NU Online News Service, July 21, 2:30 p.m. EDT

The State of Vermont's captive insurance sector reported a strong first half of 2010, licensing 17 new captive insurance companies and surpassing 2009 half-year numbers as the state nears its 900-license milestone, officials said.

This year's new captive insurance companies include 15 "pure" captives--four of which are special purpose financial captives--and two risk retention groups, according to data released by the Vermont Department of Banking, Insurance, Securities and Health Care Administration (BISHCA).

Dan Towle, Vermont's director of financial services, said that Vermont is happy with the growth as well as the high interest in prospective captive formations. "It's fair to say this is as deep a pipeline as we've had in some time," he noted. "Last year was a great year--we're ahead of that."

Mr. Towle said the domicile also is encouraged that captives are being formed "for all the right reasons--as part of a risk management strategy."

He said Vermont is well equipped to handle the growth. "We've got the staff," he said, noting that Vermont has added staff in its captive sector.

"This is a very encouraging sign at a time when the national economy's outlook is still unknown," Sandy Bigglestone, director of captive insurance at BISHCA, said in a statement. "Quality companies like Proctor and Gamble, PricewaterhouseCoopers, Crowe Horwath and Towers Watson & Co. still see the value of establishing a captive as an integral part of their risk management regardless of uncertain market conditions."

Ms. Bigglestone, a 13-year veteran with the Captive Insurance Division, who recently took over following Peter Raymond's departure in June, credited the state's continued investment in its regulatory arm and responsive political institutions for the continued popularity of Vermont as a captive domicile.

David Provost, deputy commissioner of captive insurance, observed that Vermont has seen much interest from hospital groups seeking a captive for their professional medical liabilities and smaller and mid-cap companies. Professional services, insurance companies, construction and health care continue to be growth sectors as shown by the newly formed captives for 2010, he added.

Vermont has 895 captive licenses and is the largest captive insurance domicile in the U.S. and the third largest in the world--with an excess of $77 billion in gross written premium in 2009.

Captive insurance is a regulated form of self-insurance that has been in effect since the 1960s and is used for corporate lines of insurance such as property and liability. Captives have been a form of Vermont insurance since 1981, when the state passed its initial legislation.

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