Seeking Business, States Loosen Insurance Rules

In an article from the New York Times, discussion about numerous states and their interest in creating insurance Captives.  From the ariticle:

Vermont, and a handful of other states including Utah, South Carolina, Delaware and Hawaii, are aggressively remaking themselves as destinations of choice for the kind of complex private insurance transactions once done almost exclusively offshore. Roughly 30 states have passed some type of law to allow companies to set up special insurance subsidiaries called captives, which can conduct Bermuda-style financial wizardry right in a policyholder’s own backyard.

Captives provide insurance to their parent companies, and the term originally referred to subsidiaries set up by any large company to insure the company’s own risks. Oil companies, for example, used them for years to gird for environmental claims related to infrequent but potentially high-cost events. They did so in overseas locations that offered light regulation amid little concern since the parent company was the only one at risk.

Caroline McDonald, author at, thinks the New York Times missed the mark.  From her article:

David Provost, deputy commissioner, captive insurance, Banking, Insurance Securities and Health Care Administration in Vermont, who is quoted in the article, says he plans to respond with a letter to the editor of The New York Times. “It’s not the sort of thing we can explain in two lines,” he notes, adding that he hesitates to “keep a story going that isn’t a story.”

The quick answer, he says, is “the policyholder is protected, which is the key and is the only way I would do [captives].”

Captive insurance is a regulated form of self-insurance that has been in use since the 1960s, and has been a part of the Vermont insurance industry since 1981, when Vermont passed the Special Insurer Act. About 30 states have captive regulations in place.

You can read both articles and decide for yourself by following the links above.

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The Professional Liability Underwriting Society (PLUS) was founded in 1986 by industry professionals who recognized the need for a forum for individuals involved in the field of professional liability. The Society is a non-profit organization with membership open to persons interested in the promotion and development of the professional liability industry. Membership consists of over 6,500 individuals, representing over 1,000 companies active in the many fields of professional liability. PLUS currently receives the support of more than 200 companies through corporate membership. PLUS is recognized as the primary source of professional liability educational programs and seminars, assistance to its members to help serve clients, and information regarding professional liability. The Society is continually seeking new means to fulfill its mission statement and better serve its members.

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