Vermont officials, who licensed 16 new captive insurers lastyear, about half the number in 2007, said they are focused on“aggressively” growing the sector this year.

David Provost, Vermont's deputy commissioner of captiveinsurance, said 2008 “was a slower year for captive growth due toeconomic conditions.” He added, “We continue to see interest informing quality captives with activity across all lines ofbusiness.”

The soft market, the uncertainty created by proposed financiallyburdensome IRS regulations (since withdrawn), and the currenteconomic conditions were the drivers that slowed formations in2008, officials said.

New captive formations include 11 pure captives, two specialpurpose financial captives (SPFC), one new risk retention group,one sponsored captive and one branch captive, bringing the totalnumber of licenses issued in Vermont to 839, according to figuresfrom the Vermont Department of Banking, Insurance, Securities andHealth Care Administration (BISHCA).

Some of the companies in the class of 2008 include: Microsoft,Wells Fargo, Boston Properties, Swiss Re, Thermo Fisher Scientific,Darden Restaurants and Winthrop University Hospital.

The state said it is continuing its promotion of and innovationin the captive industry, proposing several new initiatives,including:

o A Premium Tax Holiday ($7,500 reduction in premium tax forcaptives licensed in 2009 and 2010).

o Increasing the special funds budget to support captives.

o Several technical amendments that affect sponsored captives,letters of credit and accounting standards.

“We will continue to take steps to maintain our reputation asthe gold standard of domiciles,” said Governor Jim Douglas. “Evenduring these tough economic times Vermont recognizes the importanceof the captive insurance industry to our state and the need tocontinue investing in our infrastructure and innovating in ourregulation.”

Dan Towle, state director of financial services, said, “At atime when many of our domestic competitors are reducing theirresources toward captives, Vermont is making more of an investmentto grow this valuable industry.”

Mr. Towle told National Underwriter that captive legislation nowin the works maintains its priority status with the VermontLegislature.

In additional remarks, Gov. Douglas said his administration“remains committed to keeping Vermont the 'Gold Standard' ofcaptive domiciles.” He added, “We held a retail sales tax holidaythis past July and saw increased activity; it's our goal tostimulate the formation of new captives in Vermont with thisPremium Tax Holiday.”

He noted that the captive insurance industry creates valuablejobs and revenues, providing more than 1,400 full- and part-timejobs for Vermonters.

Interest has continued in health care facility captives. Vermonthas nearly 100 captives writing over $1 billion in premiums inmedical malpractice coverage. Interest in smaller companies formingcaptives has also continued.

“Nearly half of our captives in Vermont write $5 million or lessannually in gross written premium, and half of those write $1million or less,” Mr. Towle said.

This trend, he advised, opens the doors for smaller companieslooking to take advantage of the captive insurance option.

Vermont is the largest U.S. captive insurance domicile andsecond largest in the world in terms of gross written premium, with$15.2 billion in 2007. Vermont is the domiciliary state to 44 ofthe companies that make up the Fortune 100 and 21 of the companiesthat make up the Dow 30.

More information is on Vermont's captive Web site atwww.VermontCaptive.com.