In episode 81 of the Global Captive Podcast, Richard is joined by guest co-host Emma Sansom, group head of captives at Zurich, who discusses her priorities in the new role, their view on D&O in captives and Zurich is supporting more cyber captive programmes.
There is also an interview with Megan Ogden, chief operating officer at Energy Insurance Services, a sponsored captive in South Carolina which provides cell facilities to members of Energy Insurance Mutual.
Both interviews reference a recent Long Read on Captive Intelligence about renewable energy companies and their interest in utilising captives. Read it here.
Esme Gould will be Zurich UK’s new head of captives, effective from 1 April, leading a team of six captive underwriters to develop and grow new and existing captive programmes.
Esme Gould, Zurich UK
Gould’s appointment follows Emma Sansom’s move into Zurich’s group head of captives position at the start of the year.
Bernadette Hackett, Zurich’s head of customer and distribution management, said: “Esme is a talented leader, and brings with her deep insight and knowledge of our business and the market.
“She was the outstanding candidate to lead our captives business in the UK. Her appointment reflects the strength and diversity of our internal talent pool.”
Gould is currently head of heavy industry in Zurich’s energy, marine and construction team.
She has also held a number of energy underwriting positions with Zurich since joining the company in 2014.
“I’m thrilled to take on this role at such an exciting time for the captive industry,” Gould said.
“We see lots of opportunities for businesses to establish and manage captives in innovative and cost-effective ways. I’m looking forward to exploring these opportunities with new and existing customers, and our distribution networks.”
Promethean Risk Solutions has been formed by industry veterans Kirk Watkins and Michael Zuckerman, focusing on building and consulting on voluntary employee benefits and other third party risk programmes.
Promethean’s model does not require its clients to have a captive or to join a group captive programme, with Promethean utilising its own captive, FairShare, to reinsure the risk and return 100% of the net profits to the customer.
“We are excited to introduce Promethean’s fresh take on voluntary benefits, our unique approach not only generates additional profits for organisations but enriches the lives of employees, tenants, students, alumni, customers, and other stakeholders,” said Watkins.
“We work directly with brokers, captive managers, H.R. professionals, or captive owners. Whether or not an organisation owns a captive, they can still participate in this impactful and profitable programme.”
For insureds with an existing captive, Promethean can structure the programme to retrocede the risk.
Zuckerman said: “We believe our offerings will be a game-changer. We are excited to help organisations leverage their resources and generate profits/share risks to benefit their stakeholders. It is a win-win offering.”
Zuckerman and Watkins will be supported by a board of advisors made up of former Vermont captive regulator David Provost, Michael Corbett, of Pinnacle Financial Partners, and Courtney Claflin, a CICA board member and head of insurance at Fluid Truck.
The firm’s regulatory and insurance counsel is provided by Benjamin Whitehouse, partner at Butler Snow and a member of its regulatory and government relations practice.
Experienced captive lawyers Joe Holahan and Tony Roehl have joined BakerHostetler from Morris Manning & Martin.
Washington DC-based Holahan and Atlanta-based Roehl are joined by fellow partner Lori Bibb, four associates, a counsel, a paralegal and a legal assistant.
Holahan is a respected lawyer in the captive insurance industry, with experience on formations, mergers and acquisitions, governance and contracting.
“I am thrilled to welcome Joe to the Washington office,” said Jeff Paravano, managing partner of the firm’s Washington office. “Joe’s insurance industry and related transactional and regulatory experience will undoubtedly benefit our clients.”
Roehl is well known for his involvement in the Georgia captive community, including as a founding member and board director of the Georgia Captive Insurance Association.
“The Business Practice Group has been on a tremendous trajectory, adding dozens of talented attorneys over the past year,” said Joann Gallagher Jones, managing partner of the firm’s Atlanta office.
“Tony and Lori share our commitment to excellence, and I am delighted to have them join the Atlanta office.”
In a recent Long Read on Georgia as a captive domicile, he told Captive Intelligence: “The state is an excellent place to do business. And we’re fortunate to have a number of very large and successful companies here in the state.”
Several rising captive professionals have partnered with the Vermont Captive Insurance Association (VCIA) to formalise the Vermont Captive Insurance Emerging Leaders (VCIEL), in a bid to help address the challenge of developing the next generation’s captive workforce.
The group will be a platform not only to recruit students to the industry, but cultivate emerging talent already working in captives.
“VCIA is proud to work with the VCIEL to take strategic actions that yield positive results for the industry,” said VCIA President Kevin Mead.
“We take this workforce challenge seriously and the group is a deliberate way to seek effective solutions.”
Brittany Nevins, a major catalyst for the group and the captive insurance economic development director for the State of Vermont, said: “We are at a critical time in our industry where there’s rapid growth captive formations, while those who are providing services to these companies are retiring faster than those entering the industry.
“We will address this challenge proactively in Vermont with VCIEL.”
Formed under the auspices of VCIA, VCIEL aims to preserve and advance Vermont’s captive domicile status through developing a new and diverse talent base to contribute to the State’s captive community and add value to the industry worldwide.
VCIEL holds regular meetings and welcomes more captive professionals to bolster its group.
It will provide student outreach and networking opportunities, as well as build out a roster of speakers to add fresh energy to the captive conference circuit.
Ian Davis, senior vice president of captive insurance at M&T Bank and a member of VCIEL, said: “Vermont is home to one of the largest networks of experienced and knowledgeable captive insurance professionals in the world.
“VCIEL represents one way to leverage the expertise that exists to promote the state, highlight captive insurance career opportunities, and support future leaders.”
Spring survey shows 42% of employers with medical stop loss cover, self-insure within a captive
Writing MSL in a captive is beneficial for diversifying the portfolio of risk
MSL is commonly written across single parent, group and cell captives
The number of captives writing medical stop loss (MSL) continues to increase substantially, primarily as a result of hard market conditions in the commercial market, as well as the general state of the healthcare landscape in the United States.
Within the US, there is major change happening within the healthcare market, and all parties in the space are being asked to handle risk and chase healthcare dollars.
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As Chief Underwriting Officer at MAXIS GBN, Nicola Fordham leads a team of underwriters who work closely with the MAXIS network of local insurers and multinational clients, overseeing the pricing and underwriting of business included in global programmes. Contact Nicola here.
Nekisha Tyrell, chief underwriter at HSBC’s captive, and I both gave what I would call “a knowing laugh”. And it certainly wasn’t because it was a bad question from Richard, but I think it was the word “easily” that got us.
Medical inflation is one of the biggest topics in the global employee benefits industry and thousands of insurance professionals around the world spend their time studying it to ensure they’re effectively pricing their medical benefits.
I understand that not everyone will be familiar with this topic, so before we delve into the role captives can play in managing medical inflation, let me take the conversation a little bit back to basics.
What is medical inflation?
Simply put, medical inflation is the rise in the cost of medical treatment from one year to the next.
Generally, medical costs rise year on year as treatments get more expensive. New drugs, treatments and technology all help to make healthcare more effective, but that comes at a cost.
And, of course, healthcare isn’t immune to general inflation trends either. Lots of things that contribute to the delivery of healthcare rise in cost every year too, like transport, energy and employee salaries, to name a few examples.
All of these contributing factors play into the final price of treatments and healthcare services and are included in overall medical inflation.
Ultimately, this means that medical inflation tends to outpace general inflation and rises at a faster rate. And just like general inflation, medical inflation can differ significantly country-to-country and region-to-region, making it a substantial challenge for multinationals writing medical insurance in a global programme to keep on top of it.
Medical insurance is also wide-ranging, adding another layer of complexity. Because medical insurance is a more used benefit than something like life or accident insurance, there can be thousands of claims to manage.
These can vary from surgeries and other inpatient procedures for serious conditions, to more common claims like dental, optical and physio that anyone could need anytime.
The increased incidence of these kind of claims makes correctly pricing medical insurance even more important. Correct pricing is crucial on any line of business, but given the thin underwriting margins in medical, the claims frequency and medical inflation, it’s something insurers (and captives) need to get right.
Pricing medical in a captive programme
In recent years, there’s been a growing tendency to write employee benefits lines of business to a captive. This started with more long-tail risks such as life, accident and disability, but recently employers have started to look at using their captive to write medical policies too.
Adding employee benefits has helped captives to offset traditional property and casualty risks with unrelated business, benefit from underwriting profit and influence global employee benefits standards around the world with central governance.
But, as the ultimate risk bearer, it’s important that captives properly understand how to price their medical risks, particularly with medical inflation rates so high.
Insurers use medical trend to project the percentage increase in the cost of their medical policies from one year to the next. Trend works on the assumption that the plan design is exactly the same as the year before and shows the percentage increase on an apples-to-apples basis.
Many of the largest brokers and consultants in the employee benefits space publish their annual trend reports each year – this helps to show the projected rise in cost of treatment in each region and at a global level. And by using these trend rates, captives can more effectively price their medical insurance.
Here’s a rough idea of how to price medical risks.
Review your previous years’ claims.
Adjust the claims cost for past changes (ie, head count changes, has the number of people covered by the policy increased or decreased?)
Adjust the claims cost for changes being made at this renewal (ie, plan changes – are you going to increase cover in some areas, reduce it in others?)
Increase your adjusted claims cost for medical trend. This is likely to be the country trend but could be based on the region, the portfolio or, if there is credible enough data, the group being priced.
Add expenses and any profit margin.
And this pricing method is effective. Employee benefits professionals sometimes worry that including medical will negatively impact a global programme’s overall performance, but it’s possible to underwrite medical policies quite accurately at the global level.
In 2021 the net loss ratio of medical policies included in MAXIS GBN global programmes was 99% and this figure has been consistent over recent years with the exception of 2020. In 2020 there was claims suppression due to the social restrictions in multiple markets because of COVID and this resulted in an improved performance, but this is of course an anomaly.
Controlling medical inflation
So, we know that it is possible to price medical accurately, but now to get to the crux of Richard’s original question “can a captive help employers control medical inflation?”
In short, the answer is yes. Once you’ve predicted your claims cost for the year ahead, you can then begin to explore cost-containment measures. Many of these are around plan design and will depend on the medical portfolio of each captive. Here are some ideas:
Are your people using “out of network” providers? Many insurers will have relationships with preferred providers and claims could be more costly if an insured person is going to a different provider. If your people seem to be going to an out-of-network provider, you could consider bringing that supplier into your network or adding a co-pay (a charge paid by the insured person) for using the out-of-network service.
Is there a trend of using more expensive branded drugs? If there’s a generic alternative that provides the same health outcomes, you could consider adding a co-pay to the branded drug to discourage usage of the more costly brands.
Do you have the correct benefits limits set? Reviewing your limits could be another way to ensure your medical costs aren’t spiralling.
Aside from plan design, health and wellness programmes could be vital for keeping employees healthy and controlling medical inflation. Including medical in a global programme gives employers access to a wealth of medical claims data from around the world.
By analysing medical claims, you can start to build a picture of the overall health of your employee population and assess the conditions that are causing the most costly claims. You could then look at implementing targeted wellness interventions based on these.
For example, if you see increased respiratory and heart conditions in countries where smoking is more prevalent, you could consider a smoking cessation programme.
This is just one example, but in reality, every employer will have a variety of wellness challenges… If you’re not sure where to start, I’d suggest discussing this with your global employee benefits network, broker or consultant!
Writing medical in a captive can be complex, but I hope this shows that medical inflation is something that can be monitored, managed and controlled… just maybe not easily.
Singapore-domiciled Odeon Insurance Re Pte Ltd is the first Asian captive to become a signatory of the United Nations Principles for Sustainable Insurance.
Odeon is owned by International SOS and Franck Baron, group deputy director of risk management and insurance at the healthy and security service firm, said he was “proud” to make the move.
“We commit to help build more resilient, inclusive and sustainable communities and economies,” Baron said in a LinkedIn post.
“By applying the global framework to our business activities, we will be able to better address environmental, social and governance (ESG) risks and opportunities.”
The UNI PSI serves as a global framework for the insurance industry to address environmental, social and governance risks and opportunities.
The Netherlands domiciled captive owned by Italian energy multinational Enel was the first to become a signatory in 2022 with Antonio Nervini, of Enel Insurance N.V., saying it was the “finishing touch” for the captive’s sustainability focus.
Sonepar is an independent family-owned French multinational providing business-to-business distribution of electrical products, solutions and related services. It had sales of €26.4bn in 2021.
François Beaume, vice president for risks and insurance at Sonepar, said: “Being a member of the PSI initiative reinforces our position as a leading pioneer of the energy transition, by leveraging risk management and insurance and operating with complete integrity.”
In the podcast recorded at the European Captive Forum in Luxembourg, Nervini was joined by Aon’s Ciaran Healy and Butch Bacani, the UN’s programme leader for the PSI, who said they expected to see more captives sign up.
“What this is going to do and the work that Enel has done is a proof of concept that a captive actually has a role to play and can do something very positive around sustainability,” Healy said.
“There is a little bit of a myth of ‘well, the captive is small, I can’t do much around it’.
“But when you think about the protection gap, captives can potentially access reinsurance. So we can make that connection between the corporate ESG agenda, and actual issues on the ground. That’s a really important point.
“I would be absolutely certain, especially after listening to this, that we will get a lot more enquiries and a lot more captives signing up to the PSI.”
Hylant is targeting further captive expansion in Europe this year, likely to be built on strategic partnerships in key domiciles such as Guernsey, Luxembourg and Malta.
Anne Marie Towle, CEO of Hylant Global Captive Solutions, and senior consultant Alex Gedge discussed their observations of, and plans for, the European market on a GCP Short episode released on 15 March.
Towle joined Hylant in September 2019 to build its captive practice and hired London-based Gedge in June 2021.
Towle visited London in January, saying on the Global Captive Podcast that raising awareness of the Hylant brand in the United Kingdom and Europe was a focus for the privately held firm this year.
“We call ourselves and we are a global captive practice,” Towle said.
“We work with companies all around the globe and we want to be able to have options all around the globe for our clients. We are, as people would call, domicile neutral.
“We are captive managers, we are captive consultants, and we want to go and be available in the domiciles where our clients need to be, whether it’s for priority reasons, be in their home domicile or other rationale for why people select a domicile.
“Our company is investing in our specialty divisions, which includes Global Captive Solutions, and we have a strategy to expand here in Europe and want to be able to have those domiciles such as a Guernsey, Luxembourg and Malta.”
While Luxembourg and Guernsey have led the way in new formation numbers in recent years, there is also a growing movement for continental European corporates to consider using their home country as a captive domicile.
Gedge said that while such initiatives are welcomed and ultimately good for spreading the captive concept, the established captive centres will remain key locations.
“We’ve done a lot of work speaking to the UK and obviously we’ve seen the Lloyd’s proposition looking at being able to have captives over here in London and there’s a huge amount of potential there,” Gedge said.
“But there is always going be a place for the Malta’s, the Guernsey’s, these specialist areas where you’ve got all the people who know what they’re doing.
“They know how to do captives. They are always ahead of the curve with responding to new changes, things like cell legislation coming in and ILS legislation. These are always going to be leading the curve and there will always be a place for them.”
Hylant has already worked with European companies that have significant American operations on setting up captives in the United States.
“US domiciles are phenomenal with what they do and how they do it,” Towle added.
“There’s a lot of great options in the States, and so people are selecting US domiciles because they’re already subject to US tax.
“You can set up your captive sometimes more cost efficiently in the States than you can here in some of the European domiciles. There have been situations where they want to move quickly and the timetable can be 30 days or less in the US and that can be instrumental.”
Thomas Miller Captive Management will manage the Isle of Man’s first insurance special purpose vehicle (ISPV) after the Financial Services Authority approved a licence for Ilex Global Reinsurance Company ISPV Limited in February.
The jurisdiction has had legislation and regulatory framework in place to facilitate ISPVs since 2015, but to date had not the commercial market had not utilised the structure.
Appleby provided legal advise on the application and formation, which was approved in two and a half days after submission.
SPVs have commonly been used in Bermuda, Guernsey and the Cayman Islands to facilitate insurance linked securities (ILS) transactions such as catastrophe bonds and collateralized reinsurance.
“As the first application for an insurance special purpose vehicle authorisation in the Isle of Man, this was always going to be a complex matter that required expert navigation through a range of novel legal issues,” said Ross Dennett, chairman of Thomas Miller Captive Management.
“Appleby’s support and guidance through the process has been absolutely critical. They are skilled at distilling complex legal/regulatory issues into practical and user-friendly advice, and their responsiveness is first-class.”
Garry Manley, partner at Appleby, said: “We are very proud to have assisted Ilex and the Thomas Miller team on this ground-breaking matter.
“Obtaining the first authorisation of its kind was always going to be a challenge, but we were able to draw on Appleby’s vast knowledge of the global insurance-linked securities market to make the process as efficient as possible for our client.”
Manley described the FSA as “pragmatic and approachable throughout”.
Alan Rowe, senior manager at the Isle of Man Financial Services Authority, said: “The speed of turnaround reflects the applicant’s lead-up preparation, supported by legal advice, and the quality of the completed application.”
