Captive insurance in Vermont: a pillar of strength for healthcare liability management

Captive International  talks to Christine Brown (pictured), of the Vermont Department of Financial Regulation, about why Vermont is an attractive domicile for healthcare captives.

How significant is healthcare liability as a driver for new captive formations in Vermont, and what trends are you seeing among healthcare organisations?

Approximately 10% of the total formations in 2024 and 15% to date in 2025 involved entities in the healthcare sector. Healthcare has been a leading industry in Vermont for decades. As of December 31, 2024, healthcare remains the largest sector in Vermont, with 113 active captives, representing about 17% of the total active captives at that date, owned by healthcare organisations. Collectively, these captives wrote approximately $2.7 billion in premium and reported invested assets just under $16 billion. Despite headwinds caused by nuclear verdicts, litigation financing and inflationary pressures, solvency ratios continue to be strong with an average reserves-to-surplus ratio of less than 2:1, as reflected in our recently published aggregated data report.

“While stringent, our regulatory environment fosters open communication and collaboration.”

What advantages does Vermont offer healthcare providers seeking to manage medical professional liability (MPL) through captive insurance structures?

The advantages Vermont offers healthcare providers align with those extended to all our captive owners, which can be boiled down to a few key differentiators: a responsive regulatory team of approximately 30 experienced professionals, many with more than a decade of tenure with the Department, dedicated exclusively to captive insurance regulation; a thriving ecosystem of captive insurance experts – including regulators, captive managers, actuaries, lawyers, brokers, bankers and investment managers; the largest captive insurance industry association providing educational and networking opportunities and advocacy on both state and national levels; and a legislative body that understands and consistently supports the captive industry through the passage of important captive legislation annually.

From a regulatory perspective, we prioritise agility and responsiveness – working at the speed of business, understanding the operational pressures captive owners face, and we take great pride in delivering efficient, business-aligned oversight.

How are Vermont-based captives adapting to rising healthcare liability claims, particularly in the wake of increased litigation and high jury verdicts? 

Without meaningful tort reform, it is really difficult for entities to navigate nuclear verdicts and litigation financing. I recently heard the term “thermonuclear verdicts” – which refers to jury awards exceeding $100 million – underscoring the unpredictability organisations face. Of course, prevention remains the most effective strategy, emphasising enhanced patient safety and comprehensive risk management. Captives are uniquely positioned to play an important role here, as claims data can be analysed to identify risk patterns where strategies can be implemented to mitigate these risks. Captives can also help fund risk management initiatives with surplus funds, if properly implemented and managed.

A notable innovative risk management strategy employed by some Vermont captive owners in both the hospital and long-term care space involves proactive communication with patients and families following adverse events. Training practitioners with strong communication skills to act as early responders, providing transparent explanations and outlining care plans, has been shown to facilitate more constructive and equitable resolutions compared to traditional “deny and defend” approaches.

Unfortunately, we’ve probably all experienced a time when we felt ignored or dismissed in these situations, when resentment and blame can build up. I find it really encouraging to hear about the positive impacts this empathetic, transparent communication can have, not only benefiting patients and their families but also supporting clinicians and institutional culture by fostering trust and enhancing patient safety protocols. 

Are you seeing a shift towards more innovative solutions, such as cell captives or risk retention groups (RRGs), for healthcare liability coverage in Vermont?

Over the past several years, slightly more than half of the healthcare related formations have been pure captives, with the remainder comprised of RRGs and a few sponsored captives. RRGs have always been a popular solution for healthcare organisations, with 50 of our 84 active RRGs providing coverage for organisations operating in this space.

What role does Vermont’s regulatory framework play in ensuring that healthcare liability captives remain financially stable while offering flexible risk financing?

The Vermont Department of Financial Regulation maintains a robust regulatory framework to safeguard the financial stability of all our captives. This includes regular solvency monitoring through quarterly and annual analysis of required financial filings – including audits and actuarial opinions; required periodic statutory examinations; and prior approval of all changes to a captive’s plan of operation.

Importantly, our rigorous licensing process serves as a critical gatekeeper, involving detailed review of applications by department staff and actuarial consultants to ensure compliance with our laws and programme feasibility, thereby licensing high-quality programmes formed for legitimate reasons. While stringent, our regulatory environment fosters open communication and collaboration, which goes back to the strength of our team and allows us to respond quickly to stakeholders’ needs and requests. Ultimately, our shared objective with captive owners is to ensure financial solvency and success!

How are Vermont  and captive managers working with healthcare organisations to address emerging liability risks, such as telemedicine and cybersecurity in healthcare?

The department, together with captive managers, is actively engaged in supporting healthcare organisations as they navigate emerging risks which present unique challenges due to rapid technological advancements and increased digital interaction with patients.

Our regulatory framework encourages captives to incorporate these emerging risks into their risk management and underwriting strategies. Captive managers are collaborating closely with healthcare organisations to develop tailored insurance solutions that address the specific exposures of telemedicine, including licensure issues, cross-jurisdictional care delivery and data privacy concerns.

On the cybersecurity front, captives are increasingly being utilized to underwrite cyber risk policies and fund proactive risk mitigation initiatives, such as enhanced IT infrastructure, employee training and incident response planning. By leveraging claims data and risk analytics, captives help healthcare entities identify vulnerabilities and implement comprehensive cybersecurity protocols.

Vermont’s captive ecosystem fosters collaboration among regulators, managers, legal experts, and cybersecurity professionals to stay ahead of emerging risks and regulatory developments. This collective expertise allows captives to remain flexible and innovative, providing healthcare providers with the tools necessary to manage these complex liabilities effectively.

Christine Brown is director of captive insurance at the Vermont Department of Financial Regulation. She can be contacted at: Christine.Brown@vermont.gov

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