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New Captive Insurance Legislation Proposed for Vermont
Bill to Allow Incorporated Protected Cells

Montpelier, VT, March 22, 2011 – After a strong 2010 with the licensing of its 900th captive insurance company, the State of Vermont is proposing changes to the Captive Insurance law in the Legislature as part of its annual enhancements to its captive statute, according to the Department of Banking, Insurance, Securities and Health Care Administration (BISHCA).

“It is critical that we are responsive to the industry,” said Governor Peter Shumlin.  “Since 1981, when Vermont became a domicile, Governors and Legislatures have united in keeping us the gold standard for regulation of this industry and these proposals are in keeping with that tradition,” he added.

The proposed bill, H438, expands Vermont’s captive laws, to include allowing cells within a sponsored cell captive to be formed as incorporated protected cells. Vermont currently allows protected cells created by contract alone.  “This presents another option for a cell owner in addition to cells created by contract alone,” said David Provost, Deputy Commissioner of Vermont’s Captive Insurance Division.  “We’ve heard from the captive industry that they wanted the option of having incorporated cells.  This legislation does just that, without limiting any rights or protections afforded by cells created by contract.” 

Another component of the legislation will expand the potential types of companies that may be sponsors of cell structures.  “This change will address the perceived restrictions regarding whom may be a cell owner and will reinforce that the insurance commissioner will have full discretion in deciding who may be a sponsor,” said Dan Towle, Vermont’s Director of Financial Services.  

Another change has been proposed to create greater flexibility within cell structures.  This change will eliminate the current restrictions on cell business.  Business written by a sponsored captive will no longer be required to have it be fronted, reinsured or secured by a trust.  This requirement will now be at the discretion of the commissioner. 

“Vermont will continue to license quality companies that may be sponsors of cell structures. Any company that continues to meet our regulatory standards may be a sponsor and companies will now have greater flexibility in their structures and their ownership,” said Provost.  Vermont currently has 18 sponsored cell captives with approximately 100 individual cells.  

As in past years, Vermont’s newly licensed captives are off to a brisk pace in 2011.  “We’ve already licensed two new captives and have seven applications in progress,” said Towle.  “We look forward to working with the Legislature to continue to strengthen Vermont’s captive regulations.”

Vermont is the largest captive insurance domicile in the U.S. and the third largest in the world, with an excess of $17 billion in gross written premium estimated in 2010.  Vermont is also home to 42 of the companies that make up the Fortune 100, and 18 of the companies that make up the Dow 30 have Vermont captives.

Captive insurance is a regulated form of self insurance that has been around since the 1960’s, and has been a part of the Vermont insurance industry since 1981, when Vermont passed the Special Insurer Act.  Captive insurance companies are formed by companies or groups of companies as a form of alternative insurance to better manage their own risk. Captives are typically used for corporate lines of insurance such as property, general liability, products liability, or professional liability. Growth sectors of the captive insurance industry include securitization, professional medical malpractice coverage for doctors and hospitals, and the continued trend of small and mid-sized companies forming captive insurance companies. 

For more information on Vermont’s captive industry, please visit, call Dan Towle at 802-828-5232 or email at


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