Through 2019, 94 captives moved to Vermont from other domiciles, 8 percent of our total. Those were evenly split between offshore domiciles and other US states. Most of the moves from offshore to Vermont came from Bermuda (37) and the Cayman Islands (7). The most interstate moves came from Arizona (12), New York (9) and South Carolina (7).

The picture would not be complete without noting that 57 captives have moved from Vermont to other domiciles—primarily but not exclusively to other states, and most often moving to their “home” state. If my math is right, that leaves more than 90 percent of Vermont captives starting in the right place the first time.

There are a lot of things to consider: appropriate laws and regulations, convenience, cost, reputation, infrastructure and more. For example, if you are looking for a home for a risk retention group (RRG), onshore is your only choice, and even then, not all states allow the formation of RRGs in their insurance laws.

The cost of examinations (not optional for RRGs) needs to be considered, as does the reputation of the domicile. Those play a part in why Vermont is home to one-third of the RRGs in the US.

There is plenty of room to compete on price, and it shows in the broad range of costs among domiciles. The domiciles that charge premium tax generally have similar rates, but some do not charge tax on reinsurance, and some have no tax at all. Some use contract examiners, some have their own staff, and some do not conduct examinations on certain captives.

Vermont’s approach is to charge enough fees and taxes to support a domicile with a capable, qualified staff. Doing so enables us to provide the service that businesses need, and to conduct exams with our own staff at a very reasonable cost. One study showed that Vermont’s exams were the most efficient based on cost per dollar of capital.

It would be inappropriate to try to compete on regulation, except to be sure that the statutes of the domicile met the needs of your business model. I don’t think any domicile would want to be considered “easy”.

The most important benefit to Vermont is the quality jobs the captives industry creates. More than 400 Vermonters make their living working directly in captive insurance services. The tax and fee revenue supports the regulation of the industry, with plenty left over for the legislature to support other programmes in Vermont.

The annual meetings conducted by captives and the Vermont Captive Insurance Association annual conference fill hotels and restaurants across the state. At the right times of year, you can be assured that some hotels will be hosting multiple captives board meetings simultaneously. As a very small state, it’s nice to be number one in something!

This year has been very active in terms of new captive applications. Unless it comes to a sudden halt, we will license well over 30 new captives in 2020. Most of that activity has been driven by factors other than COVID-19, primarily the hardened market in property, liability, and D&O coverage.

I do expect that we will see increased new captive insurance activity in the future based on the gaps that might be identified during the pandemic, such as business and supply chain interruption.