Even though the insurance market continues to soften in mostlines, U.S. domicile regulators report steady growth. Among thehighlights:

Vermont

By far the largest domicile with 590 captives, Vermont haslicensed 15 captives this year (11 pure, one branch and three RRGs)with four pending, said Deputy Commissioner Leonard Crouse, “righton par” with last year. Depending on fourth-quarter numbers, “Ithink we'll have another 35 this year,” he said.

Of the pure captives licensed, “we're seeing the basiclines–general liability, workers' comp, some property,” he said.One branch captive licensed was a Bermuda captive setting up abranch onshore for medical benefits. “I haven't seen any unique,off-the-wall business,” he noted.

He added that while Vermont has had no problems with RRGs, “atthe same time you have to keep your eye on them–especially medicalgroups.” To make sure the groups are in for the long haul, he saidVermont's RRGs are generally sponsored by large medical facilitiesor teaching hospitals.

South Carolina

Jeff Kehler, program manager for the South Carolina InsuranceDepartment, reported 29 captives licensed in 2006. This year, 13have been licensed (nine pure, three special-purpose financialcaptives and one RRG) and seven are pending. He predicted 25-to-30by the end of 2007. South Carolina has 20 special-purpose financialcaptives.

Mr. Kehler said South Carolina's new director, Scott Richardson,was previously part owner of an insurance agency in Hilton Head,and understands both the government and private business sectors.“That is ideal for us because in the captive area, we are partregulator and also charged with providing a robust business climatefor the captive industry,” he said.

Mr. Kehler has seen a number of companies “utilizing theircaptives to fund retentions on property and windstorm,” a keycoverage for coastal exposures.

Hawaii

Craig Watanabe, captive administrator and deputy commissioner,said Hawaii has four new captives and another four in the works.Last year, Hawaii had eight new captives, compared with 18 in 2005and 30 in 2004.

Two reasons for the drop, he noted, are the softening market and“all the new U.S. domiciles coming on board. I think, overall,captives are being used and forming–it's just spread out over a lotof states.”

While the number of captives may be down, he said, “last yearour captives wrote about $1.7 billion in premiums, with totalassets of about $6.1 billion. So volume-wise, it's still upthere.”

He said two new laws were approved at the end of June. Onecreated a maximum premium tax of $200,000, and the other includesallowing captives to organize as limited liabilitycorporations.

He added that Hawaii is looking to add a specific amendment forsecuritizations, since there are “other types of securitizationsthat can be done, especially with the Asian market.” Two of theeight captives licensed last year were Japanese, and anotherJapanese captive was licensed in April.

District of Columbia

Associate Commissioner Dana Sheppard said the District haslicensed a total of 74 captives, including four this year and 10 in2006. He projects 10-to-12 for 2007.

Mr. Sheppard noted that with the softening of medicalprofessional liability for nursing homes, “about a month ago I hadthree RRGs call and say they wanted to close down–within a five-dayperiod.”

“That's the problem with some of the entrepreneurial RRGs,” hesaid, adding that to abandon RRGs “is short-sighted, and itsuggests the people weren't motivated to be long-term owners of aninsurance company. They just wanted cheap insurance.” Having themshut down is “always the fear, and the same thing can happen withphysicians, builders or other groups,” he added.

He said D.C. has licensed one RRG this year, “and we've beenselective about what we take.” Of those turned away, he said, onewanted to take a group from another RRG. “So, a year from now he'lltake them out of our RRG and take them someplace else where he canget a better deal. The service providers have more choices nowbecause there are a lot more domiciles.”

RRGs, he said, involve much more oversight than regularcaptives, “and because they don't write in D.C., in many cases, weget the minimum premium tax.”

Arizona

Rod Morris, Arizona's administrator of captive insurance, said13 captives have been licensed this year, with four applicationspending.

“We're seeing a lot of general liability and deductiblereimbursement for GL and workers' comp,” he said. “We're seeingmore property-related coverages like earthquake and terrorism, andprofessional liability/med mal.”

Arizona's statute was amended, which goes into effect Sept. 19,to enable branch captives for employee benefits only while allowinggroup captives, like pure captives, to insure controlled andaffiliated business. It also reduces the minimum captiverequirements for protected cells from $1 million to $500,000.

Nevada

Deputy Commissioner Gary Cooper said in 2006 34 captives wereformed, with nine added this year and 11 more in the pipeline.

“We'll project around 35 for this year,” he said. Mostlylicensed were pure captives and RRGs. “We probably write threepures for every RRG,” he said. “Out of our 105 [total captives], wehave 31 RRGs,” which are primarily for professional liability.

New York

Deputy Superintendent Michael Moriarty said New York has a totalof 42 captives, with six licensed in 2006 and three in 2007. “Forthis year, I would say we are looking for a total of 50 at yearend,” he said.

The captives are all pure, with the domicile seeing real estatedevelopers and companies with property in Manhattan formingterrorism coverage entities to access the federal terrorismbackstop.

He said legislation will be re-submitted this year to cut thethreshold for formation of pure and group captives and to allowprotected-cell captives. “We're somewhat confident that the new(Eliot Spitzer) administration will take a new look, and we'retrying to get some traction,” he said.

“We're not here to compete,” he added. “Our goal is to provideNew York-based companies with the opportunity to manage their riskthrough a self-insurance mechanism and not have to go outside thestate to do it.”

He added that the growth in the number of states enactinglegislation for captives is “evidence of the fact that a captive isnot an alternative risk management strategy anymore. It's really amainstream strategy that a lot of large commercial enterprises aretaking advantage of, and we expect that trend to continue, so wewant our legislation to be cognizant of that and allow moreflexibility for this type of self-insurance.”

Delaware

Captive Administrator William P. White said Delaware, which has12 captives, recently passed legislation for special-purposefinancial captives.

Under the existing captive law, the special-purpose provisionwas broadened, with the idea that Delaware was not going to beamending a law for every type of new captive.

“So they identified some key types of captives with the ideathat there are basically three types: single parent, groups, andanything that doesn't fall into those two areas being specialpurpose.”