Vermont: setting the gold standard


Vermont: setting the gold standard

Vermont has steadily risen up the rankings as an attractive domicile for captive insurers. Dan Towle believes the reason why is clear—security, stability and service.

I’m asked frequently what it is about Vermont that has made it the captive domicile of choice for nearly 900 captives, 42 of the Fortune 100 companies and 18 of the Dow 30 companies. I think it comes down to three key factors—security, stability and service.


Vermont is a small rural state. When people think of Vermont, they think of skiing, covered bridges, maple syrup and beautiful autumn foliage. We are certainly that. What most don’t know, however, is that one of Vermont’s lesser known attributes is that it is a global leader in a cutting-edge sector of the insurance industry—captive insurance.

In fact, Vermont wrote the book on captive regulation. Since 1981, Vermont’s regulations have been the standard—the ‘gold standard’ as described by the press—for states considering a model for the industry. When other states enact captive legislation, Vermont’s legislation is frequently used as the template.

Right from the outset, the captive industry in Vermont has enjoyed extraordinary support from our governor and the legislature. This has manifested itself in regular reviews of the regulation surrounding the industry in order to improve and fine-tune it according to developments in the market. In addition, the industry enjoys unparalleled bipartisan support throughout state government.

Examples of this supportive environment include a law passed last year that provides a ‘tax holiday’ for new captives formed in 2009 and 2010, despite a reduction in overall state tax revenues. This year is no exception, with new legislation proposed to streamline mergers among captives. The legislature is also proposing other widely supported technical amendments to keep Vermont at the forefront of captive legislation.

Simply put, Vermont’s captive laws work. This means that as your captive matures, so do Vermont’s captive regulations, making it a dynamic and evolving partner keeping pace with the changing economic times and circumstances. Risk isn’t going away, and neither is Vermont’s commitment to maintaining the best captive regulations in the world.


Vermont arguably has the most stable regulatory environment in the world. Since 1981, only three individuals have led the state’s captive insurance division. Currently, deputy commissioner David Provost, a 20-year industry veteran, and Peter Raymond, director of captive insurance, with 21 years in the business, head the most experienced and knowledgeable regulatory team anywhere. This means that you will receive some of the best advice you can get in the initial formation process and ongoing support of your captive programme. They are supported by 26 individuals, making it the largest and most comprehensive regulatory team in the industry.

Vermont’s captive infrastructure is also experienced, sophisticated and diverse, with 15 approved captive management firms. The options range from the largest insurance brokers in the world to smaller independent captive managers. No matter whom you choose, you can be assured that you will be working with some of the best captive experts in the industry. You will also find a full complement of other service providers to help ensure you have a complete team working for you and your programme.

There are knowledgeable investment professionals, bankers, actuaries, accountants and lawyers all ready to serve the needs of the industry. For nearly 30 years, the captive insurance community in Vermont has come to represent some of the global industry’s finest intellectual capital.

The infrastructure is further complemented by the largest captive insurance trade association in the world, the Vermont Captive Insurance Association (VCIA). The VCIA provides constant support for the Vermont domicile and is an excellent partner to the state. The VCIA hosts the world’s largest captive insurance conference, held annually in August. Last year’s event welcomed more than 1,200 attendees. The conference has become a ‘must attend’ event, and provides incredible education and networking opportunities. It also brings together all of the leading stakeholders in the captive industry for a sharing of knowledge and best practices. You can find out further details regarding the conference by visiting:


As your captive evolves and grows, Vermont’s well-staffed and experienced captive department will be on hand to provide ongoing support and help.

It is not uncommon for a captive to add new lines of business or make plan changes that require the approval of the department.

These plan change requests can be very important to the ongoing success of your insurance programme. In Vermont, this process usually occurs in a matter of days, not weeks or months. New applications are reviewed efficiently, with the process usually taking no more than 30 days. The department can often accommodate more urgent time requirements, if needed. Examinations are undertaken by Vermont examiners—not contract examiners—which keeps the cost of your exam much more affordable and ensures it is done quickly and competently.

Captive insurance is very important to the Vermont economy. It creates more than 1,400 full-time and part-time jobs, and creates direct tax revenue of approximately two percent of the general fund budget. This is a quiet industry for the Green Mountain state, but it is a sector that puts Vermont at the forefront of the insurance industry.

Since Vermont is a small state, those 1,400-plus jobs are naturally very important. To put it in perspective, if those 1,400 jobs were at a single employer in Vermont, it would be a top 10 employer in terms of numbers.

Our governor and legislature recognise the importance of the industry. This is shown in the resources allocated to the captive division and in the incredible support given by our government and its elected officials. Though the industry has been in Vermont for nearly 30 years, each year policy-makers reaffirm their commitment to longterm stability by proactively supporting the industry.

Choose Vermont

Choosing a domicile is important to the long-term success ofyour insurance programme. There are many important factors to be considered when determining a good fit for your company. These include reputation, speed of the approval process, ease of the transaction; infrastructure, experience and knowledge of the regulators, and commitment of the domicile.

Talk to experts. Talk to other companies with Vermont captives. Find out where others have chosen to form and talk to the domicile regulators. Forming a captive is not a single transaction; it is a long-term commitment to taking better control of your risk management. Choosing an appropriate domicile is important to the overall success of your programme—but we’d strongly suggest you make Vermont your first call to get sound guidance and an authoritative initial assessment.

While Vermont has the reputation of housing some of the largest captives, a little-known fact is that one of Vermont’s largest sectors of growth is in captives that write $5 million or less annually in premium. This sector makes up half of all of Vermont’s licensed captives. In fact, Vermont has 150 captives that write $1 million or less annually.

The above facts prove that captives can be an excellent risk management tool for smaller companies, as well as larger ones. While larger premium volume may create additional savings for some companies forming captives, smaller companies can also benefit in many of the same ways. It is still an excellent way to take control of your risk management programme.

Last year was the sixth best year for captive insurance growth in Vermont, with 39 new captives being licensed. The new captives included 28 pure captives, five new risk retention groups, four special purpose financial captives, one sponsored captive and one industrial insured captive, bringing the total number of licences issued at yearend in Vermont to 878.

Some of the companies in the class of 2009 include Comcast, Morgan Stanley, Swiss Re, the Empire State Building, Peabody Energy, Planned Parenthood and Turner Construction. Captive insurance companies formed by the healthcare industry continue to be one of Vermont’s fastest-growing sectors. New healthcare captives in the class of 2009 include Centra Health, Carilion Clinic, Saint Mary’s Hospital & Medical Center, Crystal Run Health Care, ENT & Allergy Associates and the Children’s Mercy Hospital.

Vermont is extremely optimistic for another strong year of captive growth in 2010. We are in an excellent position to flourish during these challenging economic times. The first quarter is proving to be a very strong start to the year and interest remains very high.

So look around. Compare other domiciles to Vermont. You may just find out what 42 of the Fortune 100 companies have already learned about our secure regulation, stable infrastructure and our focus on service.

Make Vermont your first call; you will be glad you did. And you will be in great company.

Dan Towle is the director of financial services for the State of Vermont. For more information about Vermont captive insurance, visit:

Captive International