Captive Owners Ready to Make a Move Find a Sweet Spot in Vermont

A business-friendly environment attracts captives looking to redomicile.
By: | April 10, 2019 • 6 min read

For a family, moving from one house to another can be a long, complicated, expensive, even traumatic event. For a captive insurance company, changing domiciles is usually far less fraught.


Advisors recommend reviewing all parts of a program, including the domicile, every few years. In that process a notable net gainer has been the State of Vermont, which is the third largest captive domicile in the world. Over the past two decades the pace has waxed and waned, but the Green Mountain State has three arrivals for every two departures.

To be sure, due diligence can and should take months, but once the formal transfer process has begun, it can take as little as four to six weeks.

A recent case study is PCH Mutual, a risk-retention group owned by its 1,450-member insureds that are mostly small companies providing in-home and assisted-living care. It was formed in 2004 with a domicile in Washington D.C. on the recommendation of the insurance manager at the time for a captive-friendly jurisdiction.

“We began discussions on shifting the domicile more than two years ago when I was still outside counsel,” said Julie Bordo, now president and general manager of PCH Mutual.

“We wanted to move because of our growth, and because we wanted to have our situation understood, the nuances of our operation appreciated. When it came to the board, Vermont was seen as a more favorable domicile because of the high level of expertise for captives. There is a high level of talent and engagement, based on my observations.”

“[Our companies] are not simply looking for low taxes or a rubber stamp. We are dealing with sophisticated insureds who want to be in a jurisdiction that works at the speed of business and that regulates in a manner commensurate to the risks being underwritten.” — Ian Davis, director of financial services, Vermont Department of Economic Development

Bordo took the helm at PCH in July 2016 and the first act of her presidency was redomestication. The formal package was assembled through autumn, and the captive was operating in Vermont before the end of the year.

“It was seamless,” she said.

“I attribute that to our team. The regulators told us that they appreciated a clean package, and we got approval in less than a month from filing.

David Provost, deputy commissioner of captive insurance, department of financial regulation, Vermont

“I was also impressed that Dave Provost [the deputy commissioner for captive insurance] offered to attend our first board meeting in Vermont, which was in conjunction with the Vermont Captive Insurance Association meeting. After a full week of VCIA, he was indeed there at our meeting, bright eyed and bushy tailed.”

That level of involvement “was a visible step up from our relationship with the regulator in our previous domicile,” added Bordo.

“The Vermont vision for our industry is appreciated by the regulated community.”

She is also on the board of the National Risk Retention Association, and chair of the group’s annual conference.

Regulatory Nuances of Redomestication

It is important to note that while Vermont has been successful in expanding its presence as a major domicile for captive insurance, it is no flag of convenience.

“We look at officers and directors,” said Provost.

“We look at governance and at the captive’s insureds — which is usually only one.”

He added that “we have to be sure what the prospective captive is doing is legal in Vermont. The two primary reasons that we have had to refuse a redomestication are if it is a line of businesses that is not allowed under the laws of Vermont and also if it does not fit our philosophy of what we think a captive is and does.”


The regulated community appreciates that maintenance of standards, Provost said.

His office is part of the state’s Department of Financial Regulation, and his team includes consulting actuaries to review all business plans for captives being formed.

“If the redomestication is of an already-existing entity, then it has proven feasibility. In that case, the process can take just a few weeks. We have a fairly set process on our end, because we see several a year. Other jurisdictions may not be so familiar with outgoings.”

One case in point is the big neighbor just to the west.

“New York is very difficult for a captive to leave,” Provost noted.

“Their laws essentially do not allow redomestication, so in the cases of captives that want to come from there, they have to form a new captive shell in Vermont and then merge the operations.”

He stressed that he was not disparaging New York, simply noting differences.

“If you run a captive, you should be reviewing your domicile every few years, even if you are happy with it,” said Provost.

“There are geographical and practical reasons for moving, as well as economic and philosophical. We have seen captives come here from everywhere and leave here to everywhere. Redomestication goes in cycles. Since 1983, we have had 88 move in and 56 move out.”

That equates to two or three incoming a year, versus one or two departures, for a steady net gain every year. As of this reporting Vermont is home to 580 captive insurance companies, including 22 that are inactive.

In 1981, Vermont was one of the first states to adopt legislation enabling captive insurers. Over nearly four decades, the state has grown to become the third largest captive domicile in the world, after Bermuda and the Cayman Islands. In that time, about 35 states have enacted legislation authorizing captives, so there is more competition.

Vermont’s Business-Friendly Environment

“Our companies want to be in a domicile that is well-regulated,” said Ian Davis, director of financial services for the Vermont Department of Economic Development.

“They are not simply looking for low taxes or a rubber stamp. We are dealing with sophisticated insureds who want to be in a jurisdiction that works at the speed of business and that regulates in a manner commensurate to the risks being underwritten.”

Davis added, “our captive team works closely together and in partnership with Vermont’s governor and state legislature to make sure that our regulations keep pace with the fast-changing needs of the industry. And, with nearly 40 years of experience regulating captives, we have pretty much seen it all.”

“We have seen captives come here from everywhere and leave here to everywhere. Redomestication goes in cycles. Since 1983, we have had 88 move in and 56 move out.” — Dave Provost, deputy commissioner for captive insurance, State of Vermont

Jeff Kenneson, president of Quest Captive Management, agreed.

“I work in many jurisdictions, and each has its strengths. The regulatory framework in Vermont is particularly good. I am in the process of one redomestication into Vermont now that involves merging several captives.”


For such a complex transaction, Kenneson said he is glad for the “business-friendly attitude and the flexibility of the enabling legislation in Vermont. They get it. We have moved many types of captives to Vermont: workers’ compensation, property and casualty, medical. The moves are generally quite simple, as long as the state that the captive is moving out of can support the move.”

Kenneson said he has also been working with run-off captives, where the owner cashes out or pursues some other end.

“Other domiciles sometimes have difficulty in how to approach that,” Kenneson added.

Vermont also innovates.

Bordo, at PCH, points to a pilot program involving blockchain and efforts to loosen financial investment guidelines for captives. “The industry is fertile ground for innovation because we can try things the major commercial underwriters are not willing to try,” she said. &

Gregory DL Morris is an independent business journalist based in New York with 25 years’ experience in industry, energy, finance and transportation. He can be reached at [email protected]

4 Companies That Rocked It by Treating Injured Workers as Equals; Not Adversaries

The 2018 Teddy Award winners built their programs around people, not claims, and offer proof that a worker-centric approach is a smarter way to operate.
By: | October 30, 2018 • 3 min read

Across the workers’ compensation industry, the concept of a worker advocacy model has been around for a while, but has only seen notable adoption in recent years.

Even among those not adopting a formal advocacy approach, mindsets are shifting. Formerly claims-centric programs are becoming worker-centric and it’s a win all around: better outcomes; greater productivity; safer, healthier employees and a stronger bottom line.


That’s what you’ll see in this month’s issue of Risk & Insurance® when you read the profiles of the four recipients of the 2018 Theodore Roosevelt Workers’ Compensation and Disability Management Award, sponsored by PMA Companies. These four programs put workers front and center in everything they do.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top,” said Steve Legg, director of risk management for Starbucks.

Starbucks put claims reporting in the hands of its partners, an exemplary act of trust. The coffee company also put itself in workers’ shoes to identify and remove points of friction.

That led to a call center run by Starbucks’ TPA and a dedicated telephonic case management team so that partners can speak to a live person without the frustration of ‘phone tag’ and unanswered questions.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top.” — Steve Legg, director of risk management, Starbucks

Starbucks also implemented direct deposit for lost-time pay, eliminating stressful wait times for injured partners, and allowing them to focus on healing.

For Starbucks, as for all of the 2018 Teddy Award winners, the approach is netting measurable results. With higher partner satisfaction, it has seen a 50 percent decrease in litigation.

Teddy winner Main Line Health (MLH) adopted worker advocacy in a way that goes far beyond claims.

Employees who identify and report safety hazards can take credit for their actions by sending out a formal “Employee Safety Message” to nearly 11,000 mailboxes across the organization.

“The recognition is pretty cool,” said Steve Besack, system director, claims management and workers’ compensation for the health system.

MLH also takes a non-adversarial approach to workers with repeat injuries, seeing them as a resource for identifying areas of improvement.

“When you look at ‘repeat offenders’ in an unconventional way, they’re a great asset to the program, not a liability,” said Mike Miller, manager, workers’ compensation and employee safety for MLH.

Teddy winner Monmouth County, N.J. utilizes high-tech motion capture technology to reduce the chance of placing new hires in jobs that are likely to hurt them.

Monmouth County also adopted numerous wellness initiatives that help workers manage their weight and improve their wellbeing overall.

“You should see the looks on their faces when their cholesterol is down, they’ve lost weight and their blood sugar is better. We’ve had people lose 30 and 40 pounds,” said William McGuane, the county’s manager of benefits and workers’ compensation.


Do these sound like minor program elements? The math says otherwise: Claims severity has plunged from $5.5 million in 2009 to $1.3 million in 2017.

At the University of Pennsylvania, putting workers first means getting out from behind the desk and finding out what each one of them is tasked with, day in, day out — and looking for ways to make each of those tasks safer.

Regular observations across the sprawling campus have resulted in a phenomenal number of process and equipment changes that seem simple on their own, but in combination have created a substantially safer, healthier campus and improved employee morale.

UPenn’s workers’ comp costs, in the seven-digit figures in 2009, have been virtually cut in half.

Risk & Insurance® is proud to honor the work of these four organizations. We hope their stories inspire other organizations to be true partners with the employees they depend on. &

Michelle Kerr is associate editor of Risk & Insurance. She can be reached at [email protected]