And for some types of captives, Vermont is the biggest domicile. For example, with nearly 90 risk retention groups (RRGs), a special type of captive authorized under federal law, Vermont is the home of far more RRGs than any other domicile.
The two industries that sponsor the most Vermont captives are healthcare and manufacturing, each of which accounts for nearly 20 percent of the state's captives.
Vermont is not a captive domicile that has rested on its laurels. Almost yearly, Vermont legislators have passed measures updating the state's captive statute.
Last year, for example, legislation was passed that, among other things, clarifies the ability of cells to convert to other types of entities and simplifies processes around redomestications, mergers, and the filing of organizational documents prior to licensing.
In 2020, state lawmakers approved legislation that reduced to $100,000 from $250,000 the minimum capital—known as "core capital"—for sponsored cell captives.
In 2019, state lawmakers approved legislation that made several changes to Vermont's captive statute, including giving captives more time between mandatory financial examinations.
Under prior law, those examinations had been required every 3 years, though captives were allowed to seek waivers to have the examinations every 5 years.
Under the new law, the examinations will now be every 5 years, though captive regulators will retain the authority to conduct more frequent examinations.
The measure also gives captives the option to follow current investment rules or develop an alternative investment plan.
The 2021, 2020, and 2019 legislative changes follow numerous measures Vermont lawmakers approved in prior years amending the state's captive statute.
In 2018, for example, Vermont lawmakers approved legislation giving captives more time to pay annual premium taxes. Legislators last year also approved a measure that authorizes a new onshore affiliated reinsurance alternative to insurers impacted by a 2017 federal law that imposes a tax—the Base Erosion Anti-Abuse Tax—on reinsurance ceded to offshore affiliates.
"Without exception, Vermont legislators and governors have supported necessary changes in law," said David Provost, who retired as Vermont's deputy commissioner of captive insurance at the end of August 2022.
At the same time, captive managers applaud Vermont regulators for their understanding of captive issues and their accessibility.
"There is a very knowledgeable professional regulatory team. They are very approachable to discuss issues," said Nancy Gray, a regional managing director with Aon Captive and Insurance Management in Burlington.
"Throughout our 31 years, the professional staff has been responsive and prompt in turning around requests and responding to our queries. We perceive Vermont to be the gold standard in regulating captives," said Janice Abraham, president and CEO of United Educators Insurance, a Reciprocal Risk Retention Group, which is located in Bethesda, Maryland, and has been domiciled in Vermont since 1987.