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The pace of captive insurance company growth is accelerating worldwide, with a net gain in the number of formations and domiciles sprouting up all over the globe.

Growth is attributed to new interest in markets where risk management is gaining sophistication, such as Latin America, Southeast Asia and Eastern Europe.

Formations also are driven by companies developing new risk financing uses for captives, or a desire to have multiple captives for varied risks.

Several domiciles are emerging to try to tap into this burgeoning market, which continues to see gains despite continued soft and competitive pricing in the commercial property/casualty markets. The newer domiciles-all of which have yet to attract their first captives-include: Guam, Malta, Montenegro, New Brunswick, New York, New Zealand and Panama.

Even the Council of Lloyd's is contemplating a proposal to make the market a domicile for captive insurers (see story, page 76).

In the 27 domiciles-up from 25 a year ago-with captives covered by Business Insurance, the number of licensed companies grew 6.8% to 3,104 from 2,905. That's up from a 5.6% gain in 1995, 6.4% in 1994 and 2.6% increases in both 1993 and 1992. However, not all of those entities prior to 1995 were captive insurers, because some domiciles do not distinguish between forms of insurance entities. Business Insurance now attempts to exclude non-captives from its count, where possible.

Bermuda, the largest captive domicile by far, continues to refine its tally of captives in the domicile, made easier by the Insurance Amendment Act of 1995, which broke insurers and captives into four categories. As a result, BI has revised its method for estimating the number of captives in Bermuda, and that revision is reflected in the domicile's 1995 and 1996 captive totals provided in this report.

Despite the emergence of several domiciles, it was the largest domiciles that saw the biggest gains in the number of captives last year.

Bermuda not only is the largest domicile, but in 1996 it also saw the largest net gain in the number of captives, up 64 companies, or 6.5%, to an estimated 1,050 captives.

The domiciles with the next-highest gains were: Cayman Islands, up 37 to an estimated 373; Guernsey, up 29 to 324; and Vermont, up 23 to 293.

While plenty of domiciles had a flat year in 1996, only three domiciles actually saw a decline in the number of captives: Illinois' total fell by four captives to four at year end; Colorado saw its count drop by two to 18; and Tennessee lost one captive for a total of 10.

Several domiciles last year revised their captive laws, though not as many as in 1995. Those with more recent changes include:

Luxembourg, which is abolishing a municipal business tax and plans to reduce corporate income tax.

Isle of Man, which amended its law to make the transfer of captives from other domiciles easier, among other changes.

Guernsey, which enacted a law allowing companies to form a type of rent-a-captive and aims to pass reforms making captive transfers easier.

Caymans, which have a new regulatory body and regulator, though no changes to laws.

Business Insurance's 1997 captive market report begins on page 4, with a report on the status of North Carolina's rogue fronting proposal.

A report on reinsurers' growing appetite for captive business starts on page 6.