The premiums received by Washington DC-domiciled Government Entities Mutual (GEM) have tripled over the past five years as government bodies counter rising costs and a lack of capacity brought about by the hard market, according to Andrew Halsall, president and CEO at GEM.
GEM is a mutual reinsurer consisting of risk pools or captive insurers comprised of public entities in the United States.
The mutual offers workers’ compensation reinsurance, where it provides a buffer layer of up to $2m between the retention of each pool and where the excess insurer attaches.
GEM also offers general and auto liability coverage, providing to $10m worth of cover.
“We then buy retrocessional reinsurance mainly from the London markets,” Halsall told Captive Intelligence. “We have several Lloyd’s syndicates on the panel and a couple of corporate reinsurers.”
Halsall said during the hard market members experienced a reduction in capacity from their incumbent reinsurers and prices skyrocketed.
“GEM was able to step into that void and provide more coverage and stability in pricing to existing members,” he said. “We also added five new members.”
“As a result, over the last five or so years we have more than tripled our premium income and grown our surplus significantly.”
Halsall said growth has also presented a certain amount of risk for the mutual.
“Especially if there’s a temptation to open the floodgates and accept all comers,” he said. “We have a cautious approach to growth.”
All members of GEM each represent multiple underlying government entities.
“The risk is already diversified by the stage that it reaches us,” Halsall said. “We don’t take on individual entities like large cities as members.”
“They represent a concentration of risk that would undermine our portfolio. In any case, large cities generally self-insure and buy excess insurance.”
Halsall said there were several reasons Washington DC was chosen at GEM’s captive domicile.
“First of all, there is an implied neutrality so if we’re attracting members from different states, we don’t necessarily want GEM to be already domiciled in a State which may imply some kind of bias toward that member,” he said.
“The DC regulators have also been very reasonable to deal with. They have very high standards, but they are also very approachable.”