Vermont builds on success
Brittany Nevins (pictured) of Vermont’s Department of Economic Development provides an update on what has been another successful year for Vermont’s captive insurance industry.
How has the past year been in terms of captive registrations?
In 2023 Vermont licensed a total of 38 new captive insurance companies and, as I write this in late July 2024, we have already licensed 31 new captives. Vermont has licensed a total of 1,352 captive insurance companies to date. The growth in captive formations in 2023 was among the top 10 highest since Vermont licensed our first captive in 1981, so this is sure to be another successful year.
Have there been any trends in the kinds of captives coming to Vermont?
The new captives in 2023 were licensed in 13 different industries, the top three industries being manufacturing (seven), insurance (six), and real estate (six). The formation types were pure (24), sponsored (six), agency (one), association (two), special purpose finance insurer (three) and risk retention groups (RRGs) (two). Cell formations have kept pace with growth in licensed captives.
To date in 2024 we’ve licensed 24 pures, six sponsors, and one RRG, among 16 industries, with the top sectors being healthcare, professional service, and real estate. For cells we have approved about 20 in 2024, so not quite keeping pace with the 31 formations, but still a trend in the formation of cells.
Has there been an increase in protected cell companies?
In 2023 cell formations kept pace with growth in licensed captives. In addition to the number of newly licensed captive insurance companies, Vermont’s 62 sponsored captive insurance companies continue to experience growth in the number of new protected cells, with over 30 additions in 2023. While growth is a bit slower this year they remain an important option for companies and organisations.
Over the last several years, we’ve seen growing levels of sophistication within sponsored structures and different motivations for forming them, from getting a foot in the door, to reduce administrative burden, to an avenue for expansion or an opportunity for simplification, and much more.
Single parent captives are increasingly looking to convert to a cell structure as well. Recognising this, the Vermont legislature this year added explicit language allowing for such a conversion.
“Vermont believes in the importance of analysis and examinations to ensure that companies are healthy.” Brittany Nevins
Why do so many companies come to Vermont to set up a captive?
Vermont is known for its standard of quality regulation and stability as a captive insurance domicile. We have 32 staff members in our Captive Insurance Division, dedicated solely to regulating captive insurance companies, including an in-house examination team. Vermont has had four different leaders in our 43-year history of licensing captive insurance companies, which has made the domicile very stable over the years.
Companies know when they come to Vermont that they will get thorough oversight and support, which benefits them in the long run. Having licensed captive insurance companies since 1981, Vermont has seen it all and embraces change and innovation.
Every year Vermont collaborates with the Vermont Captive Insurance Association (VCIA) to put forward a proactive bill to ensure that we are keeping pace with the needs of the captive insurance industry. Our legislators know the impact the captive industry has on Vermont and they do everything they can to support it year after year, which means supporting the captive insurance companies that are licensed here.
With the largest captive insurance association, the VCIA, in Vermont, we have a robust network of expert service providers that ensure that a captive insurance company receives wraparound services and the education and training they need to be successful.
Why have so many states taken to encouraging captives?
States have recognised the importance of the captives industry in that they see captive insurance as providing an important tool for companies and organisations amid a challenging time in the commercial insurance marketplace, and the majority have become captive insurance domiciles.
States recognise that this growing industry can have a significant impact on their economy in the form of tax and fee revenue, jobs, and tourism.
How hard does Vermont work to stay ahead of the competition?
As more domiciles pop up around the world Vermont as the global leader faces increased competition, and perhaps more importantly, a sense of responsibility to keep the industry on track. A natural consequence of increased competition is a lowering of standards—a proverbial race to the bottom—to compete.
Vermont remains committed to providing quality regulation, which means licensing companies that are financially viable and are forming for insurance purposes. Vermont believes in the importance of analysis and examinations to ensure that companies are healthy and not heading down the path of insolvency. These measures are essential for the reputation and success of the company and the broader captive insurance industry.
We work hard to speak on panels, serve on committees, and engage in thought-leadership to steer the ship and support our colleagues in other domiciles to make choices with a broad perspective.
Brittany Nevins is the captive insurance economic development director for Vermont’s Department of Economic Development. She can be contacted at: brittany.nevins@vermont.gov
Click here to read Captive International's US Focus 2024 publication.
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