MONTPELIER — State officials who celebrated the licensure Thursday of the state’s 1,000th company in the niche industry called captive insurance said Vermont would continue to expand the sector and remain the “heart of captive insurance in America.”
Cassatt Insurance Group, a collection of nine independent, nonprofit hospitals in southeastern Pennsylvania, became the 1,000th company when Financial Regulation Commissioner Susan Donegan signed its license at a Statehouse news conference Thursday. The company is providing medical liability coverage for 1,200 physicians.
Vermont has steadily grown within the industry to become the No. 1 site for captive insurance companies in the country and No. 2 in the world. Only Bermuda and the Cayman Islands have more companies, officials said.
“The message around the world — and it’s truly the world — is that Vermont is the place to be,” Donegan said.
A captive insurance company is a subsidiary corporation established to provide insurance coverage to a parent company and other affiliated companies. Corporations often look to create a captive insurance company to underwrite their own insurance rather than paying premiums to third-party insurers. Doing so can help companies save money and better manage risk.
The concept has been in practice since the 1960s. Vermont, under former Republican Gov. Richard Snelling, first allowed captive insurance companies to set up shop in Vermont in 1981. Well-established companies, including Boeing, own such insurance companies in the state.
“When Gov. Snelling envisioned making Vermont the captive center in the United States of America I bet that he never dreamt that ... we would be standing here today celebrating the 1,000th captive insurance company in Vermont,” said Gov. Peter Shumlin.
The industry is bringing quality jobs to Vermont, he said.
“It means good, high-paying jobs, which you all wouldn’t give up for anything in the world. Not even for the Cayman Islands, right?” he asked a collection of industry members gathered inside Shumlin’s ceremonial Statehouse office.
Cassatt President and CEO Eric W. Dethlefs admitted that his company will not actually employ a single person in Vermont. And that’s not atypical of most of the captive insurance companies, officials said.
Still, 1,400 people are employed in Vermont as a result of the industry, officials said.
“While this particular company won’t employ people in Vermont, they contract for services with companies that employ all kinds of Vermonters that provide the services for the captives in Vermont,” Shumlin said.
The companies are also required to hold annual meetings in the state, which boosts Vermont’s tourism industry, he said.
Vermont has created an inviting environment for captive insurance subsidiaries, Dethlefs said, because it has worked directly with the companies.
“Vermont’s understanding of the captive insurance industry, its receptiveness of sensible innovation and a professionalism of the regulatory leadership here make it the domicile of choice for Cassatt,” he said.
That doesn’t mean the state has provided a lax regulatory system, Shumlin said. In fact, officials said Vermont’s captive insurance industry is highly regulated, which companies like.
“It means that our regulators work closely with the industry to figure out what works and what doesn’t and we don’t put unnecessary obstacles in their way,” Shumlin said.
To receive a license companies must prove solvency and show they have enough capital. They must also prove they will be able to weather adverse conditions and provide a plan for dissolution if necessary.
“We don’t just take any comers. You have to meet the high standards, and there are times when we turn away potential licensees because they have not met our standards,” Donegan said.
Vermont has netted about $350 million in direct taxes and fees since the first companies were approved.
“Other states have tried to copy Vermont on this one,” Shumlin said. “They’ve tried to steal our thunder. But, whether we’ve had Democratic governors or Republican governors, Democratic legislators or Republican legislators, we’ve worked together in bipartisan fashion to keep Vermont the No. 1 captive of the 50 states,” he said. “I say to the Cayman Islands and the other folks, ‘Watch out, because we’re going to eat your lunch soon.’”
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