VERMONT Four Decades of Success - RISK& - Vermont Captive Insurance
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RISK& April 2021
VERMONT
INSURANCE
®
Four Decades
of Success
Vermont’s captive insurance
industry is thriving, and innovating
every step of the way. Page A4
Our know-how. Our people.
Your success.
Tailored financial services for the Captive Insurance Industry.
Whether you’re looking for efficient and effective treasury management services, financing
solutions, or customized investment management, People’s United Bank offers a full array
of financial services to meet the unique needs of your industry. Our dedicated Captive
Insurance team is committed to meeting the banking needs of the captive insurance
industry by establishing strong relationships, delivering personalized service, and providing
highly specialized knowledge and experience.
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Ian Davis
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ian.davis@peoples.com
(802) 660-2205
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CONTENTS RISK& APRIL 2021
VOL. 32 NO. 3
INSURANCE
®
WWW.RISKANDINSURANCE.COM
Four
Decades
of Success
Vermont’s captive insurance industry
has come a long way since 1981.
A4 By Alex Wright
Diversity and
Inclusion Progress
NFP has taken great strides
to enhance D&I, showing that
efforts like that in captives is
necessary, and possible.
By Autumn Demberger
A15
A Green Mountain of
A8 Captive Innovation
Vermont’s well-developed
Construction and captive infrastructure is key to
Real Estate Captives its success as a domicile.
Construction and real estate are By Gregory DL Morris
increasingly seeking captive so-
lutions.
By Jonathan McGoran
A12
See pages A18-A19 for statistics on Vermont’s captive formation trends. RISK&INSURANCE A3
VERMONT REPORT 2021
Four Decades of
Success
Vermont’s
captive insurance
industry has
come a long way
since 1981.
By Alex Wright
Vermont marks 40 years in the captive insurance industry.
T
he state of Vermont has (ARCs), allowing companies to captive domicile in 1986 with the
reached a significant reduce the tax they incur under the perfect storm of a hard market, tax
milestone in its Base Erosion Anti Abuse Tax. reform and the Risk Retention Act.
development. The motivating force behind Thanks to the collaborative efforts
This year marks 40 Vermont establishing itself as a of lawmakers, regulators, service
years since its legislature passed the captive domicile was the insurance providers and the captive industry to
Special Insurer Act of 1981, enabling industry’s need for a viable onshore grow the business, the state has put
businesses to form captive insurance alternative. Richard Snelling, itself firmly on the map.
companies in the state. the governor of Vermont at the “Consistency has been our focus
The first captive, First Charter time,along with other leaders, looked over the last 40 years,” said Sandy
Insurance Company, was formed to Switzerland, a small European Bigglestone, director of captive
by tire manufacturer B.F. Goodrich country that had built a successful insurance at the State of Vermont.
Company in September that year financial services industry, and “We have remained flexible in the
and the rest, as they say, is history. decided to adopt a similar model. face of ever-changing market needs
As the leading U.S. captive That same year, the state legislature while continuing to attract quality
domicile and the third largest wrote the Special Insurer Act into law. business and talent and maintain our
domicile in the world, Vermont has “Captive insurance in Vermont robust regulatory framework and
almost 600 active captives, including was initially touted as a way to create gold standard at the same time.”
more than 300 cells, with $25.4 jobs, tax revenue and additional The key to all this has been
billion in gross written premium tourism revenue,” said David Vermont continually seeking to
and $212 billion in assets under Provost, deputy commissioner, evolve and improve itself as a
management. It also has eight captive insurance at the State of domicile. “We are continually
different captive types, ranging Vermont. “Thankfully, we got into striving for consistency of
from single parents, risk retention the business early enough to create excellence,” said Provost. “That
groups and sponsored captives to a niche for ourselves. Now we are a means listening to the industry and
association, branch and agency world leader in captive insurance.” working with them to ensure that
captives. Most recently, Vermont they can achieve the best outcomes.”
became the first state to license THE PERFECT STORM Among Vermont’s biggest
affiliated reinsurance companies Vermont really took off as a achievements, said Bigglestone, has
A4 RISK&INSURANCE
been establishing itself as a truly enaction in May 1999 of a new law paying jobs in Vermont, the state
global player. Behind this drive has enabling the formation of protected has always suffered from a talent
been the state’s reputation as a center cell captives — a rental structure shortage. Previously, that stemmed
of excellence, she said. that separates an insured’s assets and from the industry’s early growth,
“Our infrastructure has really liabilities from other participants. which has accelerated in recent years.
been the cornerstone upon which Since then, uptake has soared, with “The constant challenge for us
we have built this reputation,” said more than 300 protected cells now has been the struggle for talent,” said
Bigglestone. “That is down to the registered in the state. Provost. “In order to keep moving
specialist captive management A decade later, Vermont forward, we need to find those skilled
teams of lawyers, actuaries, auditors, introduced legislation allowing people to work in government, and
bankers, investment managers special purpose financial insurance the captive management teams and
and other service providers that companies — a vehicle used to service providers.”
make up our community here, as enable risk securitization transactions Part of the solution is raising
well as the trade industry body, to fund its obligations under a awareness of the benefits of working
the Vermont Captive Insurance reinsurance contract with a ceding in the thriving captive insurance
Association (VCIA), the legislature insurer — to be established. space. Those who join the industry
and regulators.” It licensed its first one, tend to stay. “One of the biggest
Indeed, the formation of the Northwind Reinsurance Company, factors behind Vermont’s success has
VCIA itself, the world’s largest in October 2007. been the longevity of its people,” said
captive insurance association, along A law enabling the formation of Provost.
with the International Center for agency captives — a reinsurance Recruitment and marketing
Captive Insurance Education, has company controlled by an insurance will remain the key priorities for
helped to pave the way for the agency or brokerage firm — was Vermont moving forward. That
state to build on its early successes. then passed in 2017. A year later, includes targeting key markets in
Another pivotal factor, he said, in May 2018, Vermont licensed Europe and Latin America.
has been Vermont’s accreditation ARCs, with Mapfre Re Vermont “A great example of reaching out
with the National Association of Corporation, the first one to be to international markets is a recent
Insurance Commissioners. established. webinar we held with delegates from
“They have all been key drivers in “Throughout Vermont’s Mexico,” said Nevins. “In the post-
keeping the industry at the forefront,” evolution, we have consistently been pandemic era, we need to continue
said Provost. “This is borne out by developing laws for the creation focusing on these areas in promoting
the fact that every year we go to of new captive structures and Vermont as a go-to captive domicile.”
the legislature and work with the continually refining them so that Another challenge that Vermont
VCIA to modify and improve upon they remain relevant to the industry,” has managed to turn into a positive
our captive laws to ensure that we said Nevins. “That can only be done has been the COVID-19 pandemic.
remain a market leader.” by listening to and meeting the It struck just when industry and
Vermont’s annual captive industry’s needs to fill these gaps in the regulators were in the midst of
legislation and unparalleled level of the market.” working through the annual captive
government backing have helped to However, to get to that stage, insurance bill.
set it apart from rival jurisdictions. every new concept has first to “We just adapted and did
“That enables us to take a undergo rigorous scrutiny by the everything virtually, giving
far more proactive approach to regulators. Only then can it be
improving ourselves as a domicile,” presented to the legislature.
said Brittany Nevins, captive “Because we don’t want to do SUMMARY
insurance economic development anything that would jeopardize our • BF Goodrich was the owner of
director at the State of Vermont. gold standard, we always adopt a the state’s first captive.
“It also allows us to remain on the cautious approach,” said Bigglestone. • Vermont captives generated
cutting edge without compromising “That said, we remain open-minded $25.4 billion in gross written
the quality and standard of and receptive to new ideas that will premium in the most recent
regulatory supervision.” benefit the industry, as in the case of financial reporting period.
ARCs and special purpose financial
• Vermont’s captives
BIG MILESTONES insurance companies, to name a few.”
infrastructure is a key selling
A significant milestone in Despite the captive industry
point.
Vermont’s 40-year history was the creating more than 400 direct, high
RISK&INSURANCE A5
testimonies by video link,” said
Provost. “In the same way, we “In the post-pandemic era,
held preliminary meetings with
new business prospects and even
we need to continue focusing
developed our own electronic license on these areas in promoting
to replace the paper one.”
Vermont as a go-to captive
COLLABORATIVE BENEFITS
Richard Smith, president of the
domicile.”
VCIA, said Vermont’s success as a — Brittany Nevins, captive insurance economic
captive domicile comes down to two development director, State of Vermont
key factors: government support for
the industry and captive insurance’s employment.” errors in Vermont’s original law
importance as an economic driver. Many states have eyed Vermont’s that they failed to pick up suddenly
That is backed up by having a strong success and tried to emulate it with appearing across 35-plus state laws.”
regulator, he said. their own captive insurance laws. But The VCIA was established in
“That level of support has been Vermont has remained the leader 1985. Working in partnership with
consistent across the board, from thanks to collaboration between the regulators and policymakers, it lobbies
the governor and state legislature different parties. on behalf of its almost 500 members at
through to the regulator,” said Smith. “The saying goes that they both state and federal levels.
“Additionally Vermont is a relatively literally photocopied Vermont’s “An example of this is, every year
small state, so captive insurance as captive laws and just added their the state’s Department of Financial
an industry is hugely significant, state name at the top,” Smith said. Regulation and the VCIA work
both in terms of tax revenue and “There were stories of punctuation together to modify Vermont’s captive
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A6 RISK&INSURANCE
statutes for legislature review and global insurance at The AES lines.
approval,” said Smith. “We need to Corporation, a global power and Vermont was a natural fit for AES,
ensure that the changes make sense, utility firm, which has two captives which is based in Arlington, Virginia
are in the right language and will in Vermont, said the company chose because its close and in the same
benefit both the state and industry.” the state as its domicile because of its time zone, making it convenient for
Looking ahead, Smith believes service support and infrastructure. meetings with service providers and
that Vermont’s future success hinges “Having all that in place was regulators. Another key advantage is
on its flexibility and innovation. a big positive for us,” said Baillie. the quick turnaround time, he said.
An example of this, he said, is the “We have always found that when “We find that they always give
creation of a new dormant status you talk with the regulators about us valuable feedback in a timely
for captives, which allows owners matters, such as business plan manner,” said Baillie. “That’s what
who have stopped using the captive changes, they are very well informed you want from your regulator —
to retain their license in case they and knowledgeable in the level of one that gives you strong and clear
decide to resume it again in the scrutiny and advice they give you.” direction.”
future without having to pay taxes AES’s first captive, established in Vermont’s formula has clearly
while it remains unused. Vermont in 2003, predominantly worked in terms of realizing those
“Vermont needs to be on top writes property and business early ambitions over last 40 years.
of these kinds of changes and be interruption coverage as well as How it continues to evolve, however,
ready to make them when required, terrorism and cyber for an asset base will be fascinating to watch over the
whether statutory or regulatory,” in excess of $50 million. Its second next 40. &
said Smith. captive, first registered in 1987, was
acquired when it bought another ALEX WRIGHT is a freelance writer and
A NATURAL FIT U.S. utility 10 years ago, and its focus editor who lives in the UK. He can be
Andrew Baillie, program director, is on property, casualty and financial reached at riskletters@theinstitutes.org.
RISK&INSURANCE A7
CONSTRUCTION
Construction and Real
Estate Seeking Captives
The construction
and real estate
sectors are
showing an
increasing interest
in captives.
By Jonathan
McGoran
Continual hardening of property insurance markets is one factor driving the trend.
A
s the insurance catastrophes with windstorms and becoming much stricter. That really
marketplace continues wildfires. In year one, with those opens up the opportunity for captive
to harden, it should events, carriers have redundant involvement, particularly in the
come as no surprise reserve releases to help bolster their construction industry. Just getting
that more companies balance sheet and possibly inject insurance in the standard market
are looking to captives as an answer capital into the markets. In year two, has always been a challenge for the
to rising rates and shrinking they release fewer reserves and inject construction industry.”
capacity. Of note is that many less capital. Year three, very little Flexibility is another factor
of the new captives domiciled in reserve release, very little capital driving real estate and construction
Vermont last year were in real being injected into the insurance to captives.
estate or construction. industry. So what happens is it “There are not that many
“We licensed 38 new captives last compels rate increases. … The first carriers that are willing to write
year. That’s our best year in a decade,” thing that we really saw starting to construction, and those that are may
said Dave Provost, Vermont’s deputy spike up was property cover. Well, have restrictions in certain states,” said
commissioner of captive insurance. real estate companies are the most Young. “The captive industry allows
“Twelve of those were in construction heavily invested in property. So that’s more flexibility. For example, we may
and real estate. Almost a third of what started it.” go into a state that we may not be able
all the new captives last year were Melinda Young, vice president
construction and real estate.” of risk management at the Alberici
Group, a construction company, SUMMARY
THE DRAW OF A CAPTIVE which redomiciled its captive to • Real estate and construction
According to Pete Kranz, Vermont 13 years ago, agreed. are increasingly looking to
executive managing director, captive “The standard markets are certainly captives for insurance solutions.
practice leader, Beecher Carlson, this getting hard … so I’m not surprised • This pattern was established
makes a certain amount of sense: to hear that more construction well before the pandemic.
“When you think about where the companies are considering captive
• Captive pros predict interest
hardening market all started, it was participation,” said Young.
will continue this year and into
in the real estate world,” said Kranz. “You have reduced capacity,
2022.
“We had three years of increases in prices, coverage terms
A8 RISK&INSURANCE
to get insurance in a standard market.” in New York. You’re looking for a that trend will continue for a bit.”
An added attraction for some billion dollars’ worth of coverage Kranz also cites the drop in
companies is the ability to use their there, and they can be high targets the stock market earlier in the
captive to provide insurance to tenants. for terrorists, so it’s very expensive pandemic and subsequent decrease
“They’re providing a way for and difficult to insure those. Captive in investment earnings as directly
their tenants to get quick and easy insurance is frequently used for that contributing to the upward pressures
coverage for their tenants’ liability type of terrorism coverage.” on insurance pricing that have
and tenants’ property,” said Provost. caused many companies across
“They provide a check-the-box IS COVID PART OF THE EQUATION? all sectors to take a fresh look at
service. ‘We want you to have There doesn’t seem to be much captives.
insurance. We want you to prove you indication of a direct relationship
have insurance. You can go across between the COVID pandemic and A HARDENING MARKET, A
the street to your local agent and the uptick in interest in real estate LASTING IMPACT
buy it, or you can check a box right and construction captive formation, One major reason for the sudden
here on your rental application, and though it has spurred interest in surge in real estate and construction
we’ll take care of it for you.’ So that’s captives among other sectors. captives is that the market has
another way that a company can use “Three of the 13 we’ve licensed hardened enough to compensate
captives in the real estate business.” so far this year have been related for pre-existing barriers to captive
Provost also cites terrorism to long-term care,” said Provost. formation inherent in those sectors.
coverage. “COVID hit the long-term care “The obstacle that was there
“Especially for big skyscrapers industry particularly hard, so I expect before on the real estate side, their
RISK&INSURANCE A9
limits are usually a lot higher than
professional liability and Directors “Vermont’s a place where you
and Officers’, which means that
it would take a lot more capital to
can get everything you need
support that kind of captive. And the for your captive.”
market was soft for the longest time;
— Dave Provost, deputy commissioner of captive
the incentive just simply wasn’t there
insurance, Vermont
to form captives,” said Christina
Kindstedt of Advantage Insurance,
an independent firm that forms and
manages captives in the real estate
and construction industries.
“Now the market has been form a captive, it’s not something that fits that bill.”
hardening. Premium hikes and they form this year and then when
large deductibles became harder the market softens, they will get out WHY CONSTRUCTION AND REAL
to swallow than the capital of business,” said Kindstedt. “They’re ESTATE CHOOSE VERMONT
contributions. Large deductibles in doing this for the long-term, they are Direct placement taxes are
particular create uncertainty when making a commitment, and a part of another consideration for some. “It
companies plan cash flow.” the commitment is to find a domicile could be because we don’t necessarily
Having overcome those obstacles, where they can tap into an established have direct placement tax issues...
real estate and construction captives network of seasoned professionals that’s why it’s been a bit heavier in
are likely to be in it for the long haul. and where the regulators are willing Vermont,” said Kranz.
“They’re capital-heavy, and they and able to help them find creative But perhaps the main reason
want quality work, so for them to and sustainable solutions. Vermont companies in real estate and
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A10 RISK&INSURANCEconstruction have been looking to be comfortable that your captive is in and completely redoing it, really
Vermont as a domicile is the state’s a well-regulated domicile.” looking at how risk is financed and
overall reputation. “The trend in the insurance saying, ‘Why am I buying it line by
“Everyone has great things to industry is going to continue to line? Why don’t I use a captive, for
say about the captive industry in drive captive usage,” said Young. example, consolidate my risk and
Vermont,” said Young. “There’s “Projections are that the market will transfer it in a bundled integrated
such great support there. I expect continue to harden through 2021 package to insurance or re-insurance
that’s what’s driving people to go to and possibly into 2022. We’ll see how marketplaces.’ “
Vermont.” that works out, but I think it provides Provost agreed. “Having a hard
“We are a professional domicile opportunities for the captive industry market like this reminds everybody
with a deep infrastructure and full to expand, for sure.” that hard markets are out there, that
staff,” said Provost. “Vermont’s a Kranz sees even deeper and there are cycles and having a captive
place where you can get everything longer lasting repercussions. helps insulate you from those cycles
you need for your captive. And “Essentially, what the insurance to a pretty good degree. Having your
for some companies, especially if marketplace is doing is pushing own captive really lets you adapt to
you’re providing a certificate of us forward into the future of risk that hard market by changing your
insurance, it’s good to know where financing,” he said. “So we’re retentions and your coverage levels
that is coming from. Reinsurers going to continue to see increased and changing how much you keep
like working with Vermont utilization of captives on more of and how much you reinsure. If it’s
captives. They know that captives an integrated or holistic basis. It’s already in place, then you’re set to
are regulated well. So all those not going to be limited to one or go.” &
factors help, but especially if you’re two lines of dealing with the pricing
reinsuring a billion dollars’ worth of pressures of that. It’s going to be JON MCGORAN can be reached at
property, you want your reinsurers to flipping the risk equation on its ear riskletters@theinstitutes.org.
Bust out,
be bold.
Your captive’s
success
is our success.
Learn more at
GreatAmericanCaptive.com
© 2021 Great American Insurance Company, 301 E. Fourth St., Cincinnati, OH 45202
RISK&INSURANCE A11D&I
Diversity and Inclusion
Efforts THE RISC D&I STORY
In 2018, NFP, a captive
management company in Vermont,
formed a D&I advisory board to
engage a mix of people from all
business lines and levels to help
shape its D&I program from within.
Part of the board’s efforts have
resulted in several internal groups
designed to bolster women and
minority insurance professionals,
including the Women’s Resource
Group, Black Professionals Resource
Group, LGBTQ Resource Group
and Family Resource Group.
These groups aim to serve
members of different communities
Women and Black, Indigenous and People of Color (BIPOC) owned businesses are to provide a space to raise concerns,
growing. Can the captive insurance sector better meet their needs? find career growth opportunities and
foster an allyship throughout the
NFP Management Corp. has taken great strides company they serve.
NFP wanted to keep its D&I
to enhance its diversity and inclusion initiatives, internal momentum going; when it
showing that such efforts in captives are a launched its captive and alternative
risk branch — the RISC team —
necessary step forward. By Autumn Demberger leadership made it a point to place
D&I at the forefront.
I
NFP selected Stopford and Kara
n a white male dominated in our industry and know that we Tencellent, also SVP, managing
industry, it can be hard have to do our part to change it,” director and co-lead of RISC, as
for women and minority said Tracy Stopford, SVP, managing the leaders of its global captive
professionals to find footing in director and co-lead of RISC at practice in October 2020. According
insurance. NFP. “Diversity brings in new to the company, Stopford and
Data collected by S&P Global perspectives that make us better Tencellent are driven to integrate
Market Intelligence shows the for our colleagues, clients and D&I into their work, because they
percentage of nonwhite employees communities.” both understand and see the value
in the insurance workforce only NFP Management (Vermont) in having different perspectives in
reached 21.4% in 2019, an increase Corp. is a state-approved captive helping clients identify solutions that
from 19.8% the year prior. The management company that provides
percentage of nonwhite insurance services to captives licensed in
workers was 15.3% in 2010. Vermont through its Risk & SUMMARY
Women fill just under 22% of Insurance Strategy Collective • Women and minority insurance
insurance executive and officer roles. (RISC). NFP, through RISC, has pros struggle to find footing in a
Diversity and inclusion efforts made a concerted effort to drive white male dominated industry.
are on the rise, however, and many diversity and inclusion throughout • Companies like NFP are finding
institutions are taking larger strides the industry. This effort is a prime ways to change that narrative.
than ever before to open their talent example of how the insurance
• As NFP’s efforts show, it starts
pool and bring on workers with industry can not only devote time to
with internal efforts that drive
unique, distinct backgrounds and ideas. D&I initiatives but also find success
external change.
“We see that lack of diversity in doing so.
A12 RISK&INSURANCEalign with their unique needs. director for the State of Vermont, grow today.
“D&I isn’t just an initiative. It’s said, “We want these jobs to be “RISC works with our vendors
critical to changing the landscape accessible to people from diverse and partners to help bring a diverse
of the country we live in today,” backgrounds. Diverse perspectives perspective to clients, as well as
Tencellent said. “A diversity of are foundational to the future of the help them along their own D&I
ideas and insights fuels a better industry.” journey,” Stopford explained. These
understanding of what employees efforts include RISC fostering a way
and clients want and need to be OPENING THE CAPTIVES DOOR for women- and minority-owned
more successful.” FOR ALL BUSINESSES businesses to form captives — a
That’s why D&I has to be more As RISC has grown under vital tool in the insurance and risk
than a buzzword or a “quota to fill” Stopford and Tencellent’s guidance, management toolbox for any company.
for the hiring department; diversity so too has its mission to provide “As a company that has recently
brings in new perspectives informed captive services to businesses with expanded upon its services to the
by experience. The captive industry diverse leadership. captive industry, I was excited to hear
in Vermont, for example, opens According to the 2019 Annual about the company’s innovative and
insurance professionals to hundreds Business Survey released by the intentional effort to reach companies
of unique jobs. In order to fill those U.S. Census Bureau, approximately that have not been able to easily
openings, however, takes more than 18.3% (1 million) of all U.S. access the captive insurance market,
a “work available” sign in the front businesses were minority-owned particularly women and minority
window. and about 19.9% (1.1 million) of all owned businesses,” said Nevins.
As Brittany Nevins, captive businesses were owned by women “This work is foundational to
insurance economic development in 2018. That number continues to their company’s approach,” she
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RISK&INSURANCE A13added, “and will make a meaningful they assume and their cost of But Vermont’s willingness to work
impact not just in Vermont but on insurance,” said Stopford, “both of with RISC and provide a strong and
the broader industry.” which can impede growth.” sound regulatory framework helps
RISC has been collaborating drive their clients to success.
with brokers and clients to expand WHEN PARTNERS SHARE IN “For the last 40 years since
awareness of insurance solutions YOUR VALUES the captive insurance industry
among women and minority The partnership between RISC was created in Vermont, we have
business owners. and Vermont captives has enhanced always embraced change and have
“Captive solutions can help efforts to bring insurance solutions intentionally been innovative to
enhance competitiveness and help to women and minority business improve the industry,” said Nevins.
a business thrive regardless of size,” owners. “Celebrating and actively including
said Tencellent. To continue to get “We have a Vermont domiciled diverse perspectives in the captive
more women- and minority-owned captive cell facility that will continue industry is a continuation of
businesses that opportunity, RISC to be used as part of our strategic risk Vermont’s Gold Standard.”
has been working alongside state and management solution for women “D&I has no finish line,” added
local governments and insurance and minority business clients,” Stopford. “Perhaps the most
carriers to identify and address the Tencellent and Stopford said. important part of our story is that
legislative and regulatory hurdles in Education on alternative risk no matter how much progress [we
the traditional insurance market that financing strategies has assisted make], we still have room to learn
present challenges to these business these efforts. “We’ve found that and grow.” &
owners. these business owners don’t always
“The challenges can be significant have the financial resources available AUTUMN DEMBERGER is the content
for women and minority business to set up a pure captive facility,” strategist with Risk & Insurance. She can
executives because of the liability explained Tencellent. be reached at heisler@theinstitutes.org.
Around here,
Around here,
guides everything we do.
guides everything we do.
A leading provider of insurance collateral solutions.
At Wilmington Trust, we pride ourselves on being
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provider of
of insurance
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trust services. Our
At Wilmington
dedicated team Trust, we pride ourselves
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understands the
aintricacies
leading provider
not onlyofof
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trusts, Our
but of
dedicated team
captives and theofnumerous
professionals understands
associated the
transactions,
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so we cannot only of
provide or reinsurance trusts, but
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captive ROBERT QUINN MIKE RAMSEY KATIE WHITESTONE
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A14 RISK&INSURANCEINFRASTRUCTURE
A Green Mountain of
Captive Innovation
million, helped considerably by Alcoa
Inc., the first Fortune 100 company
to establish a Vermont captive.
By the end of 2020 Vermont had
licensed a total of 1,197 captives,
including 38 new ones that year. Of
that cumulative total half, 589, still
had current licenses, 564 active and
25 dormant. The sector had $212
billion assets under management, and
$25.4 billion gross written premium.
“Our firm was in Vermont when
the enabling legislation was enacted
Vermont has long been the home for captives in the U.S. Its private infrastructure 40 years ago,” said Jesse D. Crary, a
is key to its 40-year-long success. shareholder with law firm Primmer
Piper Eggleston & Cramer.
The captive insurance sector within Vermont “One of our founders, John
Primmer, was the attorney who
has experienced tremendous growth thanks helped form the first captive in the
in part to its collaborative regulation, extensive state,” Crary continued. “From there
the team grew, and now we work
infrastructure and overarching commitment to with captives that have domiciles all
over the U.S. and also some offshore.
working together. By Gregory DL Morris As a practice, we are a regional firm,
F
but for captives, we are national. I am
orty years ago, Vermont approval were also not required. not aware of any other firm that has
enacted the Special Later that year, the state licensed its as much expertise in captives.”
Insurer Act of 1981. It first captive, First Charter Insurance The success that the state has had
was among the first states, Co., formed by tire manufacturer B.F. in captives is certainly due in part to
and arguably the most Goodrich, to reinsure property risks. the longevity and just as much to the
successful, given the growth and size First Charter is still active today. nurturing. “We were in very early; I
of the captive sector in the Green think the second state to authorize
Mountain State today, to authorize ONGOING, CONSISTENT GROWTH captive insurance. But just being
captive insurance companies. Like a good tire, the captive
Notably the state has also grown concept gained traction quickly.
a considerable infrastructure of By the end of 1982, Vermont had SUMMARY
financial services, captive managers, seen the first company transfer • Vermont’s captive insurance
attorneys, investment managers, risk from an existing captive to its marketplace is increasingly
actuaries and accountants with new Vermont captive, also its first robust.
experience and expertise working industrial insured captive, as well • The state’s small size has
with captive insurance. as its first association, National allowed captives to grow, thanks
The 1981 law stated that captive Telecom Corp., which remains active in part to extensive networking
parents do not have to prove in Vermont today. and access to regulators.
that insurance is not available in The nascent segment finished
• Diligent and experienced
traditional markets, as is the case 1982 with $5 million in total assets.
regulators add to Vermont’s
in other domestic domiciles. It also By the end of 1983, assets had grown
collaborative environment.
stated that rate and form regulatory by an order of magnitude to $50
RISK&INSURANCE A15among the first is not enough. It has and industry best practices. benefit one client. In that way the
taken long-term commitment. There “Through the exam process we sector is self-policing.”
are other states that were also in early, oversee a variety of captives with
and they are not large domiciles.” unique business purposes and learn PARTNERS IN PROGRESS
“The accessibility to regulators and the details of their operations,” she Every January there is a captive
close relationships among industry said. “We build relationships with legislative day in Montpelier,
partners make Vermont’s infrastructure management and service providers, organized by the VCIA. “The
special,” said Heidi Rabtoy, assistant and perform procedures to identify purpose is housekeeping bills. Some
chief examiner at the Vermont and address areas of concern or best are major initiatives, but most years
Department of Financial Regulation practice recommendations. it’s just tweaking. The important
in Burlington. That accessibility “Our regulatory model has been thing is that the bills are driven by
“allows captives’ opportunities to be designed to detect concerns early the needs of the sector. That is what
realized and challenges to be discussed and collaborate with department shocks people when they come
and resolved in a timely manner. leadership and the company here for the first time. People from
Also, given our relatively small size, to ensure proper remediation other states are flabbergasted that
relationships are formed through daily takes place. Early detection and there can be a partnership among
interactions and further solidified collaboration are part of our success legislators, regulators, the regulated
through education and networking.” as regulators in Vermont.” companies and their service sectors,”
As an assistant chief examiner, Crary echoed that sentiment: Crary said.
Rabtoy works with other members “Vermont is a small state. Everyone Crary is quick to add that does
of the regulatory oversight team on knows everyone else, and reputation not mean legislators and regulators
examinations and analysis to ensure is everything. There is nowhere are just facilitators. Quite to the
solvency of Vermont captives and to hide. No attorney would contrary: They are diligent about
adherence to department regulations compromise the whole sector to their responsibilities of oversight and
Make CICA Part of Your Captive Insurance Strategy
CICA’s domicile neutral status fosters CICA 2022 International Conference
collaboration and networking to: March 6-8, 2022 | Tucson, Arizona
JW Marriott Starr Pass Hotel
Provide education and
professional development
Champion best practices
Create a stronger voice for
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Daniel D. Towle VISIT CICAWORLD.COM TO JOIN
President
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dtowle@CICAworld.com
A16 RISK&INSURANCEcontrol. “The objective is balance. other aspects of captive structure in said to specialize in financial services
And continuity. We’ve had just Vermont. There is a healthy degree to those entities. “Over the years,the
three commissioners of insurance of regulatory flexibility,” said Crary, bank has evolved and grown along
in 40 years. The regulatory team “which gives innovation room. with the domicile to support the
has experience. They don’t have to Captives can create sound, prudent diverse needs of captive owners,”
spin their wheels on things or chase approaches that might not be Davis said. For the bank, that growth
shadows.” attractive to the commercial market. has extended to other states and
There have been similar tweaks There are numerous examples countries.
to the investment requirements, of captives feeding innovation to Several sources noted that
noted Richard J. Litchfield, senior support business growth.” Vermont has a high captives
vice president, partner, and fixed- It is not uncommon at all levels of retention rate. Davis credits the
income portfolio manager for Maple government for leaders in business and history, the regulatory environment,
Capital. “Mandates were made less finance to move into administrative and the infrastructure for that
prescriptive and went back to more or regulatory positions. There is aggregation.
of the ‘prudent person’ rule: ‘Tell also flow in the other direction. “Transparency, accessibility and
us how you plan to invest the assets For example, Ian D. Davis, now collaboration have been hallmarks
and we will tell you if there is a captive insurance relationship of Vermont’s regulatory approach
problem.’ It is a refreshingly open- manager at People’s United Bank, since 1981. We can have open
minded approach. Forty years ago, joined the institution after serving conversations with clients and state
investments were mostly limited to as director of financial services for regulators to arrive at a consensus
government bonds and investment- the state Department of Economic solution.” &
grade corporate debt. Other states Development.
are still very limited.” Given the size of the captive GREGORY DL MORRIS can be reached at
“The same concept informs sector in Vermont, the bank could be riskletters@theinstitutes.org.
Join Us For: Solution Labs | Ignite Talks | Live Video Speakeasy Rooms
Collaboration & Expert Captive Education!
Expert Captive Insurance Education – Speakeasy Rooms – Custom video
Sessions and forums are taught by industry leaders conversation rooms to network
and captive owners. Professional credit is available. with up to 14 people face to face,
and up to 100 in the room!
Solution Labs – Unique, customized venue where
captive owners, service providers and attendees Morning Coffee Breaks – Connect
connect to share solutions to specific business issues with friends and new contacts
currently being faced. Interactive and dynamic. over coffee, informal and fun.
Ignite Talks – TED-TalkTM style presentations,
brief and energetic, to showcase the newest
innovations for the captive industry. www.vcia.com
RISK&INSURANCE A17NEW CAPTIVES IN 2020
Date
Company Name Licensed Type Manager
ALTERNATIVE RISK TRANSFER INSURANCE COMPANY, INC. 1/2/20 Sponsored Risk Services
MAIDEN REINSURANCE LTD. 1/2/20 ARC Risk Services
ATTENUATOR INSURANCE COMPANY, INC. 1/2/20 Pure Aon
LIGHTHOUSE BAY INSURANCE COMPANY 1/2/20 Pure Strategic Risk Solutions
FEDERATED UNDERWRITING COMPANY 2/6/20 Pure Marsh
3HBXP LLC 3/1/20 Pure Marsh
SENECA REINSURANCE COMPANY, LLC 3/30/20 Sponsored Amethyst
SIL CAP, LLC 4/8/20 Pure Beecher Carlson
CERTUS INSURANCE INC. 5/19/20 Pure Aon
COVESTRO INTERNATIONAL RE, INC. 6/5/20 Pure Marsh
USC CAPTIVE INSURANCE COMPANY 6/11/20 Sponsored Aon
LL INSURANCE VT INC. 6/12/20 Pure Marsh
MERCY HOUSING SERVICES, INC. 6/29/20 Pure Risk Partners
TWT INSURANCE COMPANY 6/22/20 Pure Marsh
TRANSAMERICA PACIFIC RE, INC. 6/25/20 Sponsored Willis
GRYPHON MUTUAL INSURANCE COMPANY 6/29/20 Pure Aon
FIRST TOWER PARTNERS LLC 7/1/20 Pure Willis
BAR ASSURANCE AND REINSURANCE LIMITED 7/14/20 Industrial Insured Aon
FEIL CAPTIVE CORPORATION 7/15/20 Pure Aon
PEGASUS INSURANCE LLC 7/23/20 Agency Amethyst
WESTCONGRESS REINSURANCE COMPANY LTD. 7/27/20 Pure Downs Rachlin Martin
CARPENTER INSURANCE LLC 7/29/20 Pure Aon
VOYAGER GLOBAL MOBILITY INSURANCE COMPANY, LLC 7/30/20 Pure NFP P & C
CLINICIAN ASSURANCE INC., A RISK RETENTION GROUP 8/26/20 RRG Strategic Risk Solutions
ARJ INSURANCE, CORP. 8/28/20 Pure Strategic Risk Solutions
1880 REINSURANCE COMPANY 9/24/20 SPFI Marsh
CIRCA SPONSORED CAPTIVE INSURANCE COMPANY 9/29/20 Sponsored Strategic Risk Solutions
GREIF INSURANCE CO., LLC 10/14/20 Pure Aon
CRISP, LLC 10/14/20 Pure AIG
BERKSHIRE GENERAL INSURANCE LIMITED 10/27/20 Pure Advantage Ins
SD INSURANCE LLC 10/29/20 Pure Aon
MMI GLOBAL INSURANCE COMPANY 11/13/20 Pure Aon
BUCKLE COMMERCIAL INSURANCE LLC 11/17/20 Sponsored Aon
ASAC SPONSORED CAPTIVE INSURANCE COMPANY 11/30/20 Sponsored Apetrop USA, Inc.
ASSICURAZIONE COMPANY, LLC 11/30/20 Pure Artex Risk Solutions
PEACE CHURCH SPONSORED CAPTIVE, LLC 12/1/20 Sponsored Strategic Risk Solutions
C.A.C. INSURANCE CO., INC. 12/3/20 Pure Caitlin Morgan
COOK CAPTIVE INSURANCE INC. 12/11/20 Pure Hylant Global
LICENSED IN CURRENT YEAR (as of 12/31/20)
By Industry
NUMBER OF CAPTIVES BY
Construction 7
AGRICULTURE 5
Manufacturing 7
Insurance 6 BANKING 17
Real Estate 5 COMMUNICATIONS 7
Retail 3 CONSTRUCTION 40
Professional Service 2 EDUCATION 21
Transportation 2
ENERGY 21
Banking 1
Education 1 ENTERTAINMENT 6
Financing, Lending, Leasing 1 FINANCING, LENDING, LEASING 6
Health Care 1 HEALTH CARE 103
Religious Institutions 1
HOTELS 3
Technology 1
Other 1 INSURANCE 74
TOTAL 2020 LICENSES………………. 38 MANUFACTURING 101
A18 RISK&INSURANCEVERMONT CAPTIVE
INSURANCE COMPANIES
Parent Co. Industry LICENSE SUMMARY
AMYNTA GROUP, THE Other
MAIDEN HOLDINGS NORTH AMERICA, LTD. Insurance STATUS: ACTIVE 12-31-20 12-31-19 2020
KATTEN MUCHIN ROSENMAN LLP Profess Service Affiliated Reinsurance Co. 2 1 1
s ARGILLITE HOLDING COMPANY Construction Agency 1 0 1
STATE STREET CORPORATION Banking Association 12 14 -2
BOSTON PROPERTIES, INC. Construction Branch 3 3 0
MIDWEST HOLDINGS, INC. Insurance Industrial Insured 21 21 0
SIXT RENT A CAR, LLC Retail Pure 357 351 6
EPIROC AB Manufacturing RRG 87 87 0
COVESTRO AG Manufacturing Special Purpose
UNIVERSITY OF SOUTHERN CALIFORNIA Education Financial Insurer 38 44 -6
LENDLEASE AMERICAS HOLDINGS INC. Construction Sponsored 43 37 6
MERCY HOUSING SERVICES, INC. Real Estate Licensed Cells 0 1 -1
INTERPUBLIC GROUP OF COMPANIES, INC. Real Estate TOTAL ACTIVE…………....… 564 559 5
TRANSAMERICA PREMIER LIFE INS CO Insurance
BLACKSTONE GROUP INC., THE Real Estate
STATUS: DORMANT 12-31-20 12-31-19 2020
WELLTOWER TRS HOLDCO LLC Real Estate
Affiliated Reinsurance Co. 0 0 0
NEW YORK CITY MEMBER LAW FIRMS Insurance
Agency 0 0 0
FEIL PROPERTIES LLC Real Estate
Association 0 0 0
AFFILIATES OF WOOD GUTMANN & BOGART Retail
Branch 2 2 0
WESTCONGRESS Construction
Industrial Insured 0 0 0
CARPENTER CO. Manufacturing
Pure 20 21 -1
VOYAGER GLOBAL MOBILITY, LLC AND SUBS Transportation
RRG 0 0 0
s U.S. ACUTE CARE SOLUTIONS, INC. Healthcare
Special Purpose
s TOTAL TRANSPORTATION CORP. & SUBSIDARIES Transportation Financial Insurer 1 1 0
SECURIAN FINANCIAL GROUP, INC. Insurance Sponsored 2 2 0
s CONSTRUCTION INS & RISK CAPTIVE OF AMERICA Construction
GREIF, INC. Manufacturing TOTAL DORMANT…………....… 25 26 -1
COHNREZNICK LLP Profess Service TOTAL ACTIVE and Dormant..589 585 4
RA INTERNATIONAL FZCO Construction
SAPUTO ULC (NOVA SCOTIA) Manufacturing STATUS: DISSOLVED 12-31-20 12-31-19 2020
CFHC HOLDINGS, LLC Manufacturing Affiliated Reinsurance Co. 0 0 0
BUCKLE CORP. Financing Agency 0 0 0
DARAG NORTH AMERICA HOLDING COMPANY Insurance Association 22 21 1
DECICCO AND SONS, LLC Retail Branch 4 4 0
s RESOURCE PARTNERS, INC. Religious Institutions Industrial Insured 27 27 0
C.A.C. INDUSTRIES INC. Construction Pure 434 412 22
COOK SHARED SERVICES INCORPORATED Manufacturing RRG 72 71 1
Special Purpose
Financial Insurer 26 18 8
Sponsored 23 21 2
INDUSTRY As of 12/31/2020 TOTAL DISSOLVED………… 608 574 34
TOTAL LICENSES ISSUED 1197 1159
MEDIA 0
NONPROFIT OR MUNICIPALITY 14 LICENSED IN CURRENT YEAR (as of 12/31/20)
OTHER 15
By type of Captive
PROFESSIONAL SERVICE 29 Affliated Reinsurance Co. 1
Agency 1
REAL ESTATE 31
Association 0
RELIGIOUS INSTITUTIONS 22
Branch 0
RETAIL 28 Industrial Insured 1
SECURITIES 9 Pure 25
TECHNOLOGY 6 RRG 1
TRANSPORTATION 28 Special Purpose Financial Insurer 2
WASTE MANAGEMENT 3 Sponsored 7
TOTAL ACTIVE CAPTIVES 589 TOTAL 2020 LICENSES 38
Charts Source: Vermont Department of Banking, Insurance, Securities and Health Care Administration RISK&INSURANCE A19Proud of our past. Inspired for our future. With over 40 years of regulatory experience coupled with an unparalleled service provider network and legislative partnership, Vermont offers companies the sensible, secure and supported domicile they need. Connect with us and see why Vermont defines THE GOLD STANDARD. VERMONT CAPTIVE INSURANCE OV ER 1 ,200 CA P TI V ES LICENSED
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