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Steps to Form a Captive

A captive insurance company represents an option for many corporations and groups that want to take financial control and manage risks by underwriting their own insurance rather than paying premiums to third-party insurers.

The advantages of going captive are:

  • Coverage tailored to meet your needs
  • Reduced operating costs
  • Improved cash flow
  • Increased coverage and capacity
  • Investment income to fund losses
  • Direct access to wholesale reinsurance markets
  • Funding and underwriting flexibility
  • Greater control over claims
  • Smaller deductibles for operating units
  • Additional negotiating leverage for underwriters
  • Incentives for loss control
  • Alternatives to costly practice of trading dollars with underwriters in the working layers of risk
  • Tremendous flexibility in managing risk

The process of incorporating a captive insurer in Vermont and applying for a license from the Department of Financial Regulation will involve the following steps:

  1. Call or E-mail us to arrange a meeting with the Deputy Commissioner of Captive Insurance and staff to discuss the proposed captive and obtain initial reactions from the Department.
  2. Prepare documents necessary for incorporation. The services of a local lawyer may be desirable.
  3. Prepare documents necessary for application to the Department
    (See captive application for a list of these items.)
  4. Submit one copy of all materials in numbers (2) and (3) above to the Commissioner of the Department of Financial Regulation for review. Please include $5,000.00 for an actuarial review. The fee for SPFIs is $10,000 for the actuarial review.
  5. Submit one additional copy of the application material to the assigned review firm when instructed to do so by the Commissioner.
  6. Petition the Commissioner to issue a Certificate of Public Good. The factors to be addressed are outlined in 8 V.S.A. Sec 6006(d).
  7. After the Commissioner has issued the Certificate of Public Good, present this and the documents in number (2) above to the Secretary of State's office along with the appropriate fee in order to incorporate the captive (see 11 V.S.A. Sec 2201).
  8. After the organization, apply to the Commissioner for a Certificate of Authority and submit a $500.00 license fee. SPF license fee is $5,000.
  9. Special Purpose Financial Insurers may be required to take other or additional steps.  If you are forming a Special Purpose Financial Insurers, please contact us directly to obtain additional information.

Other requirements:

  1. Select a Vermont approved management firm
  2. Have your CPA complete the necessary form for authorization to perform audits.
  3. Have your actuary complete the necessary form for authorization to render the opinion on reserves.
  4. An organizational exam may be performed by the Department as soon as possible after you receive the Certificate of Authority and have capitalized the captive. The cost of this exam will be borne by the applicant.

General Licensing Instructions and Forms