Another Year, Another Bill


I want to thank all those VCIA Members who travelled to Montpelier last week during one of our ongoing snow storms to join Vermont Governor Phil Scott in signing this year’s captive bill into law.

H.764, introduced during VCIA’s Legislative Day in  January, quickly made its way through the legislative process and on to the Governor’s desk a week or so ago. Every year, VCIA and the State work to improve the ease of doing business in Vermont by proposing refinements to Vermont’s captive bill. This year’s bill included some common-sense changes to our annual filing date and reporting requirements which will help streamline processes and provide a new level of consistency for our regulated entities.

As Governor Scott said at the signing, “It is critical that we are responsive to the needs of the industry. These improvements to our captive legislation illustrate Vermont’s ongoing commitment to the captive insurance industry…  This bill will further advance Vermont’s reputation as the ‘Gold Standard’ of domiciles and will provide greater flexibility and consistency for our companies going forward.”

Joining the Governor was Department of Financial Regulation Commissioner Mike Pieciak, Deputy Commissioner Dave Provost, Director of Financial Services Ian Davis, and a number of DFR staffers. With me were VCIA Members Jonathan McKenzie from Alterna, Pattie Henderson from SRS, Dustin Partlow from JLT, Steve Killoran from Maple Capital (straight from maple sugaring – or so he looks in the picture!), Sandi Prescott from Performa, David White from AIG, David Angus from The Angus Law Firm, Keith Jones from National Life, Kristen Sharrow from Johnson Lambert, and Bill Mourelatos and Patti Pallito from Aon. Thank you all for coming on down!

Thank you and I look forward to hearing from you.

Rich Smith
VCIA President

Hard Market, Schmard Market

chartThe siren song begins at the change of every year: based on historic losses in the year just ending, we can expect to see a hardening of the insurance market in the upcoming year. In fact, by all reports last year’s losses were high – Swiss Re’s preliminary sigma estimates for insured global losses resulting from natural and man-made disasters in 2017 are around $136 billion, well above the annual average of the previous 10 years and the third highest since sigma records began in 1970. Total economic losses soared in 2017 to $306 billion from $188 billion in 2016 primarily due to the three hurricanes—Harvey, Irma, and Maria—that hit the United States and the Caribbean, and wildfires in California.

The fact that we are seeing a “new normal” in loss rates certainly will be exacerbated by climate change – but that is a different story. To me, the story continues to be how even with last year’s near record losses, the insurance industry (which in the past would have triggered a substantive hardening of rates) has barely registered a blip.

One area we see this in is the reinsurance market. As stated in an article in Business Insurance, David Priebe, New York-based vice chairman of Guy Carpenter, said “Despite substantial catastrophe losses in 2017, the market demonstrated significant resilience with no notable capital withdrawal and moderate price increases.”

There are good reasons why the insurance marketplace remains so stable. Better loss control, better data, and more capital looking for a home have all contributed to this stability. And I would argue that the maturation of the captive insurance industry played a role by giving risk managers more options and flexibility.

Hard markets usually spark a corollary growth spurt in captive insurance formations. As prices harden, and insurance becomes more scarce, organizations form captives to fill the gap. But even without the hardening market, we continue to see growth in captive insurance. As Brady Young, president and CEO of Strategic Risk Solutions (SRS), told Captive.Com recently, he sees captives evolving in the future to be more of an offensive tool to support overall corporate strategies to serve customers and generate incremental profits. Brady also states, “captives can and will do more to reduce organizations’ overall cost of risk and squeeze out more of the inefficiencies of the traditional commercial insurance market… and in terms of specific lines of business or growth areas, captives will help solve the mismatch between the demands of companies and industries that have new risks and service models where traditional insurers struggle to provide the needed solutions.” He would know!

Next time I get asked by a reporter whether I think a hard market is coming our way, I will give them the same answer I gave at the end of last year: hard market, schmard market (which translates to not likely).

Speaking of Brady, come join us next Tuesday, February 6, in Atlanta where Brady and I will participate in VCIA’s world-famous Road Show outlining the advantages of captive insurance. We will be joined by Sandy Bigglestone, Director of Captive Insurance at the Vermont Department of Financial Regulation, Christy Williams, President of Green Mountain Sponsored Captive Insurance Company, Christopher Smith, President and Chief Executive Officer of MCIC Vermont, Inc. (A Reciprocal Risk Retention Group), and Ian Davis, Director of Financial Services for the State of Vermont.

Thank you and I look forward to hearing from you.

Rich Smith
VCIA President

Thank you and Congratulations!



ICCIE-award-squareAs I wrote about in last week’s blog, VCIA hosted our annual Member’s Legislative Day in Vermont’s state capital, Montpelier, yesterday and it was a big success!

Our members, including many who came in from afar, got to hear from Vermont’s Lt. Governor, David Zuckerman, as well as Commerce Secretary Mike Schirling at our luncheon, and then later in the day from the Speaker of the House, Mitzi Johnson, the President Pro Tempore of the Senate, Tim Ashe, and finally from House Minority Leader Don Turner. Even though they represent different parties under the Gold Dome, what they do have in common is their unwavering support of the captive insurance industry in Vermont.

At lunch the Vermont State Economist provided a view of the State and national economy for members. VCIA and ICCIE board member presented the second ICCIE Fellow designation to Vermont’s own Kate Boucher from Premier Insurance Management Services. Congratulations, Kate, much deserved!

VCIA testified before House Commerce and Senate Finance on the captive bill that was introduced this week and to provide an overview of VCIA and the captive industry. Joining me was Ian Davis, Director of Financial Services for the State of Vermont, VCIA’s board vice chair, and Jan Klodowski, vice president for Agri-Services Agency, LLC, a subsidiary of Dairy Farmers of America.  As usual, Ian and Jan did a great job!

And finally, under the sure hands of Dave Provost, the House Commerce committee passed out this year’s captive bill with an 11 – 0 vote.
For a copy of the captive bill, please click here

Thank you all very much, and I look forward to hearing from you!

Rich Smith
VCIA President

Viva Las Ve-rmont!

Sure, it seems easy – especially when you are the largest and most sophisticated captive domicile in the US. But the work that Ian Davis, Dave Provost, Sandy Bigglestone and the rest of the State of Vermont team put into attracting so many new captives to license in the state should not be overlooked.Captive-Licenses-2017

What I am talking about here is the recent report that 2017 proved to be another highly successful year for Vermont’s captive insurance industry.  Vermont added 24 new captive licenses, bringing its total to 1,112 with 566 active captive insurance companies. This is almost exactly the average number of new captives licensed yearly in Vermont (roughly 25) regardless of the marketplace. There are now more than 40 states with captive laws on the book and with the current uncertainty of state self-procurement taxes that put a thumb on the scales in favor of “home states”, Vermont still excels.

The new captives were made up of 11 pure captives, 5 sponsored captives, 3 Risk Retention Groups (RRGs), 3 special purpose financial insurers, 1 branch captive and 1 industrial insured captive – as usual, a healthy mix of sizes, types and industries.  Risk Retention Groups account for three of the new licenses, bringing the active total to 90.  Vermont continues to hold a dominant market share with over 60% of all RRG premium volume being written by Vermont companies.  As David Provost, Vermont’s Deputy Commissioner of Captive Insurance, always says Vermont’s focus will always be licensing quality companies, not chasing numbers.

Don’t forget that January 24 this year is VCIA’s annual Legislative Day in Montpelier, Vermont’s capital. It’s a full day of meeting and hearing from Vermont’s political leaders on the captive industry and issues facing the State broadly. Go to and register today!

Thank you and I look forward to hearing from you.

Rich Smith
VCIA President

Happy Holidays and See You in 2018


I just wanted to wish all of you Happy Holidays as we head out of 2017 and into 2018. It’s been another busy years in captives, that included a horrific hurricane season, the decision of the Avrahami case on 831(b)s, the specter of continued cyber security issues with the hacking of Equifax (among others), and the soon-to-be-passed Tax Reform bill – all of which impact our industry.

That being said, captive insurance is growing and remains a robust part of the world’s risk management sector. Vermont broke through the 1000 captive license mark and looks to add around 25 new captives before year’s end. With challenges and opportunities that lie ahead such as healthcare, drones, (more) cyber risk, and AI (artificial intelligence – get used to it), captives will show how entrepreneurial and innovative our industry can be!

Thank you all for another great year and Happy New Year!

Rich Smith
VCIA President

A Nice Little Holiday Gift from Congress


As reported by Business Insurance on December 13th, the House Financial Services Committee adopted legislation that aims to preserve the U.S. state-based system of insurance regulation and gives Congress greater oversight and transparency on international insurance standard negotiations.

As beneficiaries of the strong, state-based insurance regulatory framework, the captive insurance industry applauds the goal of this legislation. The bill was introduced in response to concerns expressed about the covered agreement signed by the United States and the European Union to address the U.S. lack of equivalency related to the bloc’s Solvency II directive for the insurance industry. Although we supported the covered agreement in terms of trying to create parity between jurisdictions, the NAIC objected to what they believe to be a lack of transparency and consultation with state regulators on the issue.

As reported in BI, the bill states that entities representing the United States may not agree to insurance-related international agreements unless they are consistent with and recognize existing federal and state law, particularly on the regulation of insurance. U.S. federal entities participating in negotiations would be required to coordinate and consult with state insurance commissioners, according to the bill.

Whether this bill gets enough immediate traction to pass in the next year remains to be seen. I think it does bode well that Congress reiterate the near supremacy in states regulating insurance (I say “near supremacy” because Congress can always change its mind!).

Thank you and I look forward to hearing from you.

Rich Smith
VCIA President

Old Home Week


As many of you know, VCIA hosts a couple of educational sessions in different cities across the country to espouse the virtues of captive insurance. We call these our World Famous Road Shows, well, because the Ringley Brothers Barnum & Bailey Circus is no more! It is an afternoon that focuses on the basics of captive insurance companies, including the reasons for formation, the feasibility process and key issues in putting a successful captive program together.  A brief overview of Vermont as a captive domicile is also discussed.

It hit us late last year that we have never brought our Road Show to our Homeland – the Great State of Vermont! So next Wednesday, October 25th at the Burlington Hilton we will presenting the Road Show for companies in Vermont (and neighboring regions), as well as enticing finance, business and accounting students from local colleges to come learn about this great industry in their backyard.

We will have Vermont’s chief regulator, Dave Provost on a panel with Rusty Young, a Shareholder at Burlington law firm Primmer Piper Eggleston & Cramer, PC. The panel will be moderated by Ian Davis of Vermont’s Department of Economic Development. I will host the second panel of two of the industry’s experienced captive owners. Jan Klodowski is vice present of Agrisurance Inc. and is responsible for developing and administering their successful Captive/Alternative Risk Financing programs. She manages Agrisurance, Inc., a Vermont-domiciled Sponsored Captive focused on service the farming and agricultural industry. And Wilda Seymour, the corporate director of Professional Liability for the University of Pennsylvania Health System and vice president, Franklin Casualty Insurance Company, their Vermont-domiciled captive.

Hope you can join us to get a better idea why Vermont is the #1 captive domicile in the United States!

One last thing – we need your input! Today is the deadline to submit topics for VCIA’s annual conference next August. Please click link below to submit a conference topic suggestion:


Thank you and I look forward to hearing from you.

Rich Smith
VCIA President