Vermont as a leading captive domicile
The leading US captive insurance domicile since a dedicated law passed in 1981, home to more than 600 active captives.
Vermont passed its Captive Insurance Act in 1981. At the time, large US corporations domiciled their captives in Bermuda because no state knew how to license them. Vermont set up a division of its regulator devoted to the business, staffed with examiners who could read a captive business plan, and that expertise did more for the domicile than the tax rate ever did. The state now has more than 600 active captives and calls itself the leading onshore domicile in the country, although Bermuda remains ahead on premium volume. The premium tax is tiered and light on large programs. The typical structure is a single-parent captive carrying a risk the parent understands better than the market does: products liability, workers' comp, the deductibles of a global program, sometimes a cyber retention. Where the insured has to show a policy issued by an admitted carrier, the captive works behind a fronting insurer and takes the risk back as reinsurance. That is how it gets direct access to the reinsurance market. The fronting carrier stays in the picture.
A US industrial company judges its liability premiums poorly calibrated against its own claims history. It sets up a captive in Vermont, under the state's dedicated 1981 law, to carry the risk itself and access reinsurance directly.
Follow the research
One letter a week. First, the week's underwriting note, when one is published: a dated, argued decision, signed by Paul Bernardski. Then what the observatory published on cyber risk, political risk and insurance. No account, no tracking.
No spam, one-click unsubscribe, no data ever sold.