmitted and Reinsurance Reform Act (NRRA), Scott Garrett, has addressed the speaker of the US House of Representatives to state that the legislation was never intended to apply to captive insurance.

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Business Insurance, March 2013

We'd like to thank our friends at Business Insurance for the use of this article.

 


Captive insurance market grows as economy recovers

The global captive insurance market continued to grow in 2012, both in terms of new captive formations and new captive domiciles. New captive insurers are forming to provide a variety of coverages for a host of different industries, with particular activity in formations by health care organizations or formations of group captives to provide stop-loss coverage for employee medical benefit programs.

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Risk & Insurance, Vermont Report

Risk & Insurance

We'd like to thank our friends at Risk & Insurance magazine for the use of the following article. This article is reprinted, with permission.


 

Vermont Report

The Commando Captive. One of Vermont's newer capive insurers has empowered its parent to become a better savior for its clients.

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Business Insurance, November 2012

We'd like to thank our friends at Business Insurance for the use of this article.

 


Coalition to seek clarification on Nonadmitted and Reinsurance Reform Act

A coalition is seeking legislative clarification of ongoing uncertainty about the application of the Nonadmitted and Reinsurance Reform Act to captive insurers.

The Coalition for Captive Insurance Clarity has been formed under the leadership of the Vermont Captive Association and aims to push legislative language clarifying that the NRRA never was intended to apply to captives, the State of Vermont and VCIA said Thursday in a statement.

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Business Insurance, August 2012

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Vermont Captive Insurance Assn. awards industry members for service, commitment

The Vermont Captive Insurance Assn. honored several captive industry participants for their commitment to the association and service to the captive industry during Wednesday morning's general session at this year's VCIA conference.

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Property Casualty 360, August 2012

We'd like to thank our friends at PropertyCasualty360.com for the use of this article.

 


Insurance Captives Finding Home Onshore


The years of dominance enjoyed by off-shore captive domiciles may be coming to an end as more captive formations move onshore into the United States and Europe, says a report from the Insurance Information Institute.

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Boston Globe, August 2012

We'd like to thank Boston.com for the use of this article.


Captive insurance industry to gather in Burlington

More than 1,000 professionals from the captive insurance industry are gathering in the Burlington area this coming week for a major industry conference.

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Dave Provost Interview on WCAX TV

WCAX TV graphic

The State of Vermont's David Provost, Deputy Commissioner for Captive Insurance, appeared on WCAX TV Channel 3 News to discuss the industry and the VCIA annual conference.

Dave Provost on WCAX TV

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AM Best Interview with Sandy Bigglestone at VCIA 2012 Conference

AM Best graphic

From the VCIA 2012 Conference, the State of Vermont's Sandy Bigglestone talks with AM Best's Meg Green about traction being found in the insurance industry regarding cyber-liability protection.

AM Best Interview with Sandy Bigglestone

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AM Best Interview with Dan Towle at VCIA 2012 Conference

AM Best graphic

From the VCIA 2012 Conference, the State of Vermont's Dan Towle talks with AM Best's Meg Green about new captive formations in the first quarter of 2012.

AM Best Interview with Dan Towle

 

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PFC Law Captive Newsletter, June 2012

 

We'd like to thank our friends at Paul Frank + Collins for the use of the following newsletter.

We are always interested in sharing relevant content about the Captive Insurance Industry. If you have an article to share send it to Dan Towle, dan.towle@state.vt.us.


Captive Insurance Newsletter June 2012

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Property Casualty 360, May 2012

We'd like to thank our friends at PropertyCasualty360.com for the use of this article.

 


Increasing Number of Captives Opt to Domicile on U.S. Soil


Favorable establishment conditions, interstate competition, federal legislation spur an uptick in domestic captives.

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Risk & Insurance, Vermont Report 2012

Risk & Insurance

We'd like to thank our friends at Risk & Insurance magazine for the use of the following article. This article is reprinted, with permission.


 

Vermont Report 2012

A Picture of Captive Health. Why Health Care Companies Seek Shelter in Vermont.

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Royal Gazette, April 2012

 


More captives are forming ‘onshore’ in the US than in offshore locations like Bermuda and Cayman.

An article in Bermuda's Royal Gazette describing how Vermont Captive is gaining traction in picking up new business as it competes with rival Bermuda.

 

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Business Insurance, April 2012

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Vermont Tweaks Captive Insurance Regulations

Vermont Gov. Peter Shumlin this week signed into law a bill making minor “housekeeping” changes to Vermont's captive law.

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Business Insurance, April 2012

We'd like to thank our friends at Business Insurance for the use of this article.


Vermont Insurance Regulatory Agency gets New Name

The Vermont state agency responsible for insurance regulation is operating under a new name: the Department of Financial Regulation.

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Business Insurance, April 2012

We'd like to thank our friends at Business Insurance for the use of this article.


Vermont Licenses 8 Captives in the First Quarter 2012

Vermont licensed eight new captives during the first quarter of this year, the most new captives formed in the state during a first quarter since 2005.

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Captive Review, February 2012


We'd like to thank Captive Review for the use of this article.


Vermont Premium Eclipses Bermuda’s

Vermont’s estimated captive gross premium for 2011 is likely to have been higher than Bermuda’s. Its estimated captive gross premium for 2011 is $23.1bn, while Bermuda’s 2011 premium was $21.4bn. Bermuda’s gross captive premium was $32.7bn at the end of 2010. 

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GAO Report Risk Retention Groups

 


We'd like to thank the United States Government Accountability Office for the use of this report.



Risk Retention Groups

Clarifications Could Facilitate States' Implementation of the Liability Risk Retention Act

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Medical Malpractice Company.com, January 2012

 


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2011 Very Strong for Vermont Captive Insurance Licenses


2011 was the 6th year Vermont surpassed the 40 new captives licensed mark with 41 new captive insurance companies bringing the total number of licenses to 952 with 590 active captive insurance companies. 

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Property Casualty 360, January 2012

We'd like to thank our friends at PropertyCasualty360.com for the use of this article.

 


Vt. Reports 41 New Captives in 2011


Vermont increased its number of captive insurance groups in 2011 from the two previous years as the state continues to see growth in that industry, capturing six captives that were domiciled elsewhere.

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Business Insurance, January 2012

We'd like to thank our friends at Business Insurance for the use of this article.


Vermont licenses 41 new captives in 2011

Vermont licensed 41 new captive insurance companies in 2011, the sixth year in which the state issued 40 or more new licenses

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Business Insurance VCIA Conference Coverage, August 2011

We'd like to thank our friends at Business Insurance for the use of the following articles.


Read all of the coverage of the 2011 VCIA Conference.

 

 





Insurance News Net, August 2011

We'd like to thank our friends at InsuranceNewsNet.com for the use of this article.

 


Kane USA Director: New Sponsored Cell Captive Offers Risk-Management Tool

As Kane Group Ltd. becomes the first to launch a sponsored cell captive in Vermont since legislation was updated allowing incorporated cells in the state, the managing director of Kane (USA) Inc. said they provide another tool to assist clients with risk management solutions.

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Business Insurance, August 2011

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Market Turn Appears Unlikely

Events including the U.S. debt and budget crisis and Standard & Poor's Corp.'s downgrade of the U.S. debt rating continue to fuel a climate of fear and provoke the question, “What in the world is going on?” said Wednesday morning's keynote speaker at the annual conference of the Vermont Captive Insurance Assn.

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Property Casualty 360, August 2011

We'd like to thank our friends at PropertyCasualty360.com for the use of this article.

 


Gov. Shumlin: Just the Beginning of Captives’ Success Story in Vermont

Vermont’s goal is to remain number one in the captive insurance business in the United States and next, the world, Gov. Peter Shumlin says last week at the Vermont Captive Insurance Association conference.

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Vermont Edition on Vermont Public Radio

 

Vermont Public Radio's local news program, Vermont Edition featured the Captive Insurance Industry just as the annual VCIA Conference was about to get underway. Hear from Vermont's own Dave Provost and VCIA President Rich Smith.

 


Vermont Edition on Vermont Public Radio, August 8, 2011

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PPEC Law Captive Newsletter August 2011

 

We'd like to thank our friends at Primmer Piper Eggleston & Cramer PC for the use of the following newsletter.

We are always interested in sharing relevant content about the Captive Insurance Industry. If you have an article to share send it to Dan Towle, dan.towle@state.vt.us.


Captive Insurance Newsletter August 2011

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Rough Notes, July 2011

 

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Vermont Captives - 2011: On Target for a Record Year


State's reputation keeps it in the forefront of domiciles.


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Risk Retention Reporter, July 2011

 

Risk Retention Reporter logo

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Change Brings Challenges, Interest To Captive Regulator’s Job.

An interview with David Provost, Vermont Deputy Commissioner, Captive Insurance Division


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Business Insurance, June 2011

Business Insurance

 

We'd like to thank our friends at Business Insurance for the use of this article.

 


Labor backs Deutsche Bank using captive to fund long-term disability.

The Labor Department has given tentative authorization to New York-based Deutsche Bank Americas Holding Corp. to use its Vermont captive to reinsure long-term disability benefits.


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PropertyCasualty360.com, May 2011

 

We'd like to thank our friends at PropertyCasualty360.com for the use of this article.

 


Captives in Vermont will enjoy greater protection of their assets now that a bill has been passed by the state legislature that will allow for the separation of risk within a captive cell.

Legislation passed by the 2011 session of the Vermont legislature and signed into law by Governor Peter Shumlin expands Vermont's captive laws. The bill allows cells within a sponsored-cell captive to be formed as incorporated protected cells.

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PropertyCasualty360.com, April 2011

 

We'd like to thank our friends at PropertyCasualty360.com for the use of this article.

 


Vermont’s captive insurance growth in the 2011 first quarter is the strongest start to a year since 2005, attributable to a wider understanding of the benefits of captive insurance, says the state’s captive regulator.

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PFC Law Captive Newsletter April 2011

 

We'd like to thank our friends at Paul Frank + Collins for the use of the following newsletter.

We are always interested in sharing relevant content about the Captive Insurance Industry. If you have an article to share send it to Dan Towle, dan.towle@state.vt.us.


Captive Insurance Newsletter April 2011

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Captive Review Mag March 2011

Captive Review

We'd like to thank our friends at Captive Review for the use of the following articles. These articles are reprinted, with permission.


Top 10 Leading Captive Domiciles

This year's domicile survey sees Vermont taking over Bermuda as the world's number one captive domicile, due to its huge premium figures and assets under management (AUM). These high figures caused Vermont to leapfrog Bermuda and the Cayman Islands despite having fewer captives.


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Business Insurance, VT Legislation March 2011

Business Insurance

We'd like to thank our friends at Business Insurance for the use of the following articles. These articles are reprinted, with permission.


Vermont bill would allow incorporated protected cell captives

New captive legislation introduced in Vermont would allow the formation of incorporated protected cell captives in the state. The bill, H. 438, is a response to requests from the captive industry to allow the structure in Vermont, according to David F. Provost.

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National Underwriter, March 2011

National Underwriter

We'd like to thank our friends at National Underwriter Property & Casualty for the use of the following article. This article is reprinted and linked with permission.


Vermont's Bill Would Update State's Captive Cell Legislation

Vermont is proposing changes to its captive-insurance law as part of its annual enhancements to its captive statute. The proposed bill, H438, expands Vermont’s captive laws to allow cells within a sponsored-cell captive to be formed as incorporated protected cells. Vermont currently allows protected cells created by contract alone.

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Business Insurance, January 2011

Business Insurance

We'd like to thank our friends at Business Insurance for the use of the following articles. These articles are reprinted, with permission.


Vermont licensed 33 new captives in 2010

By Jerry Geisel

MONTPELIER, Vt.—Vermont licensed 33 new captive insurance companies in 2010, down slightly from the prior year when 39 captives were formed, but more than double the 16 set up in 2008. The new formations include 19 single-parent captives, nine special-purpose captives, four risk retention groups and one industrial insured captive. Read the full article.





PPEC Law Captive Newsletter Jan 2011

 

We'd like to thank our friends at Primmer Piper Eggleston & Cramer PC for the use of the following newsletter.

We are always interested in sharing relevant content about the Captive Insurance Industry. If you have an article to share send it to Dan Towle, dan.towle@state.vt.us.


Captive Insurance Newsletter January 2011

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Rough Notes, July 2010

 

We'd like to thank our friends at Rough Notes for the use of the following article. This article is reprinted, with permission.

 


 

Vermont Captive Insurance Association Special Section

Green Mountain Momentum

Topics broadened to reflect current event and feedback

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Risk & Insurance, May and July 2010

Risk & Insurance

Risk & Insurance Magazine  We'd like to thank our friends at Risk & Insurance magazine for the use of the following articles. These articles are reprinted, with permission.


 

Captive Industry Not Blinking at Economic Double-Whammy

Captive Insurance issuances at the No. 1 domicile in the United States surge past the 900 mark, as use for the financial vehicles gets diverse, sophisticated.

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Vermont Licenses 17 New Captives

The leading U.S. domicile sees interest in captive formation in 2010 from the construction and financial services sectors, as well as from hospitals.

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The Front Man

Dan Towle, director of financial services for the state of Vermont, has been a mainstay of the Vermont captive insurance industry for the last dozen years, representing the No. 1 U.S. domicile around the world.

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National Underwriter, August 2010

National Underwriter

We'd like to thank our friends at National Underwriter Property & Casualty for the use of the following article. This article is reprinted and linked with permission.


 

Vermont Sees Captive Growth Even In Soft Market, Tough Economy 

Showing a strong first half for new formations in 2010 despite a soft commercial insurance market and struggling economy, Vermont is preparing to defend its position as the top U.S. captive domicile by adding additional staff to keep turnaround times to a minimum, as well as updating regulations.

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Business Insurance, August 2010

Business Insurance

We'd like to thank our friends at Business Insurance for the use of the following articles. These articles are reprinted, with permission.


 

 

Rent-a-Captive Sector Reports Drop in Number of Cells

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Vermont Issues 900th Captive License

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Teamwork Key for Captive Success

Fronting insurers must work closely with re-insurers: Panel

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RRGs The Rx for Medical Malpractice Needs

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GOA Report May Stop States Meddling with RRGs: Expert

Opportunity to assert Federal pre-emption seen in legislation

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Business Insurance Video


BI Video update: The Captive Market

Dan Towle is featured in a video on the Business Insurance website.

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Rough Notes, July 2009


Vermont: State of the State

The success of the captive insurance marketplace is influenced by many factors. One is the regulatory climate.

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Risk & Insurance, Vermont 2009


Staking Out A Premium Position
A tax break, preparing for the hard market and the Obama administration’s tougher stance toward offshore domiciles are expected to benefit Vermont.

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Confessions Of the Provost
After a year on the job, Vermont’s top captive regulator feels a little like a minor celebrity.

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Captive Businesslines

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Captive Charts

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US Captive - April 2009


Vermont powers ahead

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Risk & Insurance, August 8 & 15 2008

Risk & Insurance

Risk & Insurance Magazine  We'd like to thank our friends at Risk & Insurance magazine for the use of the following articles. These articles are reprinted, with permission, from the August 8 and August 15, 2008 editions of Risk & Insurance.


Meet Vermont's MVTT: Most Valuable Tag Team
Here's a closer look at the extremely capable hands that Vermont's captives have been in since the departure of Derick White and Len Crouse.

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VCIA Recap: Getting Creative With Your Captive Claims
One VCIA session discussed how captives can open the door to creative claims-handling techniques, rather than just the usual "let's file a lawsuit and defend it to the death" strategies.

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Rough Notes, July 2008

Rough Notes

We'd like to thank our friends at Rough Notes for the use of the following article. This article is reprinted with permission. "State of the State" appeared in the July 2008 issue of Rough Notes


State of the State
Many things determine the success of the captive insurance marketplace. The regulatory climate is one that will have a major effect on the captive marketplace. For a captive domicile to succeed, it requires a capable regulator, as well as thoughtful regulations.

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Risk & Insurance, April 15 2008

Risk & Insurance

We'd like to thank our friends at Risk & Insurance magazine for the use of the following articles. These articles are reprinted, with permission, from the April 15, 2008 edition of Risk & Insurance.


Passing The Torch
Vermont's outgoing captive king, Len Crouse, talks about the joys of retirement - golf and grandkids - and his outlook on the state's new captive leadership.

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The New Man In Charge
David F. Provost, a captive industry veteran, is qualified for succession with continuity in his cover letter.

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International Risk Management Institute

International Risk Management Institute

We'd like to thank our friends at International Risk Management Institute for the use of the following article. This article is linked with permission.


Has the IRS Lost Its Collective Mind?
If you are a member of the captive owners club, your world may soon be turned upside down by ...

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Captive Review

Captive Review

We'd like to thank our friends at Captive Review for the use of the following articles. These articles are reprinted, with permission.


New York's Mount Kisco Medical Group has launched Vermont's 800th captive. Scott Hayworth, CEO and president of Mount Kisco tells Aimee Donnellan conservative planning and funding are at the core of this bold move into the captive world.

 

Mount Kisco has been servicing New York's medical needs for over 50 years. In that time it has become the oldest multi-speciality physician group in New York. Its affiliation with Massachusetts General gives this medical group further integrity as it is its only major affiliate, outside of Boston.

Mount Kisco is made up of 900 employees including 146 physicians. It is soon to be in seven locations and spread across three counties in the Hudson Valley of New York. This rapid growth has given the medical group the ability to try alternative options like captives.

The new captive has a layered structure comprising the first US$250,000, another layer from US$250,000 to US$1m and a final layer of US$1m to US$2m. The medical group is self-insuring for up to US$1.5m and all the excess layers are valued at US$1m.

It seems the scene was set for a company like Mount Kisco to turn its back on the increasing rates New York State has been charging for malpractice insurance and go it alone with a captive. The medical group is entirely self-sufficient with its own ambulatory surgery centre, MRIs, CTs and a full-serviced lab.

It is clear from the way Mount Kisco has evolved that going for an independent and more cost-efficient route would make much more sense. Hayworth says he realises that his patients will not care that they have chosen a captive route but he explains: "I believe that if you're going to do something you do it right. Although the captive is not related to the patients it is more of a reflection of how we can manage our corporation efficiently and this will in turn help us to continue to recruit the best doctors."

The decision to set up shop in Vermont was not taken lightly. There was talk of domiciling in the Cayman Islands but the efficiency and experience that the state of Vermont brought to the table tipped the balance in favour of the American counterparts, he says.

Captive knowledge

Stan Moser, chief financial officer of Mount Kisco joined the team and aided the process with his extensive knowledge of captives. The data was analysed and it took a full two and a half years before the medical group was ready to take the plunge. It seems this method of thoughtfulness and diligence is a prerequisite for anything Mount Kisco related.

As US$1.5m had to be put forward from the offset, Moser explains: "We'll be funding the captive for more than we at first expected. As a result of this spending we will be doing some conservative things to handle the money inside the RRG. The decision to domicile in Vermont was one that was thought over arduously."

Mount Kisco also had the difficult task of weighing up Cayman against Vermont in terms of capacity to provide the best service and in the end the choice was Vermont. Mount Kisco decided to go with risk retention, which was unavailable in Cayman. He suggests only Vermont could offer the necessary elements to bring about a Mount Kisco captive.

"Vermont has proven to be more than capable of providing excellent assistance in starting up a captive. They have top-of-the-line regulators that in the end provided us with comfort as we took on this project. They have bent over backwards to accommodate us in meeting our deadlines," says Hayworth.

Vermont is ranked highly as a captive domicile due in no small part to its service network, which is built around the captive industry. Moser, who has vast experience with captives and RRGs says his team were impressed with the highest degree of attorneys, actuaries, accountants and managers that made the process all the smoother. Hayworth explains: "Vermont has been a true partner and in this process we couldn't have asked for anymore."

Mount Kisco also decided to take on Willis as its broker and has voiced high praise for the service received. Moser had worked with Willis in the past and its reputation in the captive world as well as a proven track record is why it was chosen above its competition, he adds.

Restricted growth

The strategy that has been employed by Mount Kisco is one of conservativism, says Moser. The plan is to keep the captive from growing in order to make sure that it is fully funded. He will not even consider distributing any of the funds until there is an ample supply in reserve.

"We realise that premiums jump dramatically in the first four to five years so the annual premium is US$1.5m. Although it is still a lot of money we were paying US$5m for outside insurance when we started so that saving of US$3.5m is welcome," he says.

Although Mount Kisco plans to take the captive plans slowly its owners foresee that the captive will grow alongside the medical group. There are 146 physicians employed and they plan on taking on a few more partners but it is certain that they will not be taking on 30 different groups to the captive.

Control is of paramount importance to the New York-based medical group and this is to be achieved through the captive. Hayworth says: "We need to be in control of our fate and destiny while ensuring that we keep the rates under control."

When it comes to medical groups who will undoubtedly follow suit, Moser and Hayworth believe that Vermont is the domicile to go with. Mount Kisco researched other states who claim to be able to provide captive services but Hayworth explains: "There are only a handful of states in America that could match the service provided in Vermont and at the end of the day we went for a sterling reputation."

The problems in New York in terms of high rates and lack of services also brought Mount Kisco to Vermont. "The market conditions were ideal for self-insuring as there are only two firms that handle malpractice insurance in the state of New York – Milmic and PRI," says Moser. The state of New York regulates their increases and seems to add additional burdens to a state that already has serious problems in relation to malpractice, he adds.

The captive has already brought value to Mount Kisco. Although it is too early to quantify its success it has heightened the awareness among the physicians in Mount Kisco about malpractice insurance, which is important in an organisation of its size. "The process of setting up the captive was smooth but not simple. The decision to begin the start-up took two years of sifting through data and dealing with actuaries. This process seems to have been improved by the help and support of the services in Vermont and the team in Willis," says Moser.

As the manager of the captive, Moser has now been working in Kisco for nine months. He has an impressive captive and RRG background which made him a safe bet for this rather conservative medical group. He was CFO of Billings Clinic in Montana before he became CFO of Mount Kisco. Moser's involvement made it easy for Hayworth to make quick decisions as he says he felt comforted by the vast experience Moser displayed which made the finishing touches much easier to apply and get the programme running quickly once the decision was made to set up the captive.

"The decision to go with Willis was quite an easy one," says Hayworth. Five firms were interviewed but during this process it became clear that Willis would provide a level of service combined with the sense of security that was necessary in a conservative organisation like Mount Kisco. Willis's reputation and their offices in New York tipped them over in terms of being the right choice.

There will always be challenges to face when starting a captive but Hayworth explains that these were minimal. "We had to analyse the history we've had and really had to understand the projections from the actuaries while keeping in mind the risk that was involved," he says Mount Kisco has clearly had a positive experience in setting up its captive. Its advice to companies who are faced with high rates and lack of services to look at their data and Moser adds: "You will need a great actuary. If you have a good actuary then they can put the numbers together and if it all looks like the benefit outweighs the risk, go for it."


The cornerstone of this year's legislation as far as Vermont captives are concerned came in the form of an act enabling the securitisation transactions by captive insurance companies.

Senate Bill number 91 was created for the whole department of banking, insurance, securities and healthcare and specifically allows for securitisation rather than having a separate captive bill. It's an act relating to securitisation transactions by captive insurance companies, and it takes effect on 1 July 2007.

Housekeeping

In addition to the securitisation enablement the bill incorporated three 'houskeeping' aspects affecting captives. State director of captive insurance Derick White explains: "We allowed association captives to insure the association and not just its members. Previously our law always said you could only insure the members and we were not sure why it was written in that way."

For example, he says, the global network of community volunteers the Rotary Association has a captive and it insures general liability for all the individual Rotary locations around the US but the law said they could not insure themselves at the national level. "This was an anomaly that the Vermont regulator felt needed to be addressed for the purpose of clarity."

The bill also allowed industrial insured captives, a form of a group captive to insure controlled unaffiliated business. White explains: "We have some hospitals that are organised as industrial insured and in theory as the law stood they were unable to write the non-employed doctors who were just admitting privileges.

"There was a demand for it, so we changed the law to allow them to do just that. We allowed risk retention groups in other kinds of captives to do that and there was really no reason why we should not have allowed that."

Finally, he says the bill clarified the premium tax structure on consolidating companies. Owners of more than one company can consolidate the premium for premium tax purposes because a premium tax is a regressive rate.

"The question arose over what would occur in the event that an organisation owned a pure captive yet was also in a cell in Vermont. We had a couple of just such cases so there we went the extra distance to remove any ambiguity from the tax status," says White.

Triple X deals

The big bulk of the bill was for securitisation to create special purpose financial captives (SPFC) which would add provisions to its existing captive insurance law to allow for a securitization transaction involving a special purpose financial captive insurance company. In a typical transaction the ceding insurer would reinsure a specific book of life policies to the SPFC which would then issue securities, or a securitisation, to finance the reserves.

The ceded reserves are secured by the proceeds of the securitisation so the ceding insurer can take credit for the ceded risk, thus relieving pressure on its capital.

It was brought about by a growing number of life insurance companies who wanted to seed their triple X business to the captive. Vermont now has five such companies, only one of which was actually previously securitizing its triple X business.

"The trouble was the law did not specifically spell out that securitisation was allowed," explains White. "It did not say it was not allowed but some of the big law firms - especially in New York City - felt uncomfortable rendering an opinion that it could be done when the law did not specifically say it could," he says.

High end deals

This law was therefore passed to set out a variety of rules. The effect is that it makes Vermont more attractive as a domicile, White says. "On these triple X deals we have licenced five in the last year, we're talking to four right now and I think we will get many more."

Most of them are large insurance companies, including some of the largest in the US, which form the captives then seed off the economic reserves and the triple X reserves to the captive.

The premium coming in is usually just sufficient to equal the economic reserves so somehow they have to come up with the redundant reserves. "They can do that by issuing a separate note to a third party entity off to the side, for instance a special purpose vehicle, which will securitise it," explains White.

Typically the deals are quite high end, anywhere between $200m and $700m in premium. White says: "I'm told it usually takes about $300m to make it worth going out to the market for a securitisation so it has to be fairly large.

We have already seen the numbers come down a little bit for the other parties that are interested such as the intermediate sized life companies.

Once these things happen of course some of the fees come down as the investment companies find themselves able to shave off a couple of basis points because they have already been through this before," he says.

"These large companies have approached us. They were following the legislation as it took its course. South Carolina already had an SPFC law in place. A number of people who wanted


Securitisation in Vermont

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Business Insurance

Business Insurance

We'd like to thank our friends at Business Insurance for the use of the following articles. These articles are reprinted, with permission.


By RODD ZOLKOS
September 19, 2005

BURLINGTON, VT. - While the corporate governance requirements of the federal Sarbanes-Oxley Act have become a fact of life for publicly traded insurance companies, they haven't yet been directly applied to captive insurers.

And the largest U.S. domicile likely won't be moving to apply them to captives unilaterally, according to Leonard D. Crouse, deputy commissioner of captive insurance in the Vermont Department of Banking, Insurance, Securities and Health Care Administration.

However, speaking during the Vermont Captive Insurance Assn.'s 20th annual conference in August in Burlington, Vt., Mr. Crouse said that while there are no mandates applying Sarbanes-Oxley to captives, it probably makes good business sense that those companies apply the guidelines to their activities, and many probably already are.

"Nothing is mandated in our industry right now as far as Sarbanes-Oxley is concerned," Mr. Crouse said, noting that the National Assn. of Insurance Commissioners has not ordered it yet.

The Vermont deputy commissioner noted that 75% of Vermont captives are pure captives. "I can guarantee you that these publicly traded companies are looking at their pure captives," he said. "Are we going to mandate it? Probably not. Are we going to look a little closer at some good corporate governance? I think we should."

"Risk retention groups should probably be taken up a notch," Mr. Crouse said, adding that he believes companies should pay attention to governance issues with regard to their captives just because it makes good business sense.

"Our examiners right now do look at internal controls," he added.

If the NAIC does apply Sarbanes-Oxley requirements to risk retention groups, it probably will be four or five years before those requirements take effect, Mr. Crouse said. "And you have to remember that there are costs associated with some of these things," he noted.

The Vermont regulator said he sees captive auditors moving in rational fashion toward working governance issues into their reviews of captive activities.

"The auditing firms are really taking their time to get things right, which I think is fine," he said. "So I think it should just flow down to those people in charge of any organization to do the right thing."

The issue is one that is of concern to captive parents, said Molly Lambert, president of the VCIA, judging by interest in the topic among this year's conference attendees.

"It certainly is on the minds of the industry, because we (had) a panel on it and it (was) one of the top three people signed up for," Ms. Lambert said.

And John S. Alberici, chairman of Alberici Corp., noted that when his St. Louis-based company looked to form its Contractors Casualty Co., the kinds of transparency issues now at the heart of Sarbanes-Oxley led to choosing an onshore domicile and Vermont.

"So having a very strong regulatory process here, having the infrastructure here in Vermont that can provide needed information is very important," he said. "That could be one of the reasons that redomestication is occurring."

During the conference, the VCIA presented three honors that have become customary at the gathering. The first, a lifetime honorary membership in the association, was given to U.S. Sen. James Jeffords, I-Vt.

The VCIA's Captive Crusader award, presented by the association's staff to an individual to recognize his or her support and assistance of the association's activities, was presented to Michael Meehan, regional marketing coordinator of Milliman Inc. in Wakefield, Mass.

And the association's Industry Service Award, presented by the association's board to an individual for his or her support of the captive insurance industry, was awarded to Thomas M. Jones, a partner with the McDermott, Will & Emery law firm in Chicago.


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By RODD ZOLKOS
March 07, 2005

MONTPELIER, VT. - While licensing 43 new captive insurance companies in 2004 falls short of the pace Vermont established with its record-setting numbers of 77 in 2003 and 70 in 2002, last year's total represents a solid year for the state and demonstrates continued interest in forming captive companies.

As that interest continues, Vermont's history in the captive market, its established industry infrastructure, its regulatory reputation and state officials' responsiveness to captive insurers' needs have combined to give the state front-of-mind status to U.S. companies looking to form captives.

"Forty-three doesn't sound great, but it was our fourth busiest year ever," said Derick White, director of captive insurance in the Vermont Department of Banking, Insurance, Securities & Health Care Administration in Montpelier.

"It probably gives us a chance to catch our breath after two years of unprecedented growth," said Julie Boucher, managing director at Marsh Management Services Inc. in Burlington. While saying, "A good amount of growth is always welcome," Ms. Boucher said, "It would be tough to sustain several years in a row of 70-plus formations."

"For the state, (2004) was still a good year," said Gary Griswold, director-captive operations at SB&T Captive Management Co. in Burlington. "The good thing is, they all seem to be good quality programs."

Among the captives formed in Vermont last year, 29 were pure captives and eight were risk retention groups, with industrial insured, sponsored, association and branch captives making up the remainder.

Companies forming captives in Vermont in 2004 included Wal-Mart Stores Inc., Textron Inc., Cinergy Corp., Whirlpool Corp., Best Buy Co. Inc., USA Hockey Inc. and the New Jersey Sports and Exposition Authority.

"You look at the list of companies we've licensed, it's amazing some of these companies have never had captives before," said Nancy L. Gray, executive director at Aon Insurance Managers (USA) Inc. in Burlington. "They're forming these captives for long-term risk management reasons and they're going to be around for many years."

Of the eight risk retention groups formed in Vermont in 2004, "Those programs were quality programs," said Leonard D. Crouse, Vermont's deputy commissioner of captive insurance in the Department of Banking, Insurance, Securities and Health Care Administration. "A number of them were large hospital groups, large universities with medical facilities."

While licensing 43 captives in 2004, Vermont also saw 26 captives dissolve. The net gain of 17 captives brought the state's total to 524 at year-end 2004. State officials estimate gross written premiums written by Vermont captive companies in 2004 at more than $10 billion, up from $9.4 billion in 2003.

Of the captives that dissolved last year, several were small RRGs, Mr. Crouse said. In addition, "We had a couple of mergers," he said. "I can't say it was all bad to get some of those small companies off the list. They were inactive," Mr. Crouse said. And some of the companies dissolved last year had never been activated after receiving their licenses, the deputy commissioner said.

Most of the newly formed captives in 2004 and thus far in 2005 were created to provide traditional insurance coverages. "The majority of the ones that I've seen so far are your standard property/casualty business," said SB&T's Mr. Griswold.

"Definitely in 2004 the reasons for establishing captives were the more traditional coverages, standard property/casualty lines," said Aon's Ms. Gray. "And that's continuing for us in 2005."

"Probably more property than you'd see looking over the past 10 years," said the state's Mr. White. "Also TRIA as well."

The use of captives to provide terrorism coverage and provide access to the federal Terrorism Risk Insurance Act backstop makes debate over a TRIA extension a closely watched subject for Vermont captives. "To many of our members that has become a very, very important item," said Molly Lambert, president of the Burlington-based Vermont Captive Insurance Assn.

"I think TRIA, whether it's extended, is going to have some impact on captives," Ms. Gray said. "I think a lot of captives were actually reactivated, some dormant ones were reactivated, because of terrorism issues."

"TRIA we're seeing a lot of. Employee benefits, we're seeing a lot of queries without a lot of action," said Guy F. Ragosta, regional executive officer at Willis Management (Vermont) Ltd. in Burlington.

Ms. Gray said that while Aon also has seen some interest in employee benefits captives, the area is developing more slowly than some had anticipated. "Companies are taking the time to evaluate whether it makes sense," she said.

Another development last year that many see as key in Vermont's growth as a domicile is the opening of a Vermont office by the ACE USA division of Bermuda-based ACE Ltd. ACE Captive Solutions Vermont offers captives traditional and structured reinsurance products and risk management programs.

"The first reinsurer coming to the state, ACE, is historic," said Vermont Gov. Jim Douglas. "Some of the captive companies were really seeking one-stop shopping here in Vermont, so to have that happening is really great."

"That speaks volumes to the momentum that we've been able to keep up," said Daniel D. Towle, director financial services in the Vermont Department of Economic Development in Montpelier.

While facing increased competition from other U.S. domiciles like South Carolina, Hawaii and Arizona, Vermont maintains its status as the leader among U.S. domiciles, both in terms of the number of captives domiciled there and, increasingly, in the role it takes in shaping and representing the industry.

"I think last year was the first year Vermont actually saw some serious competition from other captive domiciles," said Ms. Gray. "But if you look at the laws that were passed in some of those domiciles, they were basically mirroring what Vermont had done."

"You have regulators from other captive domiciles calling Len and Derick asking questions about how they should regulate some of their captives," she said.

"I'd still say Vermont's the first name on most people's lips, but it's not quite the automatic it was," said Gary Osborne, group president of USA Risk Group in Montpelier. Still, he said, "Vermont is clearly the gold standard."

"It makes it tough for the others because Vermont really doesn't do anything wrong," said Andrew Sargeant, president of USA Risk Group of Vermont Inc. in Montpelier. And the accessibility of state officials and ability to work with Vermont regulators are key elements of the state's appeal, Mr. Sargeant said.

"Over the years, if you have a captive whose had the parent company having problems, it's not `Press the panic button,"' he said. "It's `Go down and have a chat with Len and Derick."'

"They work with you on problems, which is key," said Willis' Mr. Ragosta. "If we were going to form an RRG we wouldn't go anyplace else but Vermont," he said. "Their surveillance, it's intelligently done."

Vermont's captive division has a staff of 25 with two new positions authorized after July 1. "Staffing has been great as far as getting the staff we need to run a strong department," said Mr. Crouse.

"We're strongly committed to responsive service to registered insurers and want to maintain service," Mr. Douglas, the Vermont governor, said. That responsiveness includes tweaking the state's captive law as needed, including three technical amendments under consideration this year. Those measures relate to easing the conversion from for-profit to nonprofit corporation, allowing the commissioner discretion over investment standards for association captives and RRGs, and allowing branch captives to use a trust fund or a letter of credit to secure obligations.

"If the industry's ideas make good sense we take them to the governor and with his leadership they go to the Legislature," said Mr. Towle. "It's a tremendous model because we have an incredible relationship between the state and the industry."

"Vermont shouts out about the quality of the regulation that it applies to this industry," said the VCIA's Ms. Lambert. "When you've got 25 people in a department dedicated to regulating and scrutinizing something, the Legislature knows they're being asked to only improve on the nature of that regulation."

Vermont's leadership status also includes taking a prominent role in representing the captive industry in any of a number of forums, ranging from a risk retention group study by the federal Government Accountability Office to reviews of regulatory structures by the National Assn. of Insurance Commissioners.

"Vermont's right on top of everything that's going on," Mr. Crouse said. "And I think the industry appreciates that."

"I think Vermont has the leadership position because of the trust that has developed and really the justified position Vermont has for good captives, good regulation," said Roger D. Teese, president and chief executive officer of SB&T Captive Management.


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By MICHAEL BRADFORD
March 07, 2005

The rise of domiciles in the United States has given captive owners a lot of reasons to stay home.

As the number of states allowing captives has increased, owners no longer reflexively look to Bermuda, Cayman or other offshore locales. Some U.S. domiciles, Vermont and South Carolina among the most notable, have experienced steady growth in the number of captives by offering the same quality of regulatory and infrastructure services as the old hands offshore, but with the added convenience of easier accessibility for many owners.

Offshore managers, particularly those in Bermuda, are taking notice.

Captive activity in Bermuda has slowed in recent years, and managers there say that is largely because of competition from the profusion of U.S. domiciles. New insurer incorporations, most of them captives, fell in Bermuda last year to 77 from 89 the previous year.

"We have a lot more competition nowadays," said Rory Gorman, managing director with Marsh Management Services (Bermuda) Ltd., referring to Bermuda as a captive domicile. "The marketplace is a lot more fragmented," he added, with approximately 20 U.S. domiciles vying for captive business.

"We're fighting for every client we can," Mr. Gorman said.

Captive clients considering onshore domiciles usually find that the "incidental costs" such as fees for management, administration, audits and other such services are "pretty much a wash" when compared to the costs in Bermuda, said Mr. Gorman. But many have "a desire to be in a U.S. state, to begin with," he noted. "And with more and more states having captive legislation, often the solution is right on their doorstep."

Bermuda has fought some image problems in recent years, which may have scared some captive sponsors away.

Comments by Democratic presidential candidate Sen. John Kerry, D-Mass., in last year's campaign gave the word "offshore" a negative connotation and linked it with Bermuda, creating "some unwanted, adverse publicity," noted Mr. Gorman. "But I think we're over that now," he said.

Some U.S.-based managers contend, though, that such bad publicity does influence some captive owners.

"The offshore stigma is a real issue," said Gary Osborne, the Montpelier, Vt.-based president of USA Risk Group, the holding company for several captive management companies, including some in offshore domiciles. Sen. Kerry's comments and other negative publicity have made some people reluctant to be seen doing business offshore, Mr. Osborne said.

Robert L. Johnson, senior vp with Marsh Management Services Inc. in Charleston, S.C., agreed that the stigma associated with offshore business centers makes some people "uncomfortable" because locating there is not seen as "politically correct."

Mr. Johnson said, though, that offshore markets "are not struggling," and some U.S. companies still favor them.

Convenience, in many cases, wins out when it's time to select a domicile.

"It used to be advantageous to go offshore for tax purposes, but not now," said Elizabeth Steinman, New York-based first vp of HSBC Insurance Management.

Clients now choose domiciles based more on the type of captive they are forming, the regulatory environment of the domicile and how comfortable they feel operating there, she said. All things being equal, geography wins out, Ms. Steinman remarked. "These are pretty senior executives, and their time is very valuable," she said.

Bill West, chief financial officer for builder Dunmore Homes L.L.C. in Roseville, Calif., said he chose to go to Hawaii rather than Bermuda to set up a general liability captive because it is much easier to reach the U.S. domicile. "Nothing we saw told us that we wanted to go completely across the country to set this up, as opposed to going to Hawaii."

Taxes, fees and regulatory issues do not determine where clients will go, said Jason Palmer, managing director for Willis Management (Hawaii) Ltd. in Honolulu.

"The cost of doing business is almost the same, so it really isn't an issue. It's what fits best for the client or prospect in the location that we would recommend," Mr. Palmer said.

The travel issue is not as simple as which domicile is closest, though. Going to Bermuda can accomplish more than just dealing with captive operations, Mr. Gorman pointed out.

"When all things are equal or close to equal," Bermuda has an advantage in many cases over its onshore competitors, Mr. Gorman said. "We are sitting in the middle of one of the biggest insurance and reinsurance markets in the world," he said.

Many clients are in Bermuda "renewing their policies, anyway, with the markets here," he said, so "it makes travel sense" to situate the captive in Bermuda rather than in a U.S. domicile in which the parent does not operate and has no other reason to visit. "So I think we benefit from that," he said.

Mr. Palmer agreed that a captive sponsor often chooses an offshore domicile because it has an established relationship there, whether it is, for example, to buy reinsurance in Bermuda or even to vacation in Cayman.

David Hennes, director of risk management at The Toro Co. in Minneapolis, said that the ability to conduct other insurance business in Bermuda, as well as the domicile's experience with captives, helped sway the manufacturer of outdoor products toward the island rather than to Vermont.

"But it was close," Mr. Hennes acknowledged.

Toro established Red Iron Insurance Ltd. in 2001 to write warranty coverages and deductible buybacks for some of the company's self-insurance programs, Mr. Hennes said. Toro chose Bermuda because "we had been comfortable with the environment in Bermuda," having dealt with XL Capital Ltd. and having held meetings annually with the insurer, he noted.

"We've been happy with the business environment in Bermuda," said Mr. Hennes. "They've been doing captives for a long time, and their longevity won us over vs. Vermont."

Fairview Health Systems in Minneapolis has owned a Bermuda captive since 1975 to cover its medical malpractice, general liability and corporate automobile risks for seven hospitals, 300 physicians and 30 clinics, according to Michael Seitz, vp for risk management services.

Moving the captive onshore, or to Cayman, a domicile with a reputation for hosting health care captives, would not be worth the expense or the loss of relationships, Mr. Seitz said. "We have an established team in Bermuda. We feel that we have a good local relationship, and if we were going to move it, we would just have to re-establish everything," he said.

"I don't think there's any financial incentive" to move the captive, Mr. Seitz said, because uprooting it would be too expensive.

Mr. Osborne of USA Risk Group said offshore companies moving to the United States could incur more expenses. It may be easier to form a new company onshore than to redomesticate an offshore operation, he said.

Some captives, though, are considering making the move from offshore domiciles.

John O'Brien, Charleston, S.C.-based chief executive officer of Charleston Captive Management Co., said he has seen "a great deal of interest" among offshore companies that want to relocate in the states. The captives, one of which writes hospital-related risks for large universities, want to move partly because of the perceived negativity of being offshore.

Setting up in the United States is not the solution for every captive, experts acknowledge.

Mr. Osborne said that locating offshore could be best for companies "when there's still a problematic structure to do onshore." That problem could be a captive structure not suited to an onshore domicile or one that would find the capital and collateral requirements of an offshore location more suitable, he explained.

But, he added, "our company tends to tell people, `We'll start you onshore unless you tell us what you're doing is going to be problematic here."'

Guy F. Ragosta, regional executive officer with Willis Management (Vermont) Ltd. in Burlington, Vt., said that, with "the whole corporate governance issue, I don't think we see as much business going offshore as we used to, unless there's international risk."

Non-U.S.-owned companies that have U.S. interests will continue to view Bermuda as an attractive domicile, Mr. Ragosta predicted. "But if you're the CFO of a U.S. company and you have to sit in front of your board, it's hard to go down there if you have options like Vermont, South Carolina, Arizona," Mr. Ragosta said.


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'Captive University' in Vermont Aims to Promote Industry

By RODD ZOLKOS
April 19, 2004

A collaborative venture between the Vermont Captive Insurance Assn. and the University of Vermont aims to meet the education and training needs of the captive industry and to promote the industry's growth.

The International Center for Captive Insurance Education has its roots in a 2002 survey of hundreds of captive industry professionals that led VCIA leaders to fear the industry faced a potential crisis.

The survey's results suggested that a lack of formal training in captive industry disciplines, coupled with high demand for skilled individuals created by rapid growth in the number of captives worldwide, threatened to stunt captive industry growth.

In addition, 90% of respondents said that a specific educational program-the framework of which was used for the ICCIE-was what the industry needed to avert such a talent shortage.

In response, the VCIA teamed with the University of Vermont to move forward with developing the ICCIE, or "Captive University," as some have called it. Scheduled for an Aug. 8 launch, the ICCIE will be a freestanding, nonprofit organization intended to benefit the captive industry both in Vermont and in other domiciles worldwide.

The ICCIE's offerings will include courses, seminars, teleconferences and Web conferences on captive industry topics ranging from captive basics to the most cutting-edge industry developments.

A comprehensive, nine-month certification program with extensive hands-on learning opportunities will be geared toward mid-level industry professionals. Each seminar will be offered as a half-day, classroom-based session or as an online class, with an online assessment following each course to ensure that the student has mastered the topic.

Among the areas of captive management to be covered in the courses will be captive formation, reducing risk financing expenses, captives as risk transfer mechanisms, the financial impact of captive insurance, captive retention management, reinsurance for captives and captive operations. An industry mentor will help guide each participant through the program.

Upon completing the coursework, program participants will be required to pass a certification test to obtain a professional designation.

Individual courses and teleconferences will be open to all captive industry professionals, and those not interested in pursuing certification will be able to take courses on an individual basis.

"We're fine-tuning and responding to the industry's needs continually," said Molly Lambert, president and chief operating officer of the Burlington, Vt.-based VCIA. The educational initiative is one way the association is working to meet those needs, she said.

"I think it's going to be a tremendous success," she said. "We have a wonderful advisory board that is doing the recommendations on the curriculum. We have a wonderful curriculum design group that is working with the University of Vermont's governing board."

"I think (the university is) going to be on board in a bigger and bigger way as we really get this thing launched," the VCIA president said. "It's a great partnership."

"The university's role is really to help develop the curriculum for this program," said Greg Dunkling, director of new business initiatives at the University of Vermont in Burlington. "We're kind of in the early stages of that now."

As part of that process, Mr. Dunkling and Ms. Lambert have been meeting with the state's largest captive management firms to ensure that the program is developed in line with the management firms' expectations.

"One of the challenges is that the expectation is that it will be an approximately 40-hour program," Mr. Dunkling said. "The front end of any curriculum design involves just making sure you've got the audience right, and that's part of our reason for meeting with the largest management firms in Vermont."

From the university's perspective, one important consideration is the needs of its own students and whether the school can "make available for our business school graduates programs that might serve as a ramp into the captive industry," he said. "And this program might actually do that."

The program also could benefit others in Vermont who might have the aptitude to fit a role in the captive industry but lack a formal accounting background, Mr. Dunkling said.

ICCIE leaders interviewed candidates for the program's executive director position in late March, intending to move quickly to fill the position.

Plans for the captive industry educational initiative call for start-up and initial operating expenses of $400,000, with the ICCIE's business plan projecting that it will be self-sustaining after two years.

Raising the initial amount through major corporate gifts and donations from VCIA members, the ICCIE has generated more than $200,000 in cash and gifts thus far.

Noteworthy is the backing of state officials, who have routinely supported the captive industry.

Vermont Gov. Jim Douglas "has recommended $50,000 for our educational initiative in his budget," Ms. Lambert said. "I think it's a great signal for the state that they want to do everything to support the growth and excellence of the industry."

 


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By JERRY GEISEL
Nov. 21, 2005

AVENTURA, Fla. - The biggest advantage of funding employee benefit risks through a captive insurance company is improved cash flow, say corporate financial executives.

"It was cash flow, cash flow and cash flow," according to Greg Davies, executive director and treasurer at AstraZeneca Pharmaceuticals L.P., that was the main driver behind the company deciding to seek permission to fund benefit risks through a Vermont captive. The Wilmington, Del.-based unit and another U.S. affiliate of U.K. pharmaceutical giant AstraZeneca P.L.C. sought permission from the U.S. Department of Labor last month.

Speaking earlier this month at the 15th annual World Captive Forum in Aventura, Fla., Mr. Davies noted that there can be significant cash flow advantages, for example, in funding long-term disability risks through a captive compared with purchasing coverage from a commercial insurer.

Given the long-tail nature of LTD, premiums paid to a captive can generate investment income over a long period while the claims are paid out slowly.

"The cash flow is always positive," said Allan Harris, finance manager in the risk management department at Wells Fargo in Castle Rock, Colo. "You take in the premiums and pay out benefits slowly," he added.

Wells Fargo is now in the final stages of deciding whether to apply to the Labor Department to fund benefit risks through a 15-year-old Vermont captive.

The cash flow and other advantages associated with funding employee benefits through captives are prompting a small but growing number of employers to take a look at the innovative funding arrangement. Of the nine employers that have sought Labor Department permission to fund benefits in their captives since the agency liberalized its rules in 1999 allowing the arrangements, six have done so since 2004.

And more employers could join the movement to fund benefits through captives. "This could move us in a direction we have not gone before," said Laurie Solomon, risk manager at The Coca-Cola Co. in Atlanta, who moderated the WCF session.

Improved cash flow, while perhaps the most significant incentive for companies to consider funding benefits through their captives, is not the only reason. Mr. Davies of AstraZeneca, for example, noted that employers can obtain more flexibility in the design of their benefit plans by funding them through captives.

Additionally, adding benefit risks to an existing captive can broaden the captive's book of business. "We like that spread of risk," said John Wilson, president of Three Rivers Insurance Co., a Vermont-domiciled insurance subsidiary of Alcoa Inc. Earlier this year, the Labor Department granted Alcoa approval to use Three Rivers to reinsure group term life insurance policies written by Metropolitan Life Insurance Co.

"It's nice to get that extra diversification," Mr. Harris agreed.

But panel members warned that funding benefit programs through captives is not something that can be accomplished quickly. To begin with, such projects almost always require that at least two corporate departments-typically risk management and human resources-work together.

"You have to respect the turf of HR," Mr. Wilson.

At the same time, the commercial insurers that previously covered the exposures have to be educated on their new role. Typically, commercial insurers involved in captive benefit funding arrangements will issue the policies and then be reinsured-in full or part-by the captive.

"The big challenge is to get carriers to look at this differently," Mr. Harris said.

There are other issues as well. An employer has to decide whether to use in-house or external counsel to prepare the necessary filings for the Labor Department, and it must select an external fiduciary.

Because the Labor Department has already approved seven captive benefit funding applications, employers by now have a good idea of what it takes to win regulatory clearance. Among other things, the Labor Department requires that a top-rated insurer be selected to issue policies and that plan participants benefit from the arrangement, such as through a sweetening of benefits.

"There is a road map. You don't have to reinvent the wheel. You can look at what other companies have done," Mr. Davies said.

In the end, though, an employer has to see if the arrangement truly makes sense for it. "You have to see what works best for you," he said.

The session was coordinated by James Waters, retired head of employee benefit services for Towers Perrin in New York.

 


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Rough Notes

Rough Notes

We'd like to thank our friends at Rough Notes for the use of the following article. This article is reprinted with permission.


Vermont: The Gold Standard
Despite the widespread growth in captives, some domiciles fared better than others. One domicile that continued its fast pace is Vermont.

Full Article





Risk & Insurance, April 15 2005

Risk & Insurance

We'd like to thank our friends at Risk & Insurance magazine for the use of the following articles. These articles are reprinted, with permission, from the April 15, 2005 edition of Risk & Insurance.

 


Meet Dan J. Labrie. He runs a company in Cheshire, Conn., that insures public housing authorities. The Housing Authority Insurance Group is domiciled in Vermont and provides liability insurance for housing authorities in 43 states. Labrie continues to be a leader in the captive community.

BY THOMAS J. SLATTERY

Like thousands of junior insurance industry executives, Dan J. Labrie began his career at blue-chip firms, first as an account executive at The St. Paul Cos., and then as a captive program manager with Travelers.

But despite the good salary, the smart suits, the silk ties and the MBA in international management, life was turning into a harried blur as he found himself rushing from one airport gate to the next.

Labrie, now CEO of the Housing Authority Insurance Group of Cheshire, Conn., had reached the point where he even relished the pauses in the waiting lounges of J.F.K. International Airport. He overslept one day, after dozing for two hours, and found his gate empty. Maybe it was time to move on, he thought.

And move on he did, to the Housing Authority Insurance Group, in 1988, where life was different but no calmer. Back then, the organization was a single risk retention group. Today, it has spawned five subsidiaries.

"Our mission," says Labrie, who has been CEO for the past seven years, "is to serve the insurance and risk management needs of our members, who are housing authorities throughout the United States."

In the mid-'80s, he recalls, insurers took a dim view of public housing risks, as they did of so many others. "It was a class of business at that time that had a very difficult time getting insurance," he says, "specifically liability insurance, at a reasonable cost."

Back then, it was common for carriers to cancel policies, cancel renewals or demand sky-high premiums.

VOLUMINOUS GROWTH
"I think, from the point of view of the insurance industry, public housing is a class of business that has a high frequency of claims," says Labrie. "I think a lot of underwriters, based upon that, felt the class or the risk, because of that high frequency, was difficult to price."

In addition to the frequency of claims, the severity potential of many housing claims further alienated underwriters.

In a bind, 26 housing authorities banded together, each agreeing they had a large market, wanted control over their destiny, and yearned to escape the misery of insurance cycles. In 1985, the industry decided to take matters of insurance into its own hands.

In 1985, the Council of Large Public Housing Authorities held a meeting in Chicago to find a solution. Two years later, that solution emerged: the Housing Authority Risk Retention Group. The group found a home in Vermont, and eventually grew to provide liability insurance for housing authorities in 43 states.

Today, that company is one of Housing Authority Insurance Group's five subsidiaries. The others are Housing Authority Insurance Inc.; Housing Authority Property Insurance, now a mutual insurance company; Housing Enterprise Risk Services Inc., a so-called rent-a-captive, or sponsored captive; and Housing Insurance Services Inc., an insurance agency licensed in 44 states. All are incorporated and domiciled in Vermont, but operate out of Cheshire, Conn.

HAIG currently operates in 43 states and represents close to 800 public housing authorities.

The group began in 1987 with $6 million in assets. Today, the assets of the combined companies are worth $350 million. Surplus exceeds $80 million, up from $3 million when the company started.

"We started with roughly $6 million in annualized premiums, and today we're at $110 million," he says. "We have a staff of 97 today in-house; we started with one."

Labrie says that in 1987, an association captive handled product lines a risk retention group is forbidden from handling: property, workers' comp, fidelity and boiler. Two years ago, the captive was converted to a licensed mutual insurance company, the Housing Authority Property Insurance Co. Inc.

Housing Enterprise Risk Services, or HERS, is a sponsored captive. It provides property and liability insurance to housing entities in the mixed-income housing market.

Why did Labrie choose a Vermont domicile?

"We decided back in 1987 to incorporate the first company there, which was the risk retention group," he says. "We felt they had the infrastructure and the regulatory experience to meet our needs. It made more sense to us long term. So we decided to go to Vermont, not offshore." And so it was that they invested $3 million and started the risk retention group with 26 housing-authority members.

HAIG's mission, he says, is to meet the needs of policyholders and member housing authorities at a reasonable price.

He reads off a list of products and services HAIG provides: accident incident training, risk management videos and presentations to housing groups, interactive training sessions broadcast throughout the country via an in-house satellite television network.

"We have an extensive and global way of providing risk management services here," says Labrie. "The level of products and services we provide in the risk management area is very broad and very extensive."

Additionally, there are blueprint and coverage reviews, safety code consultations, loss reviews and analyses, risk control audits, NFPA code assistance, risk control program audits, site inspections and risk management work plant support.

"There are also promotional services to encourage our housing authorities to promote the risk management mission," he says. There's a personnel and employment hotline, a housing authority risk management achievement award, and poster contests for kids living in developments on preventing fires."

A DUAL STRATEGY
Labrie says there were two strategies that made the insurance operation a success:

"First of all, back in 1988 - that's when I got hired - we were a niche provider. Also, being a part of the captive insurance industry, we decided at that time that the long-term strategy should be not only to provide liability insurance but to be a one-stop shop," he says. "Our mission was to provide the insurance needs, whatever they are, from traditional to nontraditional insurance lines, so we set up an organization to provide all the insurance needs to meet our members' satisfaction."

The other strategy was to build an in-house capacity to manage the organization, as well as to serve insurance and risk management needs of clients.

"We've built our capacity in all areas of the insurance operation," he says, referring to risk management, underwriting, finance management, training and professional development. "Even our MIS systems and software are tailor-made, very specific, very niched."

Come to think of it, there's a third significant factor.

"Part of our mission statement says that we need to have grass-roots participation," says Labrie. "Our committees and our boards are made up of housing authority management and housing authority executive directors. We do get quite a bit of feedback from them, and we're able to anticipate changes in public housing and changes in mixed-income housing to address and to respond to the ongoing changes of the industry."

DIVERSIFICATION
What are those changes? And what are the dynamics unique to the housing market and the housing authority business?

"One challenge we see coming is that housing authorities are diversifying, getting involved in other areas of low-income and mixed-income housing," he says.

There's a significant move afoot, he adds, for both the private sector and public sector to gather adequate capital to build low- and mixed-income housing, and housing authorities are involved in these types of arrangements.

"If you take a look at our risk profile," he says, "we have a significant segment of elderly housing and we also have family housing. In dealing with low- and mixed-income housing, it's mostly all family housing. We don't have a combination of both."

Then too, says Labrie, public housing is involved more deeply in assisted living exposures, and the issue of professional liability as it relates to assisted living.

Another example, he says, is how to cover exposures related to mold. "We put together a mold liability program about a year ago that's available to our housing authorities, because some of them have that exposure, and we have to find ways to provide adequate liability protection and to survey the risk and identify it and come up with recommendations to reduce the mold problem in these units," he says.

Going forward, says Labrie, his biggest challenge is "to efficiently manage reinsurance to provide affordable rates and capacity for the largest losses."

That's one big ticket item, and one tough agenda.


TOM SLATTERY is an independent insurance journalist and a regular contributor to Risk & Insurance® magazine. He is also managing director of the firm Slattery-Esterkamp Communications, Baldwin, NY. He can be reached at riskletters@lrp.com.


Two companies from opposite ends of the country began their hunt for a magic potion to help slow premium increases. In one instance, a corporate giant decides to expand its captive experiment. In another, management decides to retrench.

BY THOMAS J. SLATTERY

They hail from different ends of the continent and they differ significantly in the nature and scope of their businesses, but some years ago their paths crossed in Vermont. Years later, for similar reasons, they're still there.

Giant Alcoa, the Pennsylvania metals behemoth, and Elixir Industries, the considerably smaller California manufacturer of components for recreational vehicles and manufactured housing, found themselves somewhat strange bedfellows in the very early stages of the captive insurance industry there, and still do.

Elixir's was the second captive licensed in Vermont, Alcoa's was the eighth.

John Wilson has been with Alcoa since 1980, and with its captive company, Three Rivers, since 1991.

"To start from the beginning," says Wilson, "Alcoa had captives in Bermuda starting in the '70s. We were involved in third-party business from the very beginning. Around '83, a tax reform act in the Reagan administration eliminated the advantages of being offshore, at least for us, so we began looking for an onshore domicile."

Because Alcoa has a lot of operations in Tennessee, they thought they'd locate there and they were far along in the process when Vermont unveiled its captive law.

"They did a very smart thing," he says. "They took the Bermuda law, crossed out Bermuda, and wrote in Vermont. It was very friendly to all the captives that were moving from Bermuda to Vermont. They were familiar with the Bermuda law and here was one that was just like it."

In particular, he recalls, the Vermont law was liberal in the area of investments. "And so at the last minute we switched," he says. "We decided to move to Vermont."

Roger Phelps was named general manager of Three Rivers, which became the eighth captive in Vermont. "Roger moved up here in 1983 and we started doing business at that time," he says. "We moved people up there starting in 1983, unlike a lot of captives who hire managers to take care of all their affairs."

In the late '80s, Alcoa moved its holding companies from Delaware to Vermont as well. "We decided we'd consolidate the captive insurance company operation and Alcoa's holding company operation," he recalls. At first, the thought was to move the captive to Delaware, but Delaware didn't have a captive insurance law. "Might be easier to move the holding companies to Vermont," they figured, and that's what happened.

Phelps worked with the legislature and got a holding company law passed in Vermont. With the consolidation in Burlington, extra help was needed and so Wilson moved there, among others.

FAVORABLE LAWS
Wilson says the decision was made to domicile the captive in Vermont "because the law was so much more favorable to us." What was particularly attractive was that there were fewer restrictions on where you could invest your captive's money. "We liked that, and we liked the fact that it was Bermuda law. We were very comfortable living under the Bermuda law. There was very little risk in Vermont because it was law you were very familiar with."

Today, Alcoa is growing its captive business, having added another, the St. George Insurance Company, with its acquisition of the Reynolds Metals Company. "At first we were going to consolidate the two, but then decided we liked having both captives at least for now," he says.

"We've been expanding the role of our captives through the hard market. We've been taking higher and higher retentions. We like taking our own risks. And now Alcoa has applied for and has received permission to use its captive for insuring domestic employee benefits."

Going forward, says Wilson, there are several projects, like international employee benefits, insuring employee homes and autos, and a credit insurance program. "We've still got things on the plate," he says.

Elixir Industries found a home in Vermont in 1982, even before Alcoa. Lea Gerber, director of risk management and employee benefits there since 1985, recalls how Elixir made its way to the Green Mountain State.

The reason Elixir formed a captive, Garden Insurance Co., she explains, is because in the late '70s the insurance market constricted and premiums rose, most especially for product liability placements, but also for general liability, workers' comp and auto.

"It was the second captive in the state and is actually the longest operating because the No. 1 captive stopped using the Vermont facility, though I understand they've since picked it up again."

Elixir was familiar with captives before setting up shop in Vermont. "We started our first captive in Colorado in the late '70s," says Gerber. "As we moved into the '80s, a management decision was made to start a second captive in Vermont, because they allowed you to place outside business, whereas Colorado did not."

The favorable regulatory environment eventually led the company to transfer its entire captive operation to Vermont. Capitalizing on Vermont's liberal laws with regard to outside business, the company set up an insurance agency in California for that purpose.

Agents in California placed coverage through Garden Insurance Co., the Vermont captive, for companies not related to Elixir.

The agents, she says, focused on manufacturing companies similar to Elixir, which makes components for recreational vehicles and manufactured housing.

"So we really expanded our captive, to do outside business, but in industries that were similar to ours," she says. "In Colorado you could only use your captive to place the parent's business."

Since '93, though, the Elixir captive stopped writing outside business, but it continues to operate for its own business.

"We came to a crossroads," says Gerber. "We had to decide: Were we going to significantly invest in our captive? Hire more agents? Bring in more outside business?"

TAKING SIDES
The central question for management was whether to remain true to the core manufacturing business of Elixir, or whether to venture into the insurance business to an even greater degree?

Management eventually decided to stay true to its origins. "We just wanted to be in the business we've been in for over 50 years," she says. But management at Elixir is grateful for the service that Garden Insurance has provided the parent company, particularly in the hard market.

"Several years ago, when the property market became very, very difficult we were potentially facing a 200 percent to 300 percent increase in premium," says Gerber. "We talked to the [Vermont] Department of Insurance and they allowed us to place the first $1 million of our property coverage in our captive."

The net result was that Elixir was able to absorb the increases, without any increase in premium.

"This is where the captive comes in as a really significant tool in allowing you to evaluate your financial situation and how you want to layer your program," he says.


TOM SLATTERY is an independent insurance journalist and a regular contributor to this magazine. He is managing director of the firm Slattery-Esterkamp Communications, Baldwin, NY. He can be reached at riskletters@lrp.com.


Executives at three companies say the liberal regulatory laws are among the most important reasons for trekking to Vermont to set up a captive insurance operation.

BY THOMAS J. SLATTERY

Among the latest corporations to make the pilgrimage to the Green Mountain State are Liberty Mutual, the Collegiate Catalyst Fund and John Deere Co. It is companies like these who have made Vermont a favorite among financial services companies looking for a shelter to ease the burden of paying for benefits in an age of steeply rising premiums.

LIBERTY MUTUAL
Liberty set up a sponsored captive in Vermont in February. Nancy Glennon, managing director of captive services, says the company has been in Bermuda for a decade, where it manages various rent-a-captives, the equivalent of a sponsored captive in Vermont.

"We've had a business plan to come onshore with similar capabilities to cater to a different client base," she says. "There are certain clients who would prefer to have their captive in an onshore domicile. Boards of directors sometimes have more of a comfort level with insurance onshore. They sometimes find it's more tax effective and there may be better reinsurance offered through the Vermont market than through Bermuda."

Somewhat uniquely, Liberty moved its existing rent-a-captive from Bermuda to Vermont. Why a rent-a-captive? "There's been demand over the last couple of years in the middle commercial market for self-insurance vehicles," Glennon explains. "Setting up their own captive can be very expensive and time consuming, so [they] try out a captive structure and many of the conveniences that come with it [by] renting space, if you will, within a rent-a-captive.

Alison Calder, products director, Liberty Mutual Captive Services, distinguished this from a "pure" captive, with its much higher level of management commitment.

"By renting space in someone else's captive, you can access some of the risk financing and flexibilities, yet not have that same level of management commitment or capital requirements," she says. "So sometimes companies ? enter through a rent-a-captive, then after a few years form their own."

Glennon says Liberty will continue to expand its captive management operation to other domiciles [South Carolina, for example] within the United States, as well as in the Cayman Islands, where it will provide accounting and consulting services.

"At this point in time, from a rent-a-captive standpoint, we only foresee using the captives we have now in Bermuda and Vermont. We may set up additional ones," she says, "but as we develop new products and we enter into different lines of insurance, we find there are domiciles and structures and vendors within those domiciles that support those types of business and coverages and will be more of a niche market that we'll start to enter into."

Glennon and Calder point to the company's success with multiple-owner captive accounts. "It takes a group of homogeneous companies, already affiliated in some way, and brings them together to share rent within a segregated account in a rent-a-captive facility," Calder says. "There's a finite number of participants in it. That's a really nice opportunity that the companies within the multiple-owner captive accounts would not be able to do on their own."

Adds Glennon: "We found that there had previously been displacement in group-type captives. Clients were not satisfied with the arrangement. They sort of peeled themselves apart, these folks that understood each other and were in similar types of businesses and were looking for a vehicle to do a self-insurance, captive-type approach where they felt they had more control than in a larger group-type structure."

In the larger settings, she says, they typically don't know the other members sharing risk with them. "So if there were certain members that were having bad loss experience or not committing or investing in the same type loss strategies, it could affect their programs."

Glennon says Liberty Mutual's satisfaction level in Vermont is high. "The regulators and the vendors and the legal environment and everyone we work with have been extremely helpful. We went there with a very comprehensive business plan and, with their support, we got through the process rather quickly, more quickly than most of us thought we could. The scrutiny was definitely there."

JOHN DEERE CO.
The company, looking for financial alternatives to the regular insurance marketplace, came to Vermont in September 2004. "We were looking for increased flexibility in how we handled our risks," says Mark Middleton, the manufacturer's risk manager. "The insurance marketplace today doesn't provide the alternatives it used to for various types of coverage. Secondly, many of those alternatives come with high prices and pared-back coverage."

A captive, he says, gives his company some possibilities to alleviate that situation. "What we wanted was to give ourselves some alternatives which would allow us to deal with, to handle and manage risk, differently than we have been doing the last few years," he says. "Most corporations have seen insurance premiums go up quite a bit. We decided it was time to give ourselves some flexibility and alternatives in the commercial insurance marketplace."

The first thing Deere put into the captive was its extended warranty program on its manufactured products. But the company has further plans for its captive as well, things like reinsurance for its primary automobile, general liability and workers' comp.

"Employee benefits, of course, is one that has recently been made available to us because of the recent Department of Labor rulings," says Middleton. "And professional liability for our managed health care operation is another expensive and limited coverage?limited insofar as there aren't so many [insurers] out there writing it. We're also considering transit coverage."

Why did Deere look in Vermont? "Vermont has demonstrated its commitment to captive insurance companies," he says. "It's also been aggressive in recruiting captives. The government has assembled a knowledgeable and supportive team of experts with whom to work. And, finally, the infrastructure of business services there has developed to support captives."

"[Other domiciles] have entered the market lately," he says, "but Vermont has the jump on them."

Middleton says the company jumped into the captives marketplace now because commercial carriers were raising prices and the state's regulations were favorable.

"The hard market and high premiums convinced us that we needed to develop alternatives to the commercial insurance market," he says. "The recently adopted position of the Department of Labor which allows a parent's employee benefits to be insured by a captive under certain conditions was another motivating factor. And then it also seems to us that there's been increased clarity over the past several years by the IRS regarding captives and the tax deductibility of premiums paid to them by the parent."

COLLEGIATE CATALYST FUND
Another group that has recently entered the Vermont captive insurance market is the Collegiate Catalyst Fund. It began operating there in July.

The fund is a 35-year-old educational consortium of five colleges: Amherst College, the University of Massachusetts, Smith College, Mount Holyoke College and Hampshire College. In the past, they have shared administration and risk management services.

The fund had been self-insuring on an "ad hoc" basis and wanted to expand coverage, says Beth Carmichael, risk manager for Catalyst Fund. It decided that the captive route was the most efficient.

Vermont, she says, was the most attractive choice, because of its proximity to her home base in South Hadley, Mass., and because it was so liberal, compared with other domiciles, in its regulatory conditions.

The Catalyst Fund had been in the process of framing a limited liability corporation, with an eye to tax advantages, when it decided to go back to a captive structure. She looked at Bermuda and others, and newer (too new) domiciles in the United States, but eventually settled on Vermont. Carmichael says Vermont is a "quiet, fair and responsible high-quality environment" interested "in keeping us happy."


TOM SLATTERY is an independent insurance journalist and a regular contributor to Risk & Insurance?. He is managing director of Slattery-Esterkamp Communications, Baldwin, NY. He can be reached at riskletters@lrp.com.


Captive insurance options for middle market firms and small businesses have exploded as the scandals plaguing the regular commercial insurance industry renew interest in setting up shop onshore where regulators are less likely to raise a stink, according to captive industry officials.

BY THOMAS J. SLATTERY

In the eyes of captive insurance industry proponents, the future of the business lies in addressing the needs of middle-market corporations and small businesses. Those businesses, proponents of the captive industry say, have the same needs as larger corporations.

"I think one of the perceptions about captives is that they are only for large companies, which is absolutely not true," says Daniel D. Towle, director of financial services in Vermont's Department of Economic Development.

Towle cites a query his department did not long ago that showed more than 150 of Vermont's 700-plus active captives write less than $5 million in premium. "If you look at the marketplace of companies writing less than $5 million in premium, there's a lot more certainly than the Fortune 1,000 companies as a marketplace."

Towle also says that these days there are more options for middle-market companies looking for captives. "There are a lot of group programs accepting members for their specific niches," he says. "We're seeing strong growth in our sponsored captives. Liberty Mutual is certainly the most notable. That's going to start to fill a need. Liberty has communicated that there's a real demand from its existing customers to do what they're doing offshore in Bermuda in an onshore domicile. So we're expecting to see a lot of growth in that sector."

AN ONSHORE BREEZE
Why the preference for an onshore domicile for those targeting middle-market business, among others?

"Perception, unfortunately (or fortunately, depending how you look at it), drives that sometimes," says Towle. "In light of everything that's going on in the current marketplace, with Eliot Spitzer and corporate governance, I think many more boards of directors are just choosing to stay at home and not have to deal with the negative perception of being offshore."

He also thinks the marketplace has recognized the opportunities and possibilities of the onshore marketplace.

"In the past, it was believed that much of what you could do in the captive arena had to be offshore," he says. "That's clearly not the case. Most of the tax advantages have sort of whittled away over the years."

A case in point, Towle also says, is Chicago's Attorneys' Liability Assurance Society Inc., a risk retention group composed of 300 law firms from around the United States.

A.L.A.S., which has provided services for 25 years, furnishes professional liability coverage for about 50,000 lawyers. That includes loss prevention services through publications, audits, in-firm presentations and telephone consultation services.

Its loss prevention unit, all former lawyers in member firms, responds to more than 2,000 inquiries from member firms each year. Firms eligible for membership must have 35 lawyers or more to apply. A.L.A.S. serves small to midsize firms, as well as large firms.

"Our business model is to provide stability and coverage," says Mark Gralen, the group's senior vice president for member services. "We have, I think it's fair to say, the largest limits in the industry in one policy. We pride ourselves on offering broad and stable coverage to our members on a year-in, year-out basis."

The second pillar of the A.L.A.S. business model is excellence in claims handling by partner-level lawyers and top notch loss prevention services. Then, too, there's underwriting service beyond just the issuance of the policy.

"In 1996, we became a risk retention group. Prior to that we were an Illinois captive," says Don Breakstone, senior vice president and general counsel of A.L.A.S. Then the decision was made to move to Vermont. The organization moved to Vermont, says Breakstone, because Illinois changed its captive law and it became impossible to form the risk retention group there, convenient as that would have been.

"Vermont had an excellent reputation as a regulator, and the largest number of captives, particularly risk retention groups," he says. "We wanted to be associated with a jurisdiction that had the highest quality of captives and provided the highest quality of regulatory service to insureds and to insurers."

The big issues for A.L.A.S., says Breakstone, are stability in terms of coverage and pricing, strong loss prevention to help avoid systemic problems in its member firms, and anticipation of new trends in exposures lawyers face.

And just how does A.L.A.S. market to middle-market firms? "We've never really marketed to anybody," Breakstone says. "The facility has always developed largely by word of mouth. It's usually members that give us a name, recommend a firm."

The appeal of A.L.A.S. to small and midsize firms depends on what the firm does. "What we emphasize, putting aside broad coverage, are two key factors," he says. "No. 1 is our loss prevention program, which helps any size firm in the management of risks and understanding what risks they may face, be they a small firm or a large firm. No. 2 is claims management, where we spend a great deal of effort managing claims in the interests of the firm, which is just as important to a small firm as to a large firm."

"A small law firm of 50 people could be a firm that specializes in complex litigation or a firm that specializes in certain types of specific corporate work," says Breakstone. "And they have no different interest than in a megafirm that has the same type of practice."

In the traditional insurance world, the small law firms were lumped into the same pot with the accountants, individual lawyers and others who buy professional liability.

"They believed that law firms, as a separate risk group, could form their own captive which, writing on a preferred risk basis, carefully choosing which law firms would be members of a mutual company they wanted to create, could do as well and probably do much better than the commercial market in writing coverage and in helping firms develop a loss prevention concept, which the commercial market had never pressed."

The difference in the demands of the smaller members and the larger members depends on the firm's practice.

"For example, a small firm that did divorce law or all criminal law would probably need a different type of protection," Breakstone says. "Our smallest self-insured retention now is around $250,000. Our smallest limit is $10 million. So if a firm has a practice that doesn't merit that kind of coverage, then they would be less interested in A.L.A.S., although we've had firms that are very small that have joined and stayed because they like the risk management." Those very small firms, he says, have stayed because they've had a good claims experience with A.L.A.S., compared with their claims experience in the commercial market.

Regardless of size, any firm active in the litigation or corporate-oriented and patent fields, for example, would be as interested as anyone else. Then too, he says, A.L.A.S. has never varied its rates. "We have a unitary rate, so everybody pays the same and buys the same limits and retention. So there's never been discrimination one way or the other among the various firm sizes." In short, in the end, it's all the same, big or small.


Cheshire Cat
Like thousands of junior insurance industry executives, Dan J. Labrie began his career at blue-chip firms, first as an account executive at The St. Paul Cos., and then as a captive program manager with Travelers. But despite the good salary, the smart suits, the silk ties and the MBA in international management, life was turning into a harried blur as he found himself rushing from one airport gate to the next.

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