Skip to main content

Become a Vermont Captive

captive basicsCaptive insurance refers to a subsidiary corporation established to provide insurance to the parent company and its affiliates. A captive insurance company represents an option for many corporations and groups that want to take financial control and manage risks by underwriting their own insurance rather than paying premiums to third-party insurers.

Vermont has longstanding tradition of providing solid support for this state’s captive industry. This fact ensures that as captive industry needs change, captive legislation in this state evolves and is further enhanced with timely and meaningful changes made to Vermont captive law

Over 1,300 companies have already realized the advantages of captive insurance operations licensed in Vermont. In fact, for several years now, Vermont has ranked as the number one captive domicile in the United States and as of 2022 became the top ranked captive insurance domicile in the world.

Learn more from the Vermont Agency of Commerce and Community Development of the benefits of becoming a Vermont Captive.

Types of Captives

Affiliated Reinsurance Company (ARC):  An ARC may be formed to reinsure related commercial insurance companies.  ARCs are regulated in a manner much like their commercial parent company, but with greater investment flexibility.
Agency Captive: An agency captive is a reinsurance company controlled by an insurance agency or brokerage. Through a reinsurance agreement with a traditional insurer, the agency captive receives a share of the premiums written, and is obligated to pay its share of claims.
Association Captive: A captive insurance company owned by members of a common industry or trade association in order to share the risks of that industry among its members.
Branch Captive: A unit of an existing offshore (alien) captive, licensed in Vermont to write employee benefit business for its owners and affiliates onshore. The branch is regulated as a pure captive, is taxed only on the branch writings and is required to use an onshore trust for the protection of US policyholders and ceding insurers.

Industrial Insured Captive: A captive insurance company owned by multiple, non-related organizations (industrial insureds), to insure the risks of these organizations and their affiliated companies.


Pure Captive: Also referred to as "single-parent captive", insures only the risks of the parent and affiliated companies or controlled unaffiliated business.

Risk Retention Group (RRG): An entity created under the Federal Liability Risk Retention Act, and licensed in any one state to write liability insurance; is regulated as a captive insurance company; and, may operate nationwide, provided it properly registers with each state in which it proposes to solicit or write insurance.

Special Purpose Financial Insurance Company (SPFI): A special purpose financial insurance company is used to facilitate risk securitization via a transaction or a group of related transactions, which may include capital market offerings, that are effected through agreements where all or part of the result of such transactions is used to fund the special purpose financial insrurance company's obligations under a reinsurance contract with a ceding insurer.  Funding may be provided by the issuance of securities, letters of credit, or other assets, SPFIs are almost exclusively formed by commercial insurance companies.

Sponsored Captive: A sponsored captive insurance company has its minimum capital and surplus provided by one or more qualified sponsors.  The business of a sponsored captive may only insure the risks of participants through separate participant contracts, and the liability to each participant must be funded through one or more cells.  The assets of cells are available only to satisfy the liabilities of that cell.  Cells are formed as protected or incorporated protected.

Captive Structures

Captive Insurance Company: A closely held insurance company whose insurance business is primarily supplied by and controlled by owners, and in which the original insureds are the principal beneficiaries. The insureds have a direct involvement and influence over the company's major operations, including underwriting, claims, management policy, and investments. There are currently over 6,600 captives licensed worldwide, that service their parents' risk financing needs. In Vermont, that figure is more than 600. Vermont's captive owners represent a wide range of industries including multinational corporations, associations, banks, municipalities, transportation and airline companies, power producers, public housing authorities, higher education institutions, telecommunications suppliers, shipping companies, insurance companies and manufacturers, among others.

Group Captive: A captive insurance company owned by multiple, non-related organizations and is designed to insure the risks of these different entities.

Reciprocal: An unincorporated association; reciprocal insurance is that which results from an interchange among subscribers of reciprocal agreements of indemnity, the interchange being effectuated through an attorney-in-fact common to all subscribers.