encourage captive insurance companies to form domiciles onshore. Sue Stuart assesses whether they pose a threat to Bermuda's leading position in the captive insurance world.

A number of people from Bermuda firms will be making presentations at the Strategic Research Institute's Captives & Risk Financing Summit in Charleston, South Carolina on June 5 and 6.

Although the conference is billed as focusing on South Carolina's new captive market, Bermuda's speakers are expected to talk primarily about the offshore market.

South Carolina is just one in a line of states in the US that are implementing captive legislation and trying to attract business. In the conference promotion it says, "You'll see first hand how South Carolina has positioned itself as a highly attractive domicile and find out what innovative types of captive insurance programs can operated in South Carolina.'' Among the Bermuda firms represented will be Arthur Gallagher, HSBC Insurance Services (Bermuda) and KPMG Bermuda.

Jim Blankenship, a partner in KPMG, said his presentation will be about captives offshore and how best to use them. He will also look at the recent reviews by the OECD and KPMG for the Foreign Office and explain how well Bermuda fared in both these.

States are putting captive legislation in place in an effort to get a slice of the estimated $28 billion US industry. South Carolina enacted its legislation last year and expects to have a dozen captives signed up by June this year.

Two of these have already redomiciled from Hawaii and Vermont.

James Kinder, president of the South Carolina Captive Insurance Association, said: "South Carolina's leaders view the development of captives as an overall economic development programme that is completely supported by the governor's office.'' But other states have not managed to attract even the dozen drawn to South Carolina. Seventeen states now have captive legislation on the books, but there does not appear to be much activity in their markets. Nevada, which passed its captive laws in 1999, has two licensed captives as has Rhode Island.

Vermont legislation is being used as a model by many states new to the captive business, but Vermont is not unduly worried about losing business in spite of South Carolina's boast that its natural advantages will eventually allow it to surpass Vermont as the leading US captive domicile.

Vermont is coming up to signing its 500th licensed captive and Lisa Ventriss, president of Vermont's captive association, said: "We don't believe Vermont has any reason to be threatened. We have a 20 year track record and a great reputation.'' Nor is she concerned about other states copying Vermont's legislation and said, "A mentor once told me `the higher up the flagpole you climb, the more they can see up your skirt.' '' Bermuda's captive industry is thriving, with around 1,500 companies registered in the island. People in the industry do not see the rise in the number of US states implementing captive legislation in any way threatening the offshore captive market, particularly in Bermuda.

David Pickering, executive vice president of International Advisory Services which is part of the Mutual Risk Management group, said: "This doesn't threaten Bermuda. We look at the history of other domiciles. There is only Vermont, none of the other `onshore' domiciles have had any real success in attracting captives.

"The main attraction of Bermuda is that it has such a wealth of experience at both executive level and regulatory level.This is a huge advantage and the momentum has gathered in Bermuda. There are some minor tax advantages associated with Bermuda, but they are not as significant as the experience and expertise here.''