here is the high cost. Cathy Stovell reports.

While politicians on Capitol Hill are considering stricter taxation as a disincentive for companies to domicile in Bermuda, a gentler approach is taking place in the quiet state of Vermont. And the Vermont approach is seeing results.

The state is creating an environment to lure captive insurance business and is eying up several Bermuda-based companies.

Already the Contran Corporation has made the move and others could follow if Vermont presents more attractive working conditions.

The matter was one of the talking points at the recent Captive Insurance Conference in Vermont.

With revenues of $11 million being brought in, the New England state has recognised the financial benefits of securing the captive insurance company business.

According to the Governor, Howard Dean, the number of Vermont-licensed captives has doubled over the past nine years, their gross premiums have tripled and premium taxes received by the state have doubled.

Statistics in Vermont show them as having twice as many captives as all of the US states combined and ranking third worldwide for the number of captives in operation.

Governor Dean attributed the success to good, strong, flexible regulation. He told attendees at the conference that his state truly appreciated and understood captives and provided them with support and resources where needed.

Almost 1,000 well-paid jobs in the financial services industry have been brought by the 335 captive companies active in the state. The Governor also said that the captives help attract other Fortune 500 companies who might not otherwise consider Vermont as a place to locate their core business operations.

The Vermont conference also featured a presentation which examined why many companies had formed captives outside of the US.

Michael Douglas of IRMG noted in the presentation that tax differences were becoming less of a factor while domiciles like Vermont were becoming equally as flexible and creative.

The September edition of Captive Insurance Company Reports reported Mr.

Douglas as saying that the cost to operate in Bermuda was a third higher than in Vermont.

Pat Stangle of Contran Corp who moved from Bermuda to Vermont said that their decision was largely based on fewer restrictions on investments/reserving in Vermont than in Bermuda, the lower audit and captive management fees and coverage flexibility.

Contran also saw tax benefits to the re-domestication as it had some domestic loss carry forward.

Mr. Stangle also offered advice to companies contemplating such a move. He suggested meeting with regulators early and finding out the requirements for applications and possible problems regulators might have with your company.

He said his company found accounting principles in the first two years to be difficult and advised that companies select captive managers with lengthy involvement in the domicile and who have good relationships with the regulators.