9 August 2018Analysis

Vermont licenses 13 captives so far in 2018; claims interest in new ARC structures

The State of Vermont has licensed 13 captives so far in 2018 and is enjoying growth across all lines of business and structures, but healthcare in particular.

Captive International met with leaders of the Vermont Captive Insurance Association (VCIA), the State of Vermont Insurance Division,  and the Department of Financial Regulation, at the VCIA annual conference in Burlington, Vermont.

“We’re having a good year, we have licensed around a dozen captives already,” said David Provost, deputy commissioner of the Captive Insurance Division of the Vermont Department of Financial Regulation. “We have 3-4 companies this week we’ve booked appointments with, interested in either forming a captive or moving captives here.”

Provost said interest has been growing in the newly introduced affiliated reinsurance companies (ARCs) as well as agency captives, which were introduced last year. Although no licenses have been issued yet, awareness of the structures is growing and VCIA president Rich Smith says the ARCs have the potential to be huge.

“We had one company that was going to form an agency captive but instead formed a cell company instead - this worked out better for them,” added Provost. “We’ve had some calls in what exactly this ARC is going to do, and we’ve talked to a number of companies this week.”

In May, Vermont governor Phil Scott signed into law new legislation allowing the licensing of ARCs. The structure is designed to offer a more favourable reinsurance alternative for US companies conducting business in offshore jurisdictions, which are faced with a substantial tax burden from Base Erosion Anti-Abuse Tax (BEAT) provisions included in the Trump administration’s tax reforms.

In terms of group captives, Vermont generally does not track the membership of its groups, but Provost said that the domicile is home to some huge groups, and a number of groups are growing.

Vermont’s biggest industry continues to be healthcare. Out of the 13 newly licensed captives across nine industry sectors, three were in healthcare. There were two in manufacturing, and the rest were in professional services, real estate, and entertainment.

Sandy Bigglestone, director of captive insurance, Vermont Department of Financial Regulation, said that Vermont is also processing a couple of applications for risk retention groups at the moment.