Jacksonville-headquartered Haskell Company made the right decision establishing its own pure captive after 16 years participating in a group, according to Haskell CFO Bradford Slappey and Jeff Caudill, vice president of risk management.
The Haskell Company is a privately-owned engineering, construction and architectural firm, which had joined the ACIG group captive in Bermuda in 2006, insuring general liability, auto and workers’ compensation.
In early 2021, it began exploring whether establishing its own single parent captive was feasible and completed the formation last year.
Speaking on an episode of the Global Captive Podcast, Slappey and Caudill were joined by Spring Consulting’s Prabal Lakhanpal to discuss the project and its performance to date.
AEC Diamond Casualty, Inc was licensed in Vermont in May 2022, with Spring Consulting Group working closely with Haskell on the feasibility and formation of the new captive.
ACIG was formed in 1981 for three construction companies and also formed the United States’ first risk retention group (RRG), American Contractors Insurance Company Risk Retention Group (“ACICRRG”), in 1986.
Today, ACIG is rated ‘A’ (Excellent) by AM Best, has around 40 members and in December 2021 reported it had $236,254,000 of shareholder equity. It was inducted into the Bermuda Captive Hall of Fame in September 2022.
“It was really a safety related move,” said Slappey, discussing the original decision to join ACIG.
“We wanted to get better at safety and their group was 40 general contractors focused on safety and I think we achieved that goal and got much better at safety over the years.”
As the Haskell Company continued to grow, however, its insurance and risk financing needs became more complex, with Slappey explaining it became obvious the company’s profile did not fit as well as it had done previously.
“I thought we were at a point in time and we had enough scale that we could start our own,” he added.
Caudill joined Haskell in October 2020 and was approached by Slappey shortly after to assess the viability of forming their own captive.
“That’s when I reached out to the Spring Group and engaged them in a feasibility study. We took our time, we didn’t really go through it in a big hurry,” Caudill said.
“We could have probably done the process in four to six months, but we stretched it out to really almost a year to match up with our current renewal structure. Timing made a whole lot of sense.”
Lakhanpal, senior vice president at Spring, said a detailed review and extensive due diligence of the risk profile and group arrangement was required to assess whether establishing a new, single parent captive was the optimum solution for Haskell.
“As we went through the process, our intention was to look at it both from a qualitative perspective, which is to say, policy language, ensuring there’s going to be no gaps in coverage,” Lakhanpal said on the podcast.
“If there were gaps in coverage, we wanted to lay those out clearly, as well as articulate how those gaps could be covered within a single parent captive model.
“Then from a quantitative perspective, certainly there was an evaluation of costs, a comprehensive review of what it’s going to take to structure a programme like this, what sort of capitalisation will be needed, what collateral will be needed.
“Given their long relationship with the group captive, it was important to acknowledge all the existing surplus that sat within the programme, lay out the cashflow implications of moving away from the group captive towards a single parent captive and how all of that would play out over the next few years.”
AEC Diamond Casualty has begun by writing auto, workers’ compensation and general liability, replicating the lines it previously placed with the group captive, but Haskell has also moved its medical stop loss straight into the captive.
Caudill said professional liability is a coverage they are looking to add to the captive as the capital base builds, and the first year of operation was a success.
“We’ve had a successful first year,” he added. “We have had great experience in those lines for many years. It was not unexpected that we would have a very good result at the end.
“From a cash flow standpoint, we’re able to reduce our fees, we reduced our insurance premiums overall, changed the structure of our programme.
“We’ve been able to move our medical stop loss in there right away and we’re not done. We’re looking to do some more in the future.”