Captive Industry Makes Green Mountain State Even Greener

Vermonters from the governor on down are not shy about expressing their affection for the state’s captive insurance industry.
At the recent 19th annual conference of the Vermont Captive Insurance Association (VCIA) in Burlington, state officials told the audience of 1,200 insurance leaders that as much as Vermont has already done for them by easing regulations and reducing taxes, it is prepared to do even more to keep them happy and coming back to the Green Mountain state.

“You are an important part of our community and economy,” Gov. Jim Douglas told the his captive audience, adding, “We are not going to take you for granted.”

The state appreciates the more than 1,000 high-paying (average salary: $52,000) jobs the industry has spawned, as well as the $20 million in tax revenues—an amount about equal to the state’s entire general fund surplus, noted Douglas.

Captive insurance allows corporations to establish their own insurance company. Captive insurance accounts for about 15 percent of the U.S. commercial insurance market and has grown by about 50 percent in 12 years.

In the past year, Vermont, already the leading domestic destination for captives with more than 685 licensees, has streamlined its regulations, upgraded its captive division, capped the taxes captives pay and allowed them to be limited liability companies.

If that is not enough to keep captives coming back and the numbers growing, John Crowley, Commissioner of Banking, Insurance, Securities and Health Care, told the industry to just let him know what else Vermont could do.

“If you ever come across a regulation you think is unreasonable, let me know and I am sure we can work out a resolution to our mutual satisfaction,” Crowley said.

The friendly approach appeared to pay immediate dividends. The smiling governor announced that Ace USA would be opening a Burlington office for captive operations.

Newest Incentive: Education
Vermont captive enthusiasts also revealed they had another trick up their sleeve. The VCIA, working along with the University of Vermont UVM), is launching the International Center for Captive Insurance Education. The ICCIE will offer a curriculum culminating in an Associate in Captive Insurance (ACI). It’s the first of its kind.

Courses will be offered each August before the Vermont association’s annual conference, as well as online and at professional meetings around the country.

“Because the captive industry has grown so quickly, companies have had difficulty finding qualified staff and have had to take on training responsibilities themselves,” said Molly Lambert, president and chief executive officer of the VCIA. “A formal training program was clearly needed.”

UVM President Daniel Fogel said the industry’s presence in Vermont made a training program a natural fit for the university. “This is exactly the kind of role UVM should be playing in the state — promoting economic development efforts that result in high-paying jobs that have low environmental impact,” Fogel said.

The CCIE will require enrollees to take five core courses and two electives; to participate in three “hot-topic” teleconferences; and to pass an exam at the end of each course.

The VCIA’s conference, with a full agenda of educational sessions and networking events over three days, included a large exhibitor area with more than 100 booths. Among the exhibitors were other states including New York, Montana, South Carolina and the District of Columbia that would like to cash in on the success Vermont has had attracting captives.

Based on premium volume and admitted assets, the captive industry has grown substantially. According to A.M. Best Company, over the five-year period ending 2003, net premiums written grew by 45 percent and admitted assets by nearly 29 percent.

While many of the firms that have sprung up or expanded to serve Vermont’s captive industry are based elsewhere and have satellite offices in Vermont, others are local in origin. These include Chittenden Bank, Cope & Associates, Dwight Asset Management Company, Johnson Lambert & Co., KeyBank, Risk Services, SB&T Captive Management Company, Strategic Risk Solution and Vermont Specialty Products

Explorer Theme
In keeping with the VCIA’s conference theme, “Diving into Captives,” attendees also experienced a video and lecture presentation by keynote speaker, Dr. Robert D. Ballard. Ballard is a well-known deep sea explorer and educator from the Woods Hole Oceanographic Institution and the University of Rhode Island, whose many expeditions have included the discovery of the sunken R.M.S. Titanic and several warships and the exploration of the Mid-Ocean Ridge. National Geographic magazine has published accounts of his adventures.

Ballard told the insurance leaders that despite the fact that close to three-quarters of the planet Earth is covered by water, ocean exploration is given very little funding, especially when compared to space research. He noted that the largest mountain range on Earth is located on the ocean floor but scientists did not even know it existed until 1960, after man went to the moon.

Praising new cyber optic technologies that make deep sea exploration with robots and cameras possible, Ballard predicted the same kinds of technology will some day be available to consumers. “We will travel electronically,” he predicted.

Topics Legislation Training Development Vermont