8 January 2019Analysis

Mapfre forms first ARC captive in Vermont

The State of Vermont licensed 25 captives in 2018, including one affiliated reinsurance company (ARC), according to statistics released by the Department of Financial Regulation.

Other licenses issued in 2018 were made up of 12 pure captives, four risk retention groups, three sponsored captives, two industrial insured captives, two special purpose financial insurers, one branch captive.

The new ARC formed is MAPFRE RE, subsidiary of Spanish insurer Mapfre, and is the first license issued of its kind, following Vermont Phil Scott signing ARC legislation in May 2018

Vermont's ARC legislation is aimed at creating a more favourable reinsurance alternative for US companies conducting business in offshore jurisdictions that are now faced with a substantial tax burden from Base Erosion Anti-Abuse Tax (BEAT) provisions included in the Trump administration’s tax reforms.

Among the 25 new captives were licenses for structures operating in the healthcare, insurance, retail, manufacturing, professional services, real estate, entertainment and energy industries.

Six of the captives were in the healthcare industry, including American Health System, Vertex Pharmaceuticals, Non-Acuity Physicians & Physician Groups, Long-Term Care Facilities, The Crestwood Group, and CARE Professional Liability Association.

“The continued growth of hospitals and doctors’ groups forming Vermont captives for medical professional liability coverage has been very positive,” said Ian Davis, Director of Financial Services. “We are also seeing a considerable amount of interest from mid-market companies, and expect both trends to continue in 2019.

Other notable captives formed in 2018 includ Twenty-First Century Fox, and ACE Hardware Corporation.

“We pride ourselves on keeping pace with the needs of the industry,” said Dave Provost, Deputy Commissioner of Captive Insurance. “The regulatory enhancements we were able to introduce last year highlight our state’s ability to adapt quickly in support of the captive insurance industry.”

Vermont now has a total of 1,137 captive licenses, with 558 active captive insurance companies.

Captive International  interviewed Sandy Bigglestone, director of captive insurance, Vermont Department of Financial Regulation, in July 2018 about the new ARC structures.