In business since 1981, with a total of 831 licensed captives and premium volume of $15.3 billion in 2007, Vermont remains by far the largest U.S. captive, and indeed, one of the largest worldwide.

So far this year, eight captives have been licensed, noted David F. Provost, deputy commissioner of Captive Insurance Division for the Vermont Department of Banking, Insurance, Securities & Health Care Administration. He succeeded Leonard Crouse on June 1, who served as Vermont's captive regulator for 18 years. (See related story on this page.)

"It's been a pretty slow year, but a lot of that is due to the IRS," said Mr. Provost, referring to an initiative the Internal Revenue Service was considering--and has since abandoned, thanks in part to lobbying by The Vermont Captive Insurance Association--that would have negatively altered the tax treatment for self-insurance.

Mr. Provost estimated the domicile's total growth in 2008 would be between 20 and 30 new entities, with "25 a good, rough guess." Last year, 32 were licensed, compared with 37 in both 2006 and 2005.

Before that, "we got into the 70s--after 2001--and that was an anomaly," he added.

Of the captives licensed so far this year, "we're seeing more of the same, nothing particularly unusual," he said. "It breaks down similarly to other years." Captives are being used for construction, workers' compensation, auto general lines and deductible reimbursement plans, as well as for special-purpose financial captives (SPFCs) and securitizations--formed by large life insurance companies.

One risk retention group also was formed, "and we have interest from others," he said, noting that the potential of allowing RRGs to write property coverage--an expansion of the Liability Risk Retention Act now being debated in Congress--could "expand our existing RRGs, [although] I don't expect we'll have a lot of new RRGs forming just to take advantage of that."

Looking into 2008, he said, coverage offered is across the board, too. "We've got nonprofits, [limited liability corporations], some private companies, big public companies and quite a few securitization deals starting to come up now."

SPFC captives, he said, formed by large life insurers, "gave us a big bump last year in terms of premium written, because they tend to be in the hundreds of millions of dollars in premiums."

In 2007, he said Vermont did some housekeeping to spruce up its regulatory infrastructure--with the biggest piece of legislation spelling out requirements for SPFCs formed as sponsored captives. The new legislation will serve to "wall off the individual cells to the point of being separate corporations," he said.

Will Vermont adopt captive manager guidelines, such as those in South Carolina? "We're looking at it," Mr. Provost said. "There are pros and cons to that, and one of the biggest cons is that we regulate the insurance company, so indirectly we regulate the manager."

He added that while "I appreciate the work South Carolina is doing, for now we're going to stick with regulating the company rather than the manager--but it's not something we're closing off."

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