Formerly employed in the public sector, Vermont Captive Insurance Association President Molly Lambert said she continues to be amazed by cooperation between the private sector and her domicile state, which has sealed the long-term success of Vermont's booming captive industry.

The state has proven such a strong supporter, in fact, that any new captive legislation needed is swiftly taken care of by the legislature and Gov. Jim Douglas, with the governor a regular speaker at the VCIA's annual conference in Burlington.

In a sense, the cooperation is not surprising, given that Ms. Lambert is no stranger to government, having served as the state's secretary of commerce and community development in the cabinet of Gov. Howard Dean from 1998-2002.

"The partnership that exists between the public policy decision-makers and the private sector and their interest in the growth and success of this industry is like nothing I have ever seen," she said.

There are many plusses to the captive industry, which Vermont appreciates, she said--including good jobs for residents, minimal impact on the environment and a revenue stream for the state's general fund, "combined with the real pride that our public policy decision-makers have in Vermont playing such a key role in a very successful private sector industry."

In making the necessary business decisions for a captive, she said, "you seek people who understand what you're trying to do, and Vermont has that throughout--the legislative experience, the experience of the governor, the experience with management companies in the business, law firms and bankers."

In essence, she added, risk managers looking to launch or relocate a captive "want to go to a place where you don't have to educate, and that does it well."

Vermont's positive impact on the captive industry is evident by its growth, and it's a two-way street, she said, with captive managers "constantly on the search for more highly qualified people to staff their offices here, so that's good for our state. I think their businesses are experiencing the steady pace that we all are."

Even though the current insurance market is soft--unlike in harder markets like 2002 and 2003, when Vermont experienced "wild growth"--the domicile is still seeing a steady growth pace, she observed.

Established as a captive domicile 27 years ago, Vermont first began "with a regulatory playing field that needed to be prepared," Ms. Lambert said. Once captive legislation was written and adopted, the next step was securing management companies interested in doing business there.

"In the beginning, expertise was gained from our legal friends and insurance friends, who were dealing with captives and wanted a domestic domicile that was as innovative and competitive as some of the offshore domiciles were," she explained.

Now that Vermont has come into its own as one of the largest captive domiciles worldwide, she said, "it has grown its own experts. Lawyers, bankers, accountants, auditors are now very much experts in the captive insurance world." In fact, she added, many of the experts based in Vermont now find their advice is sought around the world.

"I would be remiss not to say that part of the important infrastructure Vermont has established is VCIA, itself," she said, noting that the association has grown from a very small organization in 1985 to one "that can really play on the national scene, have a voice that is heard, and be a respected spokes-association for captive insurance--whether it's to the [National Association of Insurance Commissioners], the IRS, Congress or items more local to Vermont."

VCIA's legislative advocacy has become an important function for members, she said, noting that late in 2007, VCIA found itself very involved with legislative issues, with a looming IRS initiative that would have altered the captive industry.

This particular issue brought VCIA and the Captive Insurance Companies Association together to fight the potential ruling, as well as other industry groups. Their efforts likely played a large part in the fact that the IRS eventually backed down from the potential ruling to alter a captive's tax status, to the detriment of self-insureds.

"This is one of the things we point to very proudly," she said. "That's why membership organizations exist. While an individual company might be big and have clout, the voices of many, sometimes, are even more powerful when you're dealing with large, entrenched institutions."

She added that general regulatory reform issues, as well as efforts in Washington to expand the Liability Risk Retention Act to allow risk retention groups to write property coverage, have also been a focus of VCIA.

The association has vowed to keep the momentum going that was built up with the IRS campaign. "We now have on retainer an attorney in Washington as well as our lobbyists here in Vermont," she said. "I think our members expect us to keep our eyes and ears open, not only to what's happening in Vermont, but any federal issues that might affect captive insurers."

Staying on top of legislative issues becomes even more important as the industry continues to grow.

"We talk about captives being an alternative [to traditional insurance], but the alternative market is now the mainstream market," Ms. Lambert said. "It has matured, and probably the initial skepticism that was in place 20 years ago has long since dissolved, because more of the major companies have found this to be such a valuable risk management tool."

Education also is critical to VCIA's mission, she said, which is why development of the International Center for Captive Insurance Education has been such an important goal. ICCIE, which now offers a captive designation, is a separate organization but was spawned by VCIA, she said. It now attracts students worldwide.

"Without the interest of members in expanding education and VCIA's financial capacity to underwrite the feasibility study and invest heavily, we wouldn't have ICCIE," she said. "Now we've got 400 people who have taken part in professional education. It's a great example of how, if you do things well for a long time, people trust the introduction of new ideas."

The annual VCIA conference this week, she said, presents a tremendous networking opportunity for captive owners and ancillary businesses. Building on this, she said VCIA has been taking its show on the road every month around the country, with the exception of July.

"So the association has grown to meet or exceed people's expectations of what a trade association is supposed to do," she added. "It supports the industry in Vermont and the industry as a whole."

Because the captive industry is growing so quickly, spawning more competition with new domiciles, she emphasized that just keeping pace isn't enough--"I think we have to keep ahead of the pace, and that's what we try to do by constantly modifying our legislation," she explained.

"We held a critical issues forum in June that brought more than 100 people together to talk about trends and strategic directions the association might pursue in the next three to five years," she noted. "You can't ask for more than the brains of so many incredibly talented people to focus time and attention on the quality of an industry to service its clients."

All in all, she said, "it's a great partnership, and I think that's why Vermont does so well--they're unanimously focused on being an environment that breeds success for this industry, so it's a great place to be."

Special Reports /

Vermont Continues To Provide Fertile Ground For Captive Growth

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