Saturday, June 15, 2024

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Further Side A D&O cell captives established in Hawaii

A large fintech company has followed Meta’s lead in transforming its Hawaii single parent captive into a cell company and insuring Side A D&O in a cell.

Captive Intelligence revealed in December in an exclusive Global Captive Podcast episode featuring Meta’s Janaize Markland that the social media giant had used a cell to support a ‘Laser DIC policy’ tailored to ensure directors and officers retain coverage equivalent to the commercial market.

Restructuring Hawaii-domiciled Honu Insurance Company, LLC into a cell captive allowed Meta to separate the D&O capacity from other risks in the captive.

“There’s been one other that’s actually already almost accomplished that identical conversion and that should be in the can very soon,” Paul Shimomoto, partner at Hawaii law firm Goodsill, said on a GCP Short released on 23 April.

“I am hearing rumblings from others they want to think about it, they want to hear about it, and explore it. At least in Hawaii anyway, I do think that because of the kinds of parent companies and captives that we have I do think there’s going to be more.”

Hawaii is a popular domicile of choice for large west coast technology companies. Multinationals including Google, Tesla, Uber, Lyft and Airbnb own captives in the state.

Captive Intelligence understands the other business to utilise a cell for Side A D&O is a fintech which originally formed a pure captive in Hawaii within the last five years.

Matt Takamine, captive practice leader at Brown & Brown, added: “I think Hawaii is a good jurisdiction because the path has been laid with that Side A D&O, especially with the kind of companies that we have doing business in the state, a lot of large publicly traded Fortune 500 companies.

“That is an important exposure for them.”

Meta worked with broker Woodruff Sawyer on the Laser Side A D&O structure, with Allianz Global Corporate & Specialty (AGCS) supporting the policy.

The innovation was originally pursued by Meta because of changes to the Delaware corporate code in February 2022 that explicitly allowed captives to insure some Side A exposures.

AGCS published its Global Risk Dialogue on 25 April with a section focused on the D&O law changes in Delaware and how the insurer has worked with captives, including Meta, in implementing such structures.

Nick Troxell, manager of global captive fronting at AGCS, said: “Delivering an innovative solution like this called for collaboration between the insured, the broker, and the insurer.

“We had a full steering committee working on this project, with in-house experts from claims, legal, financial lines, distribution, and risk consulting.

“It was vital to establish a strong rapport from the outset so we could respond with agility to the clients’ needs and support them through this process.”

Captive Intelligence reported in March that Marsh Captive Solutions had established a new cell facility in Delaware, specifically designed to serve clients seeking alternative risk transfer options for Side A directors and officers (D&O) insurance.

“The approved Delaware law is a significant step forward as it allows more companies to consider a wholly owned captive or a “cell” as a partial or complete solution for covering Side A D&O claims,” Donna Weber, senior vice president and pooling & cell facilities leader at Marsh Captive Solutions, said last month.

“We feel that the combination of the new Delaware law, combined with utilisation of a cell facility domiciled in Delaware, provides the closest alternative to commercial insurance with least amount of potential issues.

“As one example, since both the corporate law and the captive law are both Delaware, potential public policy conflicts that may arise if the captive is domiciled outside of DE are removed.”