January 3, 2008
By MEGAN JAMES
ADDISON COUNTY — When former state Rep. Mark Young of Orwell got his first crash course in Vermont’s captive insurance industry 15 years ago, the rest of the country was suspicious of what the Green Mountain State was up to.
At the time, only a handful of states had laws to license captive insurance companies, which a business may form if it wishes to insure its own risks, rather than get coverage from an outside insurance company.
Once known as “offshore” insurance companies, captives have traditionally operated out of places like Bermuda and the Cayman Islands. But back in 1992, Vermont’s captive industry was already on its way to becoming the largest in any state in the country.
Today, it is the second largest in the world, and the economic benefits for Vermont are undeniable. Besides creating employment opportunities for young Vermonters with a college degree — there are nearly 1,500 related jobs — the industry brought in $24.3 million last year in tax revenue.
“And think about it, there’s no smoke, there’s no pollution, no trailer trucks coming in and out,” Young said. “It’s a huge thing for Vermont.”
In 2003, the last time the state released a comprehensive evaluation of the captive industry’s economic impact, 1,429 Vermonters worked in the industry. The average salary for those jobs was $55,179, about 60 percent above the average private, non-farming job in Vermont, according to Dan Towle, Director of Financial Services at the Vermont Department of Economic Development.
This year 814 businesses have captive insurance licensed in Vermont, and $11.5 billion has flowed through the state in premium payments.
“Vermont started from humble beginnings, and now we’re the second largest in the world (behind Bermuda),” Towle said.