Vermont’s Captive Conference

Vermont is well-known for, among many other things, its leading captive insurance industry — home to more than 900 captives.

The state’s captive insurance advocacy group, the Vermont Captive Insurance Association, held its annual conference last month. The event drew nearly 1,100 participants this year, from 8 countries and 42 U.S. states.

The group’s president, Richard Smith, recently spoke with Insurance Journal to share the latest buzz from the meeting, from new emerging opportunities to concerns over over-regulation.

Smith said conference attendees voiced “ever-present concern about the creeping regulatory apparatus” of Washington, D.C. One of the main concerns is language in the Dodd Frank Act called the Non Admitted and Reinsurance Reform Act, which was a portion of Dodd Frank that was meant to better deal with surplus lines tax collection amongst states.

“Unfortunately, because of the language of how that particular part of the Act was developed, there’s confusion whether captive insurance companies fall within that, and that’s created angst and confusion within the industry.”

He observed that with the turmoil in the financial services industry, it’s understandable why both the government and citizens in general have concerns about what’s happening. “But the insurance industry and the captive insurance industry sometimes get swept up into some of these discussions. I think that’s unfair.”

On the bright side, he added, there was a lot more positive energy about the captive industry — a lot of energy about forming captives, and new areas, and new lines that people were exploring.

The conference featured 22 seminars. Among some of the more prominent seminars were events that talked about “using your captive insurance for employee benefits.” This is an emerging area, he noted.

Smith said there was a lot of discussion around health care — both the use of captives in the healthcare industry as well as the new health care reforms that are coming down from the federal government, and how those might impact captive insurance companies, especially those in the medical field.

“More and more, we’re seeing parties that are interested in the potential there. Every time you see a major risk event, such as the flooding in Thailand that impacted supply chains, you’re going to hear about, ‘Can the captive insurance handle those issues?'”

Cyber risk is another area that’s getting a lot of discussion these days, he said. “Anything hot in the insurance world is also being talked about in the captive industry as well, in terms of, ‘Is that an appropriate program to put into my captive insurance program?'”

All in all, the captive industry appears to be weathering the economic doldrums in good shape. Even though the economy hasn’t truly bounced back yet, Smith observed, “we’re seeing that the growth in the captive industry has remained steady and strong.”