Bermuda is still the king of the captive domicile hill - but is losing ground to rivals Cayman Islands and Vermont, according to 2002 figures which showed a bumper year for these types of insurance companies.

And this comes after record year when 462 new captives insurance companies were licensed for business around the world in 2002, a growth of nearly 10 percent overall and an increase of 75 percent over 2001's new captive formations.

“As with last year's growth, the hard market again drove the formations,” said Captive Insurance Company Reports (CICR) which compiled the figures for its June issue. “Organisations that are perceived by commercial insurers as being poor risks led the way, such as health care and medical malpractice, among others.”

The compiled figures show that Bermuda had 1,426 captives in 2002 - 29.5 percent of the global market which is more than double the next largest domicile, Cayman, which has 642 and more than three times the number in Vermont, 454.

But while Bermuda tops the chart in terms of sheer volume, the Island is once again losing ground on the formation of new captives. Of the 462 captives formed in 2002, 79 or 17.1 percent were formed on the Island. But 21 percent or 97 were formed in Cayman and 70 or 15 percent formed in Vermont.

Speaking about Bermuda, Cayman and Vermont being the dominant forces, CICR said: “The usual suspects. It seems clear that those domiciles that have historically created a fertile environment for flexibility and responsiveness to these unique insurance companies attract most of the interest from new captive owner wannabes, channelled by industry gatekeepers. This truly distinguishes the contenders from the pretenders.”

Storming up from behind are other offshore jurisdictions and some surprising newcomers onshore.

British Virgin Islands is also creeping up, with 45 or 9.7 percent of the new market taking the total number of incorporated captives to 296.

Guernsey had 49 or 10.6 percent of the new formations and now has 408 captives on its shores.

Another island, Hawaii has taken this market by storm and had 16 new captives - a huge increase in its total number of captives which now stands at 102.

South Carolina is also moving into the market with 20 new formations and Barbados continues to take a larger share with 19.

The figures are a mixture of data compiled by the monthly newsletter itself and a report by AM Best, but the newsletter says there are anomalies between the numbers because of different ways each jurisdiction has of compiling its figures. But Captive Insurance Company Reports said that the high number of new captives formed was offset by a large number of liquidations during 2002.

There was a total of 311 liquidations which were “primarily the formalised closures of captives long inactive and do not represent a marked change in business focus.”

The magazine said: “We suspect that the liquidations are from businesses that are cleaning up financial matters in light of the near-recession.

“Businesses prefer not to have assets lie dormant in an unused insurance subsidiary and do not want to spend money wastefully keeping these subsidiaries. Risk managers also pressed to eliminate redundant captives from their purview after years of mergers and acquisitions.

“Finally, several captives that insured their wayward parents, such as Enron, also were put into run-off and eventual liquidation.”