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GCP Short: Nick Hentges on group captive growth, new lines and limits

Richard Cutcher
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GCP Short: Nick Hentges on group captive growth, new lines and limits
Nick Hentges, Captive Resources
Richard Cutcher, Captive Intelligence

In this GCP Short, produced in partnership with ⁠Captive Resources⁠, Richard was delighted to welcome Nick Hentges, CEO of Captive Resources, back onto GCP for an in person catch up at the CICA International Conference in Scottsdale, Arizona, in March.

Nick covered a range of issues, including how the group captives are offering higher limits, a potential expansion into property lines and his wider ambitions for the organisation, particularly in medical stop loss.

For the latest news and analysis on the global captive market, visit ⁠Captive Intelligence.io⁠ and sign up to our⁠ twice-weekly newsletter⁠.

HCIC Friend of the Podcast

Richard Cutcher
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The Hawaii Captive Insurance Council (HCIC), a nonprofit corporation since 1991, is committed to promoting, developing, and maintaining a quality captive insurance industry in the State of Hawaii. In partnership with the State of Hawaii Insurance Division, the HCIC provides information and education on issues affecting captives, and assists the State of Hawaii in promoting Hawaii as a quality captive domicile on the local, national and international level.

Our Mission

Guided by the Aloha spirit, the HCIC unifies and supports captive owners, regulators, legislators and captive service providers. The HCIC advocates on issues and initiatives, educates on current and future issues and communicates this information to its members and prospective members to maintain Hawaii as a world-class captive domicile.

Our Vision

The Hawaii Captive Insurance Council supports Hawaii as a world-class captive domicile. We provide meaningful benefits to our members. Through our efforts, Hawaii is a leading captive domicile of the highest quality, known for its reliable regulatory approach and captive-business friendly environment. Our membership is actively involved and engaged in HCIC’s activities – where business and government work hand-in-hand towards a common goal with unity, shared involvement and responsibility, while surrounded by the natural beauty of Hawaii.

KEY CONTACTS

Paul Shimomoto

President, HCIC

pshimomoto@goodsill.com

Kari Nettel

Project Coordinator, HCIC

nettelkari@gmail.com

Matt Takamine

Director, HCIC

Matt.Takamine@bbrown.com

HAWAII ON THE GLOBAL CAPTIVE PODCAST

SRS to acquire Garnet Captive Insurance Services

Luke Harrison
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SRS to acquire Garnet Captive Insurance Services

Strategic Risk Solutions has agreed to acquire Philadelphia-based Garnet Captive Insurance Services, a firm that partners with retail brokers to implement group captive solutions for clients.

The acquisition is subject to customary regulatory approvals.

“There has been significant growth in the use of group captives, given their ability to help businesses in the middle market to reduce and stabilize the cost of their property and casualty risk,” said Brady Young CEO at SRS.

Brady said Garnet has some unique features to their group captives, and having Garnet as part of SRS enhances the company’s current services and capabilities.

“The expertise, reputation, and high touch approach make the Garnet team a perfect fit for SRS,” he added.

Garnet was founded in 2002 and has created group captive programmes that help employers access self-insurance, while the group captives are member-owned and operated for the benefit of those members.

“We’ve worked hard over the past 22 years to create dynamic programs that reduce the cost of insurance for business owners working side-by-side with their trusted advisors,” said JJ Purdy, president & founder at Garnet.

“SRS brings a broader base of prospective members to our group captives which means more business owners can take advantage of our flexible programs to help reduce costs and control their own risk. SRS’ reputation of being a trusted and dedicated leader in the industry speaks for itself.

“Our value systems align in that we both focus on the needs of our clients and brokerage partners first and strive to deliver best in class service and solutions. Joining forces to continue that endeavour only makes sense.”

In January SRS acquired captive and insurance manager Robus from the Ardonagh Group, strengthening its presence in Guernsey and adding Gibraltar to its list of domicile options.

Lloyd’s “not in a hurry” to form its first captive

Richard Cutcher
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Lloyd’s “not in a hurry” to form its first captive

Lloyd’s of London will not rush its first Captive Syndicate formation and is keen to find the right candidates, according to CEO John Neal.

Lloyd’s has been consulting on reintroducing the Captive Syndicate proposition since 2019, with its latest offering approved by the Council of Lloyd’s in August 2021.

It has been working with prospective captive syndicate applicants since last year but speaking at its annual results media briefing today, Neal said getting the first captive up and running was not high on the priority list.

“As we sit today, the only UK onshore authorised domicile for captives is Lloyd’s,” Neal said.

“All of the analysis that we have done looks at quite a thin wedge of captive markets that ought to be interested in a Lloyd’s proposition, so we are not trying to compete with the other captive domiciles.

“It is trying the find the right constituents that would value the captive structure at Lloyd’s and going through the process diligently and appropriately.

“We think there is a value proposition, but we are not in a hurry to get the first captive off the ground.”

In a GCP Short episode released last year Davies’ Lloyd’s experts Keith Nevett, head of business development, and consultant Bob Stevenson demystified Lloyd’s and how a Captive Syndicate would work.

While the required annual premium volume to make it cost-effective is expected to be around £20m and a £100,000 application fee is significantly more expensive compared to traditional captive domiciles, the benefit of the Lloyd’s licence network could be a pull factor for large corporates with complex international insurance programmes.

“My understanding of what you would be getting if you are setting something up in Guernsey or Bermuda is you are getting your captive licence,” Stevenson said on the podcast.

“Whereas, with Lloyd’s, you’re getting your insurance licence, you’re getting immediate access to the full range of Lloyd’s services. You immediately tap into the rating, you immediately tap into the brand, and there is no ongoing franchise fee.

“On the one hand you are getting a certificate, but you’re not getting much more than that, you’re getting the opportunity to build your platform. Here, you are already tapping into a franchise, you are being plugged into something.”

It is also expected that prospective users of a Lloyd’s Captive Syndicate could do so as part of a multi captive strategy, and potentially using their existing captive to reinsure its Lloyd’s syndicate.

“The Lloyd’s Captive Syndicate is complementary to an existing captive they currently have in the group,” Nevett said in June 2023.

“If those captives within the group are well capitalised, you could leverage those funds to provide the funds at Lloyd’s to support the syndicate.

“In addition, the captive in Bermuda in that example, could reinsure the corporate member in terms of reinsuring the result of the syndicate as such. We believe there’s a number of structures that could facilitate if they have existing captive structures.”

Pool Re members back new reinsurance arrangement

Luke Harrison
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Members of Pool Re, Great Britain’s terrorism reinsurance pool, have backed formal proposals from the Pool Re Board to change the current Pool Re scheme.

Pool Re’s reinsurance covers property damage arising from nuclear, biological, chemical, and radiological attacks (CBRN), as well as property damage arising from cyber-triggered terrorist losses and conventional terrorist acts, and non-damage business interruption.

Any type of insurer, including captives, that cover terrorism risk in the UK can access the Pool Re reinsurance fund.

A significant number of captives, from domiciles including Gibraltar, Guernsey, Isle of Man, Bermuda, Ireland and Vermont, are members of Pool Re.

The proposals to convert its reinsurance arrangements from the current facultative obligatory treaty to an annual aggregate catastrophe excess of loss treaty will take effect in April 2025.

Pool Re said the changes will create the conditions to support members in driving greater take-up of terrorism cover, returning risk to the private market, and further distance the taxpayer from the financial consequences of acts of terrorism.

“Members and HM Treasury have given Pool Re a very clear and exciting mandate to continue Pool Re’s modernising journey,” said, Tom Clementi, Pool Re CEO.

“When Pool Re was founded some 30 years ago, it was never intended to be a permanent, static, and definitive solution.

“Our job was always to correct a market failure, and to provide opportunities for the industry to take more terrorism risk onto its own balance sheet and normalise the market.

“The change to an aggregate catastrophe excess of loss treaty is the best possible outcome for both members and the taxpayer.”

This modernisation is a element of the ‘Scope of Works’ programme agreed by members and HM Treasury following the last review of Pool Re by the government which concluded in March 2022.

The updated scheme will provide members with reinsurance cover that is priced in a more sophisticated and risk-reflective way, while members’ reporting obligations will simplify, with members only required to provide an annual exposure return.

Domicile Wars: Mauritius positioning itself as reinsurance hub as captives rise

Luke Harrison
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Domicile Wars: Mauritius positioning itself as reinsurance hub as captives rise
  • Most Mauritius captive owners have links to Africa
  • New legislation permits pure captives to write third party risk
  • Big focus on anti-money-laundering efforts

Despite being one of the biggest insurance centres in Africa, Mauritius is keen to enhance its reputation as a global financial hub and continue captive expansion in the domicile and recently allowed pure captives to write third party risk.

In order to do this, the jurisdiction is in discussions with the World Bank on a new reinsurance framework that Mauritius hopes will further develop its place on the international stage.

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Everen CEO Bertil Olsson to retire March 2025

Luke Harrison
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Bertil Olsson, the CEO of Bermuda-domiciled energy mutual Everen, is set to retire from his position in March 2025, as the board has declared a dividend of $350m.

The dividend was declared at the company’s board meeting on 19 March, which was followed by its annual general meeting on 21 March, where Olsson broke the news regarding his retirement.

“Whilst my retirement is still a year away, I would like to express what an honour and privilege it has been to lead this amazing organisation over the past 8 and a half years,” Olsson said.

“I am looking forward to the continued work over the coming year with our very talented team and Board of Directors and to transition the business to the next leader upon completion of the succession recruitment process.”

Directors Gwenola Jan, Michele Waters, and Robert Wondolleck are also set to retire.

At the AGM, shareholders voted to approve amendments to Everen’s by-laws and shareholders’ agreement, aimed at enhancing governance and operational flexibility.

Shareholders also elected a new Board of Directors who will serve until the March 2025 AGM. 

The newly elected Board appointed John Weisner as chair of the board and Brian Mullen as deputy chair for 2024.

For the fiscal year 2023, Everen reported a net income of $679.5m, driven by a rebound in the investment portfolio, positive underwriting income and cost management.

“In 2023, Everen performed very well and remained dedicated to advancing Strategic Plan initiatives including our marketing and communication activities and facilitating the use of our coverages through the approval of the use of incorporated cell captives,” said Robert Foskey, senior vice president and COO at Everen.

“The addition of three new members underscores our continued growth, geographic and insured portfolio diversification, and the strong interest from global energy companies to be a part of our world-class energy insurance mutual.”

In March last year, Olsson told Captive Intelligence that Everen is facilitating the global transition to a greener economy by providing an insurance solution to all types of energy companies for both old and new projects.

US commercial brokers keen on captive education, no longer “pushing back”

Luke Harrison
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US commercial brokers keen on captive education, no longer “pushing back”

American commercial brokers are increasingly looking for captive education to avoid losing clients as more businesses demand information and advice on captive utilisation.

Heather McClure, a former captive owner, joined new captive manager and consultant Helio Risk as general counsel and chief risk officer in April 2023.

Speaking on episode 100 of the Global Captive Podcast, she said a lot of the focus has been on building relationships and providing education to brokers who have not previously worked with captives.

“We’ve been doing a lot of education with commercial brokerages and really educating them about captives because their concern is losing their commissions,” McClure said.

McClure said the time has come when commercial brokers “can no longer push back”.

“Years ago, they were only familiar with the commercial market solutions and captives were competitors to them,” she said.

“We’re not beating down their doors,” McClure stressed. “They are coming to us, saying, ‘okay, give us a captive 101, empower us with information and data to present before our clients so that it becomes our idea’.”

She said that if brokers are not able or willing to answer a client’s captive questions, then clients will find their way to Helio or to another captive expert.

“We’ve seen that happen quite a bit, where a client will come to us directly and say, ‘I have been asking my trusted broker that I’ve had for 15 years about captives for the last two years.’”

She said if prospective captive owners do not get the information or answers on captives, they can become irritated and look for alternative broking and captive partners.

“We try to reach out, if we can repair that relationship, fine, but if not, there are many brokers that are willing to shepherd their clients through the captive process.”

McClure said the last few months have been some of the most intense in terms of clients coming to Helio for advice.

“Sometimes directly or sometimes through referrals, when they are having difficulty with the property markets, and we are partnering with brokerages in a way that I could not have really foreseen.”

Artex launches new group captive for US transportation industry

Luke Harrison
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Artex Risk Solutions has launched a new group captive to address risks associated with transportation, trucking for hire, convenience store operators and petroleum marketers in the United States. 

The group captive is a homogenous insurance company that will provide coverage for workers’ compensation, auto liability and auto physical damage.

Artex are the captive consultant and manager for the captive, while claims administration and loss control will be handled by Gallagher Bassett and Carolina Casualty.

“The U.S. transportation industry has experienced pockets of reduced insurance and risk management options in recent years due to labour shortages, supply chain challenges and a distressed insurance market,” said Martin Hughes, executive vice president, specialty risk transfer for Artex in North America.

“The new group captive addresses a need for alternative risk solutions in the space.”

Artex sad the objectives of the captive are to provide participants with the ability to take control of their insurance program through quality claims and loss control services, retain underwriting profits and investment income, and reduce the cost of insurance.

Tennessee licences 25 new captives and 66 cells in 2023

Luke Harrison
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The Tennessee Department of Commerce & Insurance (TDCI) licensed 25 new captives and 66 cells in 2023, taking the total number of risk bearing entities, including cells, in the domicile to 719.

Tennessee currently has 164 active captives and 555 active cells. 

The active captives in the jurisdiction include 97 pure captives and 57 protected cell companies (PCCs), in addition to several risk retention groups (RRGs) and association captives.

Total Gross Written Premium (GWP) increased in 2023 to $2.41bn, up from $2.12bn in 2022.

“In Tennessee, our focus on responsible regulation, our modern captive insurance statute, and our roster of seasoned professionals continues to create a difference for captive domicile managers who might not find that combination when looking elsewhere,” said TDCI Commissioner Carter Lawrence.

“Taken together with our central location and our network of first-in-class service providers, Tennessee continues to prove to the world why we are a first choice when establishing a captive insurance domicile.”

At the end of 2022, Tennessee had 100 pure captives, 411 individual cells and 42 PPCs.

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