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Captive sector has strong selling points for future workforce

Richard Cutcher
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The captive insurance sector has a good story to tell graduates and young professionals when they are considering career choices, but the industry must be pro-active, according to members of CICA’s NextGen group.

The Captive Insurance Companies Association (CICA) launched its NextGen initiative in 2019 in an effort to support the career development of new professionals in the industry.

Speaking on the Global Captive Podcast at the Association’s International Conference in March, Bailey Roese, partner at Dentons Bingham Greenebaum LLP, said the sector should be confident in what it can offer to the next generation.

“We think of this question of how we attract and retain new talent as a really intimidating question, a really hard question,” Roese said on GCP #84.

“But I also think we have the answers as an industry if we are just intentional about it. This is a really creative industry. It’s an industry that, it’s people who want to get to “yes”.

“We want to be helpful to our clients, we want to be helpful to one another. And those are the kinds of attributes that are going to lead us to attract new talent, retain new talent.  If we can welcome them in, I think that they will stay.”

Claire Richardson is a captive consultant at Hylant Global Captive Solutions, having attended Butler University where she played an active part in its risk management and insurance (RMI) programme, which included the running of the university’s Bermuda-domiciled captive.

“Continue investing in RMI programmes, or programmes outside of RMI, because we all know that the graduates from those very specific programs are fantastic, but there’s not enough of them to go ahead and fill those holes and gaps that the older generation leaves when they’re retiring in the next five, 10 years,” Richardson said.

“So for the current generation in the industry, continue investing, whether that means funds or time or mentorship opportunities or internship opportunities, really make yourself known. Show up for these students and they will do the same for you.”

Dylan Feringa, assistant vice president in the insurance & specialized industries group at PNC Institutional Asset Management, said he had found CICA’s NextGen group particularly beneficial since joining the industry.

“It helps this next generation coming into this industry really build their network and I think that is a challenging aspect that, as a newer person coming into the captive industry, we see these thousands of people at the conference and don’t know anyone,” he added.

“So having that NextGen group where you know five people out of the thousand. And guess what, those five people know other people and they’re able to make those introductions. So I think that’s one important aspect, of just being able to help build your network.”

Listen to the full discussion with Bailey Roese, Claire Richardson and Dylan Feringa on GCP #84 here, or on any podcast app. Just search for ‘Global Captive Podcast’ and hit subscribe.

Captives are no longer an ‘alternative market’ – Paul Phillips

Richard Cutcher
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Captives are no longer an ‘alternative market’ – Paul Phillips

Captives should no longer be considered an ‘alternative market’, with the volume of premium and assets under management carried by self-insurance subsidiaries demanding they be viewed as a market in their own right, according to Paul Phillips, partner and global captive network co-leader at EY.

Speaking on a GCP Short with Lisa Wall, executive vice president and risk finance practice leader at Lockton, Phillips discussed the growing prevalence and sophistication of captives, pushing the envelope further with clients and how they may be used to insure ESG-related risks.

“One of the things I’ve been saying on my stump speeches is captives are no longer an alternative market,” Phillips said. “They are in their own right, a market.”

According to data collected by Captive Intelligence, there is more than $100bn in premium written through captives domiciled in the United States alone, while it is estimated 90% of the Fortune 500 own at least one captive insurance company.

Phillips said he is seeing captive owners increasingly explore and push the boundaries of the types of risks they insure through a captive.

“There’s no doubt that we’re seeing new product getting deployed into captives routinely, no doubt that people are becoming more creative around what types of business risks may be insurable, that they can drop into their captive,” he explained.

“Part of that was driven due to the state’s adopting new laws, part of that was driven due to federal tax court cases going in favour of the taxpayer. And the biggest part of that is driven by the hard market and the CFOs looking for alternatives, not to use the same word, but looking for alternatives on ways to finance the risk.”

Lockton, although not a captive manager, does provide risk financing and captive consulting to clients and Lisa Wall said the number of strategic reviews of captives her team have been requested to do has “taken a sharp increase” over the past three years.

“I think it might have been some of the retrenching after Covid, just coming up with what is the best thing for our organisation now in light of where we are,” she said.

“It’s definitely been hard market driven too, but I think it is this view of ‘we’ve got this captive, what else can we do? Can we make it something more and is it going to be more valuable for us?’”

Third party risk continues to be a significant topic in captive circles, with an increasing number of companies keen to explore if they can use their established captive to provide consumer, warranty or affinity types insurances to their customers, contractors or suppliers.

Phillips said this remains industry specific, with some lending themselves more to the opportunity of participating in third party risk programmes.

“In different sectors we do see people who are looking for different revenue streams and seeking opportunities to expand out to third party coverage and basically open their own insurance company,” he added.

“In other sectors, not so much. Other sectors are more conservative, looking at only the first party risk. They’re not very interested in true third-party acceptance of outside risk.”

Wall said entering third party risk programmes does require careful consideration from the captive owner because it can change the profile and purpose of the captive.

“We start every discussion with what are the opportunities here? And put it in the buckets; third party, first party,” she added.

“And if there is a natural fit for the industry sector, then that’s the initial conversation. Is this something that you want to get in to? Is this a business risk?

“Because you’re underwriting. You’re trying to determine is this the appropriate risk that we should take and do we know enough about it to do it? I think it’s just more in the industry sectors where it hits that it is an active conversation.”

You can listen to the full discussion between Richard, Paul and Lisa on the Global Captive Podcast here, or on any podcast app. Just search for ‘Global Captive Podcast’ and hit subscribe.

Coke’s Stacy Apter looking for insurance evolution, role for capital market platforms

Richard Cutcher
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Coke’s Stacy Apter looking for insurance evolution, role for capital market platforms
  • Coca-Cola treasurer Stacy Apter speaks exclusively on the Global Captive Podcast about risk financing philosophy and captive strategy
  • Hard market prompted company to re-assess how it deploys captive balance sheet
  • Keen to see insurance market move to a more portfolio approach to underwriting
  • Role for capital markets and platforms in bringing insured and investors closer together

The hard market has led the Coca-Cola Company to lean further on its captive with treasurer Stacy Apter keen to see a move towards a more portfolio-based approach to risk transfer, from both the commercial insurance and capital markets.

Speaking in an extensive interview on the Global Captive Podcast Apter, vice president and corporate treasurer at the Coca-Cola Company, sets out the beverage giant’s risk financing philosophy and how it has evolved over the past five years.

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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.

GCP #86: Stacy Apter, Coca-Cola’s corporate treasurer, on captive strategy and the future of insurance

Richard Cutcher
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GCP #86: Stacy Apter, Coca-Cola’s corporate treasurer, on captive strategy and the future of insurance
Stacy Apter, Coca-Cola Company
Jason Flaxbeard, Brown & Brown

In episode 86 of the Global Captive Podcast, supported by the EY Global Captive Network, Richard sits down with Stacy Apter, vice president and corporate treasurer at the Coca-Cola Company, while visiting Atlanta, Geogia for RISKWORLD.

Stacy is known to many in the captive market from the various roles she has held at Coke since joining in 2005, which included risk and insurance and global benefits positions, and gives her an incredibly rounded outlook on how the risk, insurance and captive market can be utilised most effectively to support Coke’s financial and business goals.

We are also joined by Jason Flaxbeard, of Brown & Brown, a familiar voice for regular listeners to the pod, and who works closely with Stacy and Coke’s risk and insurance team on their captive programme.

Stacy and Jason talk in depth about the philosophy driving Coca-Cola’s captive strategy, and how they want to see the insurance market evolving further.

To stay up to date with all news, analysis and thought leadership on the global captive market, sign up to our twice-weekly newsletter here.

Vermont governor signs new captive legislation, increases funding

Luke Harrison
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Governor Phil Scott has signed Bill H.76 into law, which actions several updates to Vermont’s captive legislation, including refining the confidentiality of company information and increasing funding for the Vermont Captive Insurance Division.

The Bill was signed into law on 8 May.

“Vermont continues to be the worldwide leader in the captive insurance market, and this bill makes additional steps to enhance our strong reputation,” Scott said.

“The hard work of the Vermont Department of Financial Regulation (DFR) and their partnerships in the industry ensure Vermont continues to see the significant economic benefits that come with our leadership in this sector.”

The legislation aims to align the statute with the information collected when a new company applies for a licence.

It also updates the language for how the confidentiality of information collected is handled, extending such treatment to subsequent updates, approved amendments or revisions to a company’s information, and its plan of operation.

Other sections of the Bill include updates to references, the allowance of electronic records as an acceptable form of record retention, and amends protected cell naming conventions to be inclusive of all allowable business type.

The legislation also included support for funding for the DFR captive insurance division to enable sustainable regulatory staffing and adequate resources to improve the environment captive insurance companies operate.

“Vermont is the gold standard when it comes to captive insurance regulation,” said Vermont deputy commissioner of captive insurance, Sandy Bigglestone.

“Captive owners have consistently communicated the need to operate in a jurisdiction with quality regulation because it adds value to their investment in managing their own risk and provides support for the captive operations of the organization.”

Vermont licensed 41 new captives in 2022 as it continues to benefit from a boom in captive business, largely driven by the hard insurance market.

There is more than $194bn in assets under management within the 639 captives domiciled in the state at the end of 2022, which write $30bn in annual premium.

Product recall a challenging line for captives, but interest increases

Luke Harrison
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Product recall a challenging line for captives, but interest increases
  • Product recall is split between food & beverage, automotive suppliers and pharmaceuticals
  • In Germany in 2019 3.6m new cars were registered, while close to 3.2m cars were subject to recall
  • Electric vehicle trend expected to increase demand for product recall insurance
  • AstraZeneca’s long-term captive utilisation protected it from pricing surge during pandemic

The current utilisation of captives in the product recall market is infrequent, but the interest in putting the coverage in captives is increasing, particularly in the automotive space.

One of the main reasons for the lack of captives writing product recall in the UK is the current competitiveness of the domestic recall market, which usually does not inspire many new captive formations.

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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.

Artex acquires Dublin-based Allied Risk Management

Richard Cutcher
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Artex acquires Dublin-based Allied Risk Management

Artex Risk Solutions, owned by Arthur J. Gallagher & Co, has completed the acquisition of the Irish independent captive manager Allied Risk Management.

Artex, which already has significant presence in Guernsey, Malta and Gibraltar in Europe’s captive market, now adds Ireland to its domicile options.

Captive Intelligence understands Allied has seven captives under management, while it also offers actuarial and underwriting services.

Frank Coyle, who runs Allied, and his team will remain in place and report to Paul Eaton, who was appointed CEO of Artex International in January.

“Allied Risk is a highly respected company that will enhance Artex’s insurance management and actuarial capabilities,” said J. Patrick Gallagher, Jr, chairman, president and CEO of AJG.

“I am very pleased to welcome Frank and his associates to our growing, global team.”

Allied Risk Management’s future had been left uncertain since CBL Corporation, a New Zealand-based credit surety provider and financial risk insurer, which bought 40% of Allied in 2017, went into liquidation in February 2018.

Captive Intelligence understands several captive managers and brokers had been interested in a deal for Allied Risk Management, with Robus Group owners Ardonagh among those who had previously explored a deal.

Insurance fund established to protect journalists from strategic lawsuits

Luke Harrison
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The United States Agency for International Development (USAID) has launched Reporters Shield, an insurance fund to protect journalists from strategic lawsuits, using a captive solution provided by law firm Primmer Piper Eggleston & Cramer.

Vermont-based Primmer Piper Eggleston & Cramer provided pro bono legal support for the formation of the non-profit insurance fund.

Through its captive insurance management department, Primmer was able to design and form a captive solution that helped make Reporters Shield a reality.

Jesse Crary, shareholder with Primmer, who donated his time to the formation of Reporters Shield, said: “Reporters Shield will hopefully have a large impact on the way that stories get reported, and how we can create safe spaces for journalists to report on what they are actually seeing.

“The existence of this captive can have global impact. I am proud to have provided my skills and expertise to assist in its formation.”

Reporters Shield has been established to support journalists to fight back when they are challenged by “repressive governments” by providing insurance and the legal protection.

“Right now, around the world, there are more than 500 journalists who are in detention of some kind,” said Samantha Power, the Administrator of USAID.

“Just in the last year, 67 journalists have been killed while doing their work.

The fund will operate on a membership basis, accepting applications from outlets and organisations from North America, South America, Europe and Central Asia to start.

USAID is contributing up to $9m in seed funding for the programme to support non-US media, while private donor contributions fund the programme to support US media.

GCP Short: Have captives grown out of the ‘alternative market’ label?

Richard Cutcher
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Paul Phillips, EY
Lisa Wall, Lockton

In this GCP Short, produced in partnership with EY’s Global Captive Network, Richard is joined by Paul Phillips, Partner and Global Captive Network Co-Leader at EY, and Lisa Wall, Executive Vice President and Risk Finance Practice Leader at Lockton, for a fascinating 18-minute conversation.

Recorded at the CICA International Conference in Palm Springs, in Marsh, Richard, Paul and Lisa debate whether the power of captives remain undervalued, if they should no longer be considered the ‘alternative market’ as they become more mainstream, how to push the envelope further with captive owners and what role self-insurance vehicles have in insuring ESG-related risks.

For more information on EY’s Global Captive Network and services, visit their Friend of the Podcast page here.

Airbnb fined for acting as an unauthorised insurer in Washington State

Richard Cutcher
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0
Airbnb fined for acting as an unauthorised insurer in Washington State

Airbnb is the latest corporate victim of Washington State’s Insurance Commissioner, Mike Kreidler, who has fined the technology company $20,000 for acting as an unauthorised insurer in Washington state.

The enforcement action, which also requires Airbnb to secure a surplus lines policy through a broker licensed in Washington by August 5, 2023, is in relation to the home-sharing platform’s Host Damage Protection (HDP) programme.

“Kreidler’s office opened its investigation based on the HDP program, which advertised $1 million in coverage for damages caused by a guest,” the regulator said in a statement.

“It was included with each booking as part of the company’s AirCover program, provided under a general liability policy with hosts covered as insureds.”

The Office of the Insurance Commissioner (OIC) initially issued a Cease and Desist order on Airbnb on 7 February, ordering it to immediately cease from:

“(i) engaging in or transacting the unauthorized business of insurance in the state of Washington, (ii) seeking, pursuing, or obtaining any insurance or service contract business in the state of Washington, and (iii) soliciting Washington residents to induce them to purchase any travel insurance contract.”

Due to the complexity of the matter, the order was stayed on 15 February, effective from 6 February, with the OIC and Airbnb agreeing to “fully resolve this matter by entering into a compromise resolution”.

As part of the agreement with the OIC, Airbnb will now require its surplus lines broker that Washington State be treated as Airbnb’s “home state” for the policy “and will receive surplus lines premium tax on 100% of the Policy’s premium”. This will only be the case for hosts located in Washington State.

It is not stated whether Airbnb’s Hawaii-domiciled captive, Launa Insurance Company, Inc, is directly implicated in the rules breach, but it does play a role in some of the insurance programmes offered to hosts and users of the platform.

“We have a wholly-owned captive insurance subsidiary to manage the financial exposure related to our Host and Experiences liability insurance programs along with certain corporate insurance programs,” Airbnb said in a February SEC filing.

“Our captive insurance subsidiary is a party to certain reinsurance and indemnification arrangements that transfer a portion of the risk from our insurance providers to the captive insurance subsidiary, which could require us to pay out material amounts that may be in excess of our insurance reserves.”

As well as the captive, Airbnb also operates its own US insurance agency.

Kreidler became well known to the captive insurance industry in 2018 when he began targeting self-insurance subsidiaries owned by Washington-headquartered businesses, accusing them of being unauthorised thus insuring risk in the state illegally.

Microsoft, Costco, Alaska Airlines and Starbucks were among those corporates caught up in enforcement action before a legislative fix was landed upon in 2021.

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