Vt. Captive Regulator Says Dean Gets Bum Rap
An article reporting that presidential candidate Howard Dean turned Vermont into a corporate tax haven for captive insurers has riled a Vermont captive regulator, who said the article is full of misconceptions.
The article, written by Michael Kranish in the Boston Globe on Dec. 12, said that as governor Mr. Dean enacted tax breaks that attracted to the state a "Whos Who of Corporate Americaincluding Enronto set up insurance businesses." The article said Mr. Dean succeeded in turning Vermont into the "kingdom of captives" by enticing them with tax breaks.
However, Len Crouse, deputy commissioner of the Captive Insurance Division in Vermont, argued that "this business was here 10 years before Gov. Dean became governor, and its going to be here a lot longer after Dean leaves."
He added that "nothing changed under Deans administration other than tweaking taxes." He said that Mr. Dean "played a role in it and supported us, but he didnt do itso [Mr. Kranish] is barking up the wrong tree from day one."
In the article, Mr. Kranish wrote that Mr. Dean has "often complained about Bermudas tax haven status, saying that the United States needs a president who doesnt think that big corporations who get tax cuts ought to be able to move their headquarters to Bermuda."
Mr. Crouse responded that Mr. Dean was not referring to captives, but rather to "the Enrons and the Tycos of the world. Hes talking about the Tycos because Tyco is headquartered [in Bermuda]."
The issue, he said, "is something thats been [debated] in Congress for years. Theyve talked about large corporations headquartered in Bermudatheyre not talking about captive insurance companies," which are self-insurance subsidiaries of their parent firms.
Mr. Crouse added that Bermuda is "an insurance center, not a captive haven." Bermuda is "needed in this market. Without reinsurance, we wouldnt even have an insurance market."
Mr. Crouse noted that because of the hard market and the scarcity of some coverages, the alternative market has been a boost to consumers and corporations in the last three years. "Over 50 percent of all commercial premium is going to be in alternative marketsself-insurance, captives, pools and risk retention groups," he explained.
Risk retention groups have "helped immensely in the medical malpractice crisis," he added. "Weve had commissioners from other states say, Talk to Vermont, maybe they can help you get something going here."
Although captives do not pay income taxes in Vermont, they pay up to $200,000 in premium taxes, Mr. Crouse said. The state recently capped premium taxes at $200,000 because 11 companies were paying more than that figure as captive premiums soared in the hard market.
"These companies had been around a long time, the market is hard, theyre putting more premiums into their programs, so it was a way of staying competitive [with other domiciles]," he said, adding that next year the state plans to lower premium taxes by 5 percent.
"More important than premium tax are the jobs and the people coming to Vermont," he said.
Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, December 19, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.
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