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Renewables sector embracing cell captive solutions

Luke Harrison
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<strong>Renewables sector embracing cell captive solutions</strong>

There has been a rise in the utilisation of protected cells in the renewables market due to the accessibility for smaller players and a challenging market environment.

As with many in the commercial market, the renewables sector has faced pricing and coverage challenges despite a rising appetitie from (re)insurers to underwrite the associated risks.

“There has definitely been an uptick in the use of protected cells, particularly given it’s a much easier entry point for many of the smaller players, as they can get involved and share some of that expense, while still getting the bulk of the benefit,” Michael Kolodner, global renewable energy & US power leader at Marsh, told Captive Intelligence.

“There’s a lot of existing single parent captives at the high end of the maturity scale. There are also a number of group captives that already existed.”

Energy Insurance Services (EIS) owns and manages a sponsored captive in South Carolina which members of Energy Insurance Mutual (EIM) can access.

Megan Ogden, chief operating officer of EIS, said in an upcomoing Global Captive Podcast episode that they were increasingly seeing renewable projects and infrastructure insured by their members using the cell facility.

“We have seen a big upswing in coverage for renewable projects in the last 12 months in EIS,” Ogden said.

“There are several risks factors including construction risks, regulatory risks, technological risks, operational risks and environmental risks that are participants need to address.

“While the commercial market is currently offering a more consistent approach to renewables in both capacity and pricing, a captive or cell is a very valuable alternative risk management and financing tool.”

Kolodner highlighted how captives are particularly useful in the renewables market as there is a high amount of dismemberment and specification within the class.

“If you are an oil and gas major, the marketplace for your risk is different than if you are an independent developer simply looking for insurance for a solar facility,” he said.

“So, the market is segmented and specialised, and renewables can be a hyper specialisation within the broader space, or it can be just another asset.

“And this is where captives actually help bridge this gap quite significantly.”

The most mature players in the renewables market are ultimately using their captives to control the different market access challenges.

Kolodner added: “So, if you run everything into your captive and then you approach the market, on a wholesale basis, you’ve got the ability to go with a more diversified portfolio than if you’re bringing individual projects to the market to the renewables only market in a particular region.”

Captive Intelligence will be publishing a Long Read on captives in the renewables sector on Thursday, 16 February.

Are ERISA benefits back in fashion for captives?

Luke Harrison
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Are ERISA benefits back in fashion for captives?
  • “Several” captive applications in to the Department of Labor
  • Applicants undeterred by expected lead time and administration, but cost-effectiveness questioned
  • Uncertainty whether the expedited process (ExPro) may return
  • Further changes to exemption process have been touted by the DoL

After a gap of four and a half years between successful captive exemption applications to the Department of Labor (DoL), the 2022 achievements of Phillips 66 and Comcast is laying the path for further employee benefits activity in the United States.

Bursting the flood gates is too strong a term to describe the increase of interest in a notoriously admin-heavy process, but consultants and (some) clients are bullish about their desire to reinsure employee benefits under the United States’ Employee Retirement Income Security Act (ERISA) into their captive.

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Stonefort Friend of the Pod

Richard Cutcher
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Stonefort Group stands as one of the largest and most successful insurance, reinsurance, and captive management businesses in Luxembourg. Established in 2000 and with an excellent A.M. Best A- rating, Stonefort Group provides bespoke B2B solutions to those seeking advanced alternative risk management solutions. Entrepreneurship is built on trust and principles, and mastering risk management is essential. Stonefort Group’s underwriting philosophy and risk appetite places the effective management of risk at the core of its risk selection process. 

Based in Luxembourg, a center of excellence for insurance and reinsurance, and the top European captive domicile, the Group comprises of three integrated business units – Stonefort Insurance, Stonefort Reinsurance, and Stonefort Captive Management – enabling it to offer a comprehensive one-stop-shop experience for a broad range of risk exposures and business activities worldwide. 

The importance of a reliable and financially sound insurance partner has never been more critical, and Stonefort Group has the independence, credentials, experience, and financial strength to be the trusted partner of choice. 

With regards to Stonefort Captive Management, it is a fully independent provider for captive management services, offering also strategic advice and guidance, as well as extensive support for clients’ needs throughout the entire duration of their business cycle. Our expertise and our business units’ integration allow us to provide clients with upper-class services to optimize operational efficiency and cost reduction, while also promoting robustness against market volatility. At the same time, our solutions ensure that the model upholds good governance and duty of care, as well as adheres to corporate social responsibility. By entrusting us with their needs, clients can rest assured that their risks are in safe and sound hands. 

At Stonefort, we understand that captive management is a complex endeavor, and our clients need to be assured that their requirements are properly met. That is why our team is dedicated to providing the very best in terms of specialized advice and support, with an emphasis on ensuring that clients receive the solutions they need. With our assistance, clients can expect a captive management process that is tailored to their individual needs, while offering the highest levels of protection.

KEY CONTACTS

John Morrey

Group Chief Executive Officer

john.morrey@stonefort.com

fabrice volkaerts

Group Chief Operating Officer fabrice.volkaerts@stonefort.com

bertrand gilson

Client Relationship Manager

Bertrand.gilson@stonefort.com

STONEFORT ON THE GLOBAL CAPTIVE PODCAST

Sonepar captive second to sign up to UN’s principles for sustainable insurance

Richard Cutcher
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Sonepar captive second to sign up to UN’s principles for sustainable insurance

Switzerland-domiciled Sonepar International Re is the second captive to become a signatory of the United Nations’ Principles for Sustainable Insurance (PSI).

The UNI PSI serves as a global framework for the insurance industry to address environmental, social and governance risks and opportunities.

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.”

Captive Intelligence reported in December that Enel Insurance had been the first captive to sign up to the PSI, and more were expected to follow.

Speaking exclusively to Captive Intelligence in GCP #76, Antonio Nervini, head of insurance in the Netherlands at Enel, explained why and how they had become the first captive signatory of the PSI.

Nervini said one of the motivations to become a signatory was to lead the way and he now hoped other captives will follow suit.

“We understood that it was time for us to step in and take the lead and try to advocate for sustainable insurance,” he said.

“It’s time for captives to join the PSI. It’s time to take action. So we would like to think that others will come soon. This is our main goal, to invite others to join us.”

HDI appoints Jason Tyng as its first US captive leader

Luke Harrison
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HDI appoints Jason Tyng as its first US captive leader

Jason Tyng has joined HDI Global in the newly created role of lead of US Captive Solutions at the multinational industrial insurer.

HDI Global, which already has strong captive expertise in Europe, said that the appointment was in response to the importance of the American market to its captive solutions business.

Tyng joins HDI Global from Amazon, where he recently served as head of construction risk, handling placements of both international and domestic programs, and brings more than than 15 years of sales and leadership experience in commercial insurance.

“As a Captive partner, our goal is to provide holistic, long- term management across multiple lines of business, be it property, liability, marine or cyber,” Tyng said.

“Our clients often conduct international business. With us, they have the knowledge and confidence to choose a risk management team that will work with them to find the best solution that fits their organization in the long term.”

HDI Global’s Captive Services, in the last three years, has had a Compound Annual Growth Rate (CAGR) of ceded premiums to captives averaging 26%.

Dr Thomas Kuhnt, member of the board of HDI Global SE responsible for Captive services, said: “While in Europe we are already a leading captive player, building up our presence in the US with Jason is part of our global growth strategy.

“For us, it is crucial to stay close to our clients and build on local expertise to understand their needs. We can then help our clients in finding the most suitable traditional or non-traditional solutions for risks that the classical insurance market struggles to cover.”

Sixty-two new captives for North Carolina in 2022

Luke Harrison
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The North Carolina Department of Insurance (NCDOI) licensed 62 new captives in 2022, while more than 100 cells and series were also approved.

The licences were a combination of new formations and the transfer of existing captive insurers to North Carolina from other captive domiciles.

A variety of industries are represented in the new cohort of captive owners, including healthcare, construction, financial services and insurance.

Mike Causey, North Carolina Insurance Commissioner, said: “We are excited by the continued success of our captive programme here in North Carolina as we approach the 10th anniversary of the passage of the Captive Insurance Act in 2013.

“Our programme’s growth is fuelled by helping meet the risk management needs of captive owners and members with business-friendly regulation and a focus on professional, responsive customer service.”

There was a total of 1,024 risk bearing captives under the regulation of the NCDOI as of 31 December 2022, comprised of 294 captive insurance companies and 730 cells and series. These numbers include conditional licences and approvals.

Of the 294 active captives at year-end 2022, 215 are pure captives, 51 protected cell captives, 10 risk retention groups and 18 special purpose captive insurers.

The department said that all indications signify that 2023 will be another year of growth for North Carolina’s captive industry as companies of all sizes “seek increased flexibility and lower costs while managing their risk profiles in the hardening market”.

Alabama’s Arsenal Insurance Management petitions for bankruptcy

Richard Cutcher
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Alabama’s Arsenal Insurance Management petitions for bankruptcy

Arsenal Insurance Management, LLC, an Alabama-based captive manager, has petitioned for bankruptcy in the District of Delaware’s Bankruptcy Court.

Arsenal, formerly owned by TaylorChandler, was rebranded in 2015 and had a presence in multiple US domiciles including Vermont, Texas, Georgia and Tennessee.

Arsenal Intermediate Holdings, LLC and Arsenal Health, LLC have also filed for Chapter 11 bankruptcy.

The captive manager was particularly focused on forming and managing smaller captives making the 831(b) tax election, a section of the market that has come under increasing scrutiny from the Internal Revenue Service over the past 10 years and seen captive managers facing portfolio-wide audits.

Arsenal has previously been nominated and won industry awards, but in 2020 lost a lawsuit  brought by Christopher Jarvis, former owner of Jade Risk, which TaylorChandler had bought for $3m to merge with Arsenal in 2016.

Arsenal is now owned by BR Intermediate Holdings, which has acquired several captive and insurance related businesses in recent years.

DoL process improving for ERISA benefits captive exemption

Luke Harrison
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DoL process improving for ERISA benefits captive exemption

Momentum appears to have returned to the application process for companies wanting to use their captive to reinsure employee benefits under the United States’ Employee Retirement Income Security Act (ERISA).

While using a captive to reinsure international employee benefits is becoming increasingly common, in the US approval is required to include covers such as life and accidental death and dismemberment.

Companies must also use a US-domiciled captive to reinsure the fronting partner.

The Department of Labor (DoL), which is responsible for administering and approving ERISA exemptions, had been beset with a high rate of staff turnover during President Donald Trump’s 2017 – 2021 administration, but two approvals in 2022 suggests a more efficient system is returning.

Captive Intelligence is aware of at least one company that gave up on an ERISA application for their captive during this period, but Phillips 66 and Comcast Corporation both achieved final approvals in early 2022.

“There’s a couple of companies we’re working with now who’ve got applications in with the DoL and there’s traction,” said Paul McNiff, global pensions & employee benefits consultant at WTW.

“They’re also answering questions and there’s activity as opposed to nothing, so it’s a positive outlook.”

During President Trump’s administration there were four different heads of the DoL, which caused significant disruption and made the application process more challenging.

Prior to Comcast and Phillips 66’s successful applications, the last approval was for Hyatt Hotels in 2017.

Hyatt was also able to make use of the ExPro regime, which allows the applicant to cite a previous “substantially similar transaction” to expedite the exemption request.

It remains to be seen whether the ExPro regime will be brought back, although there is hope that the Phillips 66 and Comcast exemptions could be used as part of future applications.

Sources highlighted a renewed sense of optimism for others wanting to go through the process, but McNiff said companies would likely still need around 12 months to get the exemption from the DoL if ExPro is not available.

“This means you’re going to have the project sitting on your list for a 12-month period, and there’ll be times when there’s a lot of work to do and there’ll be times when it goes quiet, and not everyone wants to sign up for that,” McNiff said.

“However, for some companies, the potential savings will be too high to ignore.”

Captive Intelligence will publish a long read on the pros and cons of seeking Department of Labor approval to write ERISA benefits on Thursday, 2 February.

Charbonnier adds APAC and facultative underwriting in new role

Richard Cutcher
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Charbonnier adds APAC and facultative underwriting in new role

Marine Charbonnier has taken on a new role as head of captives and facultative underwriting for APAC & Europe at AXA XL.

Charbonnier, a respected captive practitioner in Continental Europe, was previously global programmes & captives regional director for Europe at AXA XL. She first joined AXA in 2013 as head of risk financing solutions.

In her new role, Charbonnier will lead AXA XL’s captive business for the APAC & Europe business unit. She will also be responsible for implementing AXA XL’s outwards facultative underwriting strategy for the APAC & Europe business unit, supporting local underwriters.

“Interest in captives has risen sharply over the last three years, with our clients either owning, growing or looking to open a captive,” said Etienne Champion, chief underwriting officer for APAC & Europe at AXA XL.

“They are a strategic risk management tool for our clients and an area of growth for our business.”

The hard market of the past three years has increased captive activity in Europe and Asia Pacific, while new French captive legislation passed in December 2022 is expected to lead to an increased number of feasibility and formation projects in France in 2023.

“Marine is a seasoned insurance professional with extensive knowledge in captive management,” Champion added.

“She is recognised for her expertise in Europe and beyond, and expanding her role to APAC means our Asia and Australia clients will benefit from additional resources and capabilities for managing their complex risks.”

NED programme to provide “fresh blood” to Guernsey boards

Luke Harrison
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The Non-Executive Director (NED) Development Programme in Guernsey will help to offer “fresh blood” to the jurisdiction’s director community, including for captive boards, according to Nick Wild, founding member and honorary secretary of Sagacious Group.

“We always need to have some sort of fresh blood in the area,” Wild said.

The NED programme is an initiative from the GTA University Centre that introduces potential new non-executive directors to board environments, as a means of providing knowledge and experience as a non-executive director.

“It also lets them see whether this is actually something that they want to do in the future,” Wild said.

Wild, who has had long career in captive management in Guernsey with JLT and International Risk Management Group, highlighted how a lot of current board members in Guernsey are retired from banking, accounting, legal firms, or the insurance sector itself.

“There’s only so long they can continue to serve,” he added. “Some of them have substantial numbers of directorships, so they’re going to have to relinquish those at some point.”

In Guernsey, a captive insurer is required to have at least one independent non-executive director.

In December 2022, a GCP Short featuring Zurich’s Paul Wöhrmann, two captive owners and serving NEDs in Guernsey, Luxembourg and Switzerland outlined the value of outside board directors and what makes an effective one.

In that discussion Malcolm Cutts-Watson recognised that the appointments and recruitment of them is becoming more professional and thorough.

“What I’m seeing now is a move to a more professional way of recruiting outside directors and I would say it’s a transparent and objective process that is defensible so that if you are challenged you can demonstrate why you have appointed a particular candidate,” Cutts-Watson said.

Wild also noted the business environment is changing, and how some of the long-standing directors have found this difficult.

“With what’s happened with Covid in terms of changing the way businesses interact and boards work together, some of the longer standing directors have found that quite challenging,” he said.

Wild noted that he mentored two people through a full year of the process last year, and that he has another two in 2023.

The people Wild mentored last year were placed on two different insurance boards, resulting in “two very different outcomes”.

“One absolutely loved it, and indeed the client really liked them,” he said. “And we’ve now moved to appoint that individual as an alternate director on the board.”

Wild said the other candidate looked at the role for 12 months and decided that it wasn’t something they felt comfortable with and as a result, decided to take a different path with their career.

“I’m happy with both of those outcomes because the individual who was unsure about it all has not put themselves in a difficult position taking on a directorship role that they didn’t feel comfortable with,” Wild added.

For more information on the NED Development Programme, click here.

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