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Vermont Embarks upon a Captive Insurance Blockchain Pilot

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January 14, 2019

A state of Vermont pilot program will allow new captive insurance companies to register with the secretary of state using blockchain technology. The pilot program is designed to test the functionality of the emerging technology in state regulatory processes.

The pilot will also include a review and revision of relevant statutes, rules, regulations, and bulletins to ease blockchain implementation.

"Developments in technology provide opportunities for government to improve efficiency and transparency, cut red tape, and improve services for Vermonters," said Secretary of State Jim Condos. "This pilot will allow us to examine whether or not the application of blockchain technology for digital record keeping can improve aspects of the state regulatory process."

Vermont Department of Financial Regulation Commissioner, Michael Pieciak, said, "Financial services firms are innovating at lightning speed, and regulators have an obligation to keep up."

Three Technologies

Blockchain or similar digital ledger technology is designed to create a transparent and validated record of transactions, while providing increased efficiency, accuracy, and security for users when compared to traditional record keeping methods.

At the 2018 Vermont captive conference, Rocco Mancini, vice president at Marsh Captive Solutions, said that in order to understand blockchain, it is first important to recognize distributed ledger technology (DLT). He said, "We've actually been using distributed ledgers for a very long time … and blockchain is just a natural evolution for using [this existing] technology."

DLT combines three technologies resulting in a shared transaction record. In order to put these three technologies into context, Mr. Mancini asked attendees to imagine a three-party insurance contract where each party has simultaneous access to the same copy of the contract.

  • Cryptographic keys. Cryptographic keys create a secure digital identity to validate all parties to the contract. The cryptographic keys are attached to permissions associated with the contract.
  • Peer-to-peer (distributed) networks. These create a shared system of records and connect the parties to the contract with a real-time shared view (distributed data storage) of the contract.
  • Protocols. Protocols are the algorithms surrounding consensus aspects (the rules) of the blockchain contract and are similar to a computer's operating system. For instance, a protocol dictates that you can't change X unless the other parties to the contract agree to the change.

Blockchain is a specific type of distributed ledger technology, originally developed as the underlying protocol for the digital asset Bitcoin.1

Vermont Captives: An Ideal Place To Spearhead Blockchain Technology

Vermont is the worldwide leader in captive insurance by premium written and third in the world by active licenses.

David Provost, deputy commissioner of the Captive Insurance Division of the Vermont Department of Financial Regulation, said, "Vermont has long been known as an international leader in the captive insurance industry, with a robust regulatory and professional community and a willingness to embrace innovation [making it an] ideal place to pilot this blockchain program."

The pilot program will help the state identify areas where the use of blockchain technology in regulatory and other government business may increase data security and reduce costs for residents and those doing business in Vermont.


  1. Moir, Rachel. October 2018. "An Update on Blockchain from the Vermont Captive Conference." Captive Insurance Company Reports (CICR). Dallas: International Risk Management Institute, Inc.
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