Vermont captive industry celebrates 25th birthday in grateful state

More than 1,200 people showed up in South Burlington, Vt., early in August to celebrate the 25th anniversary of an idea cooked up in Al Moulton’s kitchen that has grown into a multi-million-dollar industry and top employer for the state.

The captive insurance industry has become one of the state’s leading employers and generates enough tax and fee revenue to support roughly 3 percent of all the state’s general fund spending.

Although no one has a good estimate on the total payroll associated directly with the industry, a 2003 study found it supported 1,400 jobs with salaries paying 70 percent higher than the Vermont average and generating an estimated $100 million economic spinoff. It produced $23 million in premium taxes and licensing fees for the state treasury last year and draws thousands of annual visitors for conventions, annual meetings and other business.

“If that was a single employer, that would be a top 10 employer,” said Daniel Towle, financial services director at the state Economic Development Department.

Vermont’s captive industry got its start around 1980, when H. Lincoln Miller, a Long Island, N.Y., broker, sat down at the kitchen table with Moulton, then the state’s development secretary. Large corporations were trying to create wholly owned subsidiaries through which they could insure themselves against property loss, casualty and liability. The subsidiaries became known as captive because they provided insurance to only one company, their corporate parent. Most had to incorporate outside the country, such as in Bermuda, because there were few states with corporate law that permitted what they wanted to do.

So Miller, who had a vacation home in Quechee not far from Moulton’s home, decided to see if Vermont would be interested.

“He sold the idea that we could develop a revenue stream for the state and bring people to the state and jobs and some things like that,” Moulton said, seated next to a traditional chocolate birthday cake thick with butter icing marking the occasion.

Moulton became intrigued and got then-Insurance Commissioner George Chaffee involved. Moulton and Chaffee ultimately took the idea to then-Gov. Richard Snelling, who liked it and helped guide it through the Legislature in 1981.

Vermont now plays host to 542 captive insurance companies, owned by such corporate heavyweights as Exxon Mobile Corp., Microsoft Corp., The Walt Disney Cos. and Wal-Mart Stores Inc. The Vermont Captive Industry Association claims that 42 of the Fortune 100 companies have captive insurance subsidiaries organized and licensed in Vermont.

Copyright 2006 Associated Press. All rights reserved.

Topics Vermont