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FERMA elects Charlotte Hedemark as its next President
The Federation of European Risk Management Associations (FERMA) has elected Charlotte Hedemark as the next president of the organisation.
Hedemark is a risk management expert at SAP and is currently vice president and a board member of FERMA.
Her tenure as president will officially begin on 17 October at the closing of the FERMA Seminar 2023 in Belgium, where she will succeed Dirk Wegener following the completion of his four-year tenure as president.
“It is an honour to be elected President of FERMA,” said Hedemark. “During a period of unprecedented challenges for corporations across Europe, the criticality of FERMA’s role in representing the interests of its member associations and raising the profile of the risk profession has never been greater.”
“As we look forward during this time of uncertainty, FERMA will continue to act as a strategic radar for the industry, monitoring developments, informing associations, and addressing policymakers. In my role, I will work to ensure FERMA continues to be a rallying point for our members as we all strive to Be Risk Leaders.”
Her election was announced at the first meeting of the new FERMA board following the annual general assembly in Brussels on 27 June.
She is a well-respected risk professional and has been a strong figure in the ongoing development of FERMA in recent years.
She has worked in Global Risk & Assurance Services (GR&AS) at SAP for more than 15 years and is presently a risk management expert in Customer Success Risk Assurance Services.
“I am delighted that Charlotte has been elected to the position of President,” said Wegener.
“Her deep understanding of the risk management function and commitment to evolving and elevating the profession through her involvement with the wider risk community make her the ideal candidate to take the helm at FERMA as we help guide our members and represent their interests at all levels.”
The 831(b) Institute launches in US, demands clarity from the IRS
The 831(b) Institute has launched in the US and is asking for clarity from the IRS around how it regulates micro-captives, arguing that it “unfairly” scrutinises them.
Instead of creating guidelines that allow for micro-captive plans to be fairly regulated, the 831(b) Institute argues that the IRS is attempting to push forward harmful regulation that will make micro-captives less effective.
The 831(b) Institute said it was formed to bring the business community together and give them a voice around what true risk mitigation and insurance coverage means to small and medium-sized businesses.
“Insurance is an essential part of owning a business, but often complicated rules and lack of proper guidance from the Internal Revenue Service (IRS) result in confusion and misconceptions,” the Institute said.
“Our country is built on entrepreneurial spirit, and micro-captive insurance helps protect the livelihoods of America’s entrepreneurs.”
The Institute argued that micro-captives can serve as an excellent insurance option for small business owners, as they allow for self-reliance, independence, and flexibility for businesses.
“The inability of the IRS to create clear regulatory standards for micro-captives is harmful to good faith business owners looking to have an insurance plan in place that allows them to participate in the risk and premium of their insurance programs in the same manner as large enterprises,” said Nate Reznicek, president and principal consultant at Captive.Insure, and advisor to the Institute.
“This includes the ability to help to cover unpredictable expenses and potentially catastrophic events.”
Captive Intelligence reported in April that the IRS had proposed new regulations for “micro captives”, which have divided opinion across America’s captive landscape, with some saying they could destroy the industry, while others have branded it a refreshing change.
Oklahoma’s Insurance Commissioner Glen Mulready recently called on the IRS to withdraw its Notice of Proposed Rulemaking (NPR) concerning micro captives and form a joint task force consisting of the IRS, regulators and representatives of the captive insurance industry.
Unbundled fronting more prevalent, plays to AGCS’ strengths – Brian McNamara
The rising popularity of unbundled fronting services for captive insurance companies is playing to the strengths of Allianz Global Corporate & Specialty, according to Brian McNamara, regional head of multinational, North America and global head of captive solutions at the carrier.
Speaking in an interview on GCP #88, McNamara outlined AGCS’ recent investment and further expansion into the captive space aligned with the group’s broader efforts to be a bigger player in the multinational market.
The insurer has had a significant presence in the captive market for the past decade or so through Allianz Risk Transfer (ART) and AGCS in both fronting and structure reinsurance programmes, but the rise in demand for captive services during the hard market has called for further investment and reorganisation.
AGCS has made a string of high-profile hires to lead multinational and provide captive services over the past 12 months, including Guy Money as global head of multinational business.
The carrier also brought in Salil Bhalla as a global captive fronting manager in Europe, added Nick Troxell, formerly global risk financing manager for Nike, to the fronting team and moved Jayesh Patel internally to global head of multinational market practice.
McNamara said the reduction in capacity and appetite in certain lines from the commercial market had pushed large multinationals “against the wall”, which has led to a greater utilisation for captives and more demand for unbundled fronting on global programmes.
“The unbundled fronting has been around for many years,” he added.
“It started really with the energy companies with established captives in Bermuda 50 years ago.
“I think what we are promoting and some of our competitors are promoting is the fact that you can unbundle the captive fronting services. If you’ve got a global franchise, it doesn’t necessarily mean that your main capacity provider is actually the best at providing those global services.
“It’s becoming more prevalent now, and obviously we want to capitalize on that and provide those services.
“Obviously there’s a high barrier to entry for doing it on a global basis, there’s probably five companies that can do it globally. We believe we’ve got the largest franchise, which includes our network partners globally of over 200, and I think we’ve got the biggest owned network as well. So that obviously plays to a strength that we’ve got.”
With the rise in demand for unbundled fronting, meaning the front is retaining no risk and ceding 100% to the captive, there is also increased possibility for bespoke wordings and more innovative coverage.
Although not a fronted programme, Captive Intelligence revealed in December that AGCS had worked with Meta on a Side A ‘Laser DIC’ policy backed by its captive.
“Traditionally, we have specialised in basically manuscript customized wordings for our clients,” McNamara added.
“We will essentially provide a multi-line policy and that’s not stapling five or six policy wordings together. It’s actually crafting a multi-line policy.
“We also try to have a global aggregate limit on that policy, and then also we’ll do it over a multi-year period. Generally, three to five years.
“It gives the risk manager some security that there’s continuity there. We have one client where we have seven lines of business in over 80 countries. Obviously putting together and crafting that programme initially is not easy, there’s a lot of work that goes into it, but once it’s up and running it’s a very effective programme for the risk manager to have.”
Listen to the full interview with Brian McNamara, regional head of multinational, North America and global head of captive solutions at AGCS, on GCP #88, either on the Captive Intelligence website or on any podcast app
Oklahoma calls on IRS to drop proposed 831(b) rules and form joint task force
Oklahoma’s Insurance Commissioner Glen Mulready has called on the Internal Revenue Service to withdraw its Notice of Proposed Rulemaking (NPR) concerning micro captives and form a joint task force consisting of the IRS, regulators and representatives of the captive insurance industry.
Captive Intelligence reported in April that the IRS had proposed new regulations for “micro captives” at the same time as obsoleting Notice 2016-66, having had it struck down by the courts in March 2022.
The proposed regulations for 831(b) captives have divided opinion across America’s captive landscape, with some saying they could destroy the industry, while others have branded it a refreshing change.
The call from Oklahoma came in a letter to IRS Commissioner Danny Werfel, written by captive regulator Steve Kinion on behald of by Commissioner Mulready, as part of the State’s comments in response to the NPR.
One mission of the task force proposed by Oklahoma would be to enhance the IRS’ knowledge on captives and why they are important for risk transfer.
“Once a level of mutually enhanced knowledge exists, the task force’s next mission will be to consider the feasibility of the NPR’s proposals as those proposals relate to captive insurance,” the letter, penned by Kinion, stated.
Under the Notice, the IRS proposed regulation which would see certain micro-captive transactions deemed “listed transactions” and other micro-captive transactions labelled “transactions of interest”.
The majority of captives that record a loss ratio under 65% would be considered a “listed transaction”.
The 65% loss ratio calculation and limit has attracted the attention of many across the US captive market since it is not uncommon for captives, whether taking the 831(b) tax election or not, and commercial insurers to perform at or better than that level.
The Oklahoma insurance Department (OID) said it opposes the NPR for the reason that captive insurance transactions, which insure low frequency but high severity risks, will be “needlessly” designated listed transactions or transactions of interest.
“Low frequency risks will very likely fail the 65% loss ratio test applied to the captive insurer’s most recent nine taxable years,” Kinion said.
“Legitimate insurance coverages like terrorism or pandemic risks thankfully have few claims meaning they are low frequency. However, when claims occur, they are severe in dollar amounts.”
Kinion said that captive insurers that insure such risks for legitimate reasons should not be burdened with the administrative and legal expenses associated with being in the category of tax evasion or avoidance by failing the loss ratio test.
The letter noted that Commissioner Mulready is willing and ready to engage with the IRS to find agreeable solutions to the IRS’ concerns with captive insurance.
The comments from the OID follow those provided by the Tennessee Captive Insurance Association (TCIA) last week.
“The IRS should not attempt to impose a 65% loss ratio on micro-captive transactions as only Congress has the authority to impose loss ratios on the insurance industry under the McCarran Ferguson act,” The TCIA said.
The letter also follows comments from The Self-Insurance Institute of America (SIIA), which said the proposals will “severely limit access to captive insurance programs for small- and medium-sized businesses in the US”.
PSI only the start of ESG journey for International SOS captive
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Captive Intelligence provides high-value information, industry analysis, exclusive interviews and business intelligence tools to professionals in the captive insurance market.
Lemonade establishes Bermuda cell to retain windstorm exposure
Lemonade, the technology driven insurance carrier, has established a captive cell in Bermuda, which it plans to utilise in order to retain most of its windstorm exposure.
The cell was formed as part of the company’s reinsurance renewal programme, which Lemonade said was “in good time and on good terms.”
Although windstorm reinsurance capacity was available, Lemonade said the cell structure was determined to offer a materially better cost and benefit profile.
The company has also formed Lemonade Re in the Cayman Islands, where it plans to hold some of its retained risk.
Lemonade is a B Corp that offers renters, homeowners, car, pet, and life insurance and is powered by artificial intelligence and social impact.
The centrepiece of the reinsurance programme is 55% quota share protection, the same level as the expiring coverage, and covers all Lemonade businesses globally.
“It says a great deal when some of the world’s largest and most respected reinsurers choose to stake their capital on the performance of our business,” said Daniel Schreiber, Lemonade co-CEO and cofounder.
“These partners allow us to operate in a very capital light mode and focus our resources on expanding our customer base across all of our products and geographies, while harnessing our technologies to get ever more efficient, and ever better at matching rate to risk.”
The existing reinsurance programme expires at midnight on 30 June 2023, at which time the new programme will go into effect for a standard 12-month term.
Willie Forsythe to retire from IMAC, Kevin Poole retained as consultant
William “Willie” Forsythe will retire as general manager of the Insurance Managers Association of Cayman (IMAC) after nearly 15 years of service to the jurisdiction’s captive insurance industry.
Forsythe has supported the executive committee and has touched every aspect of IMAC, including finance, marketing, fund raising and IMAC events.
He has also played a key role in planning IMACs signature event, the annual Cayman Captive Forum.
IMAC is retaining Kevin Poole as a consultant to assist the Association during the transition period following Willie Forsythe’s retirement.
“Willie has been integral to the growth of IMAC for more than a third of its existence and deserves enormous credit for the success we have had in promoting the Cayman Islands captive insurance industry,” said Lesley Thompson, IMAC Chairperson.
“Professionals across the industry have come to depend on the phrase ‘just call Willie’ to get the information and action we needed and that expertise and reliability will be greatly missed.”
Forsythe relocated to the Cayman Islands as a senior auditor with Coopers & Lybrand in 1981.
After 22 years in senior professional roles with other industry associations and companies, Willie joined IMAC as general manager in 2008.
“Willie’s familiar face, helpful attitude and extensive experience will be missed by everyone at IMAC and throughout the industry,” Thompson added.
“The entire IMAC membership and Cayman captive insurance industry wish Willie the very best in his well-earned retirement and for the extended travels he has planned.”
Connecticut legislation permits captive parametric contracts
Connecticut Governor Ned Lamont has signed Public Act 23-15, legislation designed to strengthen the state’s captive market including new regulation that permits captives to accept and transfer risks through parametric contracts.
The Bill introduces several changes to Connecticut’s captive insurance laws, offering increased support and flexibility for captives, owners, and service providers, which will become effective on 1 October 2023.
“The bill, championed by Commissioner Andrew Mais of the Connecticut Insurance Department (CID), marks a significant milestone in advancing a business-friendly regulatory environment that encourages innovation and supports the growth of captives to provide more options for businesses to manage their risk,” the CID said.
The new legislation allows captives to accept and transfer risks through parametric contracts, providing businesses with a more efficient method to mitigate risks that are challenging to insure through the commercial market.
The CID noted that its “innovative” parametric approach offers businesses coverage for unique and hard-to-place risks.
The Bill also provides greater flexibility to protected cells by enabling them to establish separate accounts to address businesses’ specific insurance needs.
This enhanced structure provides a solution that aligns with the risk management needs of cell participants, while protecting the assets and liabilities within each account.
A third change is the introduction of a certificate of dormancy for captives that have stopped doing business and have no remaining liabilities. A successful application for dormancy means an exemption from paying Connecticut’s minimum premium tax.
This exemption reduces the financial burden during inactive periods, while allowing captives to be easily reactivated when market conditions or insurance needs change.
“With the signing of P.A. 23-15 Connecticut reaffirms its commitment to maintaining a supportive and competitive captive insurance landscape,” said Commissioner Mais.
“The new legislation, combined with the state’s recognized expertise, competence, and innovation, solidifies Connecticut’s position as a premier domicile for captives.”
The new bill builds upon previous legislative changes enacted in 2022, when the state implemented other pro-captive laws.