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Delaware licenses 43 captives, series and cells, as 110 surrender

Luke Harrison
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The Delaware Department of Insurance licensed 43 new risk bearing entities in 2023, including cells and series captives, compared to 60 in 2022.

Delaware’s year-end total was 670, including cells and series, compared to 737 at the end of 2022.

Of the 43 new captives licensed in Delaware in 2023, 15 are single parent captives, 26 are series captives and two are individual cells.

There were 110 dissolutions in 2023, compared to 90 in 2022.

Of the 670 year-end total, 262 are single parent captives, two are agency captives, one is a risk retention group, 50 are group or association captives, two are industrial insureds, 340 are series captives and 13 are individual cells.

Delaware’s total gross written premium (GWP) for 2023 was $4.3bn, compared to $4.5bn in 2022.

The State’s assets under management (AuM) were $47.8bn in 2023, compared $50.3bn in 2022.

Mary Ellen Moriarty confirmed as new CICA chair

Richard Cutcher
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Mary Ellen Moriarty confirmed as new CICA chair

Mary Ellen Moriarty, vice president for property & casualty at EIIA, is the next chair of the Captive Insurance Companies Association (CICA).

The Association held its board meeting on 13 March, the day after its International Conference, and confirmed Moriarty would succeed Nick Hentges, CEO of Captive Resources.

“The need for the captive insurance vehicle has never been as important as it is today which will continue the rapid growth for CICA and the captive insurance industry,” Moriarty said.

“I look forward to working with my board colleagues and our volunteer leaders to continue CICA’s vital role in providing networking and education to support innovation and best practices to enhance industry growth. And we will continue to raise awareness and advocate for our industry while also being prepared to defend against potential threats.”

Moriarty has worked in insurance for more than 30 years and at EIIA since 2002.

EIIA is a not-for-profit which provides insurance and risk management solutions to more than 150 private, faith-inspired higher education institutions.

Heather McClure, general counsel and chief risk officer at Helio, is now CICA vice chair, while Prabal Lakhanpal, senior vice president at Spring Consulting, will be secretary / treasurer.

Nick Hentges serves as the immediate past chair.

CICA ramps up federal lobbying efforts

Richard Cutcher
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CICA ramps up federal lobbying efforts

The Captive Insurance Companies Association (CICA) has increased its investment in its federal advocacy efforts, according to CICA president Dan Towle.

Speaking at the opening of the International Conference in Scottsdale, Arizona Towle said while the industry is in a continued ‘Golden Age’ it is important not to “rest on our laurels”.

CICA has retained a leading lobbying firm in Washington DC to support these efforts.

“We feel it is important that we are prepared to represent and defend our interests throughout the year and have these resources be readily available,” Towle added.

“It is easy to get excited about the wonderful growth we are seeing in the marketplace, but we must never lose sight of ongoing threats. As our industry grows, we become a larger target for people and entities that don’t understand what captive insurance is and the benefits it provides for companies to better manage their risk.

“Despite our success, we cannot rest on our laurels. We need to continue to be diligent and consistently educate, lobby, and defend the use of captives for better risk management and financial efficiency.”

Towle said the record new numbers of captive formations, the emergence of new domiciles and the broader utilisation of existing captives are all indicators of a period of “continued growth and prosperity”.

“Our members that service and manage captives report year after year of continued record numbers with very little slow-down in sight,” he said.

“On a global perspective, it has been encouraging to see at least half a dozen European countries either becoming a domicile as France did recently or expressing interest in becoming captive domicile.

“This long overdue development clearly signifies the acceptance by these countries’ governments of the validity and valuable business purposes of captive insurance. That is a huge development for their markets.”

Blue Cross Blue Shield of Michigan captive wins CICA award

Richard Cutcher
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Woodward Straits Insurance Company (WSIC), a single-parent captive owned by Blue Cross Blue Shield of Michigan has been recognised with the CICA Outstanding Captive Award at the Association’s conference in Scottsdale, Arizona.

WSIC is domiciled in Michigan and Fred Driscoll, director of risk financing and captive operations at Blue Cross Blue Shield of Michigan, accepted the Award from CICA president Dan Towle.

“The captive increases our flexibility when there is a need for new or unique insurance and reinsurance across the enterprise,” Driscoll said.

“For example, we have written, but have not had to utilize, $5 to $10 million layers across our most important programmes in the event the traditional market is not competitive regarding pricing or terms.”

The CICA Outstanding Captive Award is presented to a captive insurance company or risk retention group that has shown creative uses for a captive, been successful in managing the captive in terms of net results and usefulness to its owners, has prevailed over difficult times or situations and has gained acceptance, recognition, and a positive reputation among rating agencies, regulators and colleagues in the captive industry.

WSIC was also successful is supporting its parent group in keeping physical locations with employee on-site protected during the Covid-19 pandemic.

The captive used a broadly written policy that enabled the organisation to secure reimbursement for part of its cleaning and sanitizing costs through a sub-limit in the policy, placing WSIC in a pool of less than 1% of the broker’s clients that saw reimbursement for similar costs.

Driscoll said he had also been encouraged by the group to share their success as a captive with other health insurers and different sectors.

“For other health insurers, we talked to several, and many have implemented, or will be implementing, the use of a captive in some form to assist with the strategic utilization consistent with their plan’s needs,” he added.

Skip Myers receives CICA Distinguished Service Award

Richard Cutcher
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Skip Myers receives CICA Distinguished Service Award

Captive legal legend Robert ‘Skip’ Myers has been awarded the CICA 2024 Distinguished Service Award by the Captive Insurance Companies Association at its International Conference in Scottsdale, Arizona.

Myers has been heavily involved in the United States captive market for more than 40 years, and played a key role in developments such as the Liability Risk Retention Act and Terrorism Risk Insurance Act.

As senior counsel at Morris, Manning & Martin LLP, where he has worked for 30 years, he has worked closely with the captive industry and captive owners on regulatory legal matters.

Accepting the award, Myers said: “Looking at this large crowd, it takes me back to a time when captives were only a tiny part of the property and casualty insurance business.”

He discussed the introduction of Vermont’s captive law in the early 1980s when the vast majority of captives were domiciled offshore.

Myers reflected on the battle between Vermont and the National Association of Insurance Commissioners (NAIC), which was sceptical of captives and threatened with the fast growing captive domicile with being disaccredited from the NAIC.

Vermont, thankfully for the captive industry, won that battle and the US domestic captive market has grown and the number of domiciles proliferated ever since.

Myers has sat on various captive association boards, including CICA, the National Risk Retention Association (NRRA) and ICCIE.

Descartes sees captive opportunity with launch of French cyber parametric policy

Luke Harrison
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Increasing numbers of captives are realising there is an opportunity to write cyber as part of their captive programme, according to Léopold Larios, cyber director at Descartes Underwriting.

Descartes launched Cyber Shutdown Cover last month, a parametric policy dedicated to cyber risk in France.

“Especially when a company has faced a major cyber loss, often insurers will have a new expectation regarding the deductible and amount that the group will carry,” Larios told Captive Intelligence.

“That’s why more and more captives are using their capacity in order to cover cyber.”

The Cyber Shutdown Cover is designed for small and medium-sized businesses, particularly in manufacturing and retail.

Captive Intelligence published a long read in September examining the potential for more captive involvement in parametric structures, and specialists Descartes believe the time is right for greater adoption.

Descartes is a carrier that has primarily written natural catastrophe related parametric policies across the globe.

Larios said Descartes wanted to identify a clear peril and something that could be seen from the outside and assessed, with the company using encryption as a trigger for a claim.

The policy is triggered when a third-party cyber specialist confirms that a cyber encryption incident has occurred at the insured organisation as part of a ransomware attack.

“Encryption can often be seen both from inside and outside the firm, because the bad guys are proud to highlight on the dark web that they have access to the IT system of the company they have targeted,” Larios said.

“The phenomenon of encryption is a tangible change to the integrity of the information, so encryption is the first parameter that we care about, for triggering cover.”

The second parameter for a claim is a forced shutdown of activity.

“With these two elements, we consider that we have evidence of a real loss suffered by the insured,” Larios said.

To rate the product and set the pay-out levels, Descartes uses financial information about the companies it underwrites, as well as information extracted from a questionnaire, which is designed for use with its model.

“We also apply threat intelligence to provide more information about a company,” Larios said.

Larios told Captive Intelligence that he is currently preparing an analysis for specific assets of a client that wants to involve his captive in the cyber cover that Descartes is underwriting to increase the level of coverage for his subsidiaries.

Captive Intelligence published an article last week highlighting that interest from captives in parametric solutions is increasing, particularly in the property market where insureds are looking at managing rising insurance costs.

NRRA celebrates legislative progress for RRGs in Florida

Richard Cutcher
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NRRA celebrates legislative progress for RRGs in Florida

A Bill containing language drafted by the National Risk Retention Association (NRRA) has been passed by the Florida Legislature and is awaiting signature by the State’s Governor Ron DeSantis.

Captive Intelligence reported extensively last year on the fallout from proposed legislation targeting risk retention groups (RRGs), which NRRA and business owners said would have a devastating impact on RRGs and force trucking companies to close or cease operating in the State.

That legislation ultimately failed to proceed with NRRA launching a fundraising and lobbying campaign to protect the rights of RRGs in Florida and propose legislation that would clarify their position.

NRRA proposed two alternative drafts of bill language, which addressed two Florida statutes defining financial responsibility and foreign RRGs.

Joe Deems, executive director of NRRA, told members in an email update: “While neither of those statutes technically violated the LRRA (Liability Risk Retention Act), the state’s definitions of “authorized insurers” versus “insurers authorized to do business in the state” had been anecdotally used to thwart RRG operations in certain areas, as has been done and continues to be done in many other states.

“So following vigorous opposition by NRRA, after last year’s bill(s) died, we went back to work for this year.”

Tim Sullivan, NRRA chair, said: “With more support to our campaign from all RRGs and other Industry leadership, we are hopeful to have yet another bill to present to the Florida Legislature next year, to continue with our initiatives.”

Hylant partners with Hawaii captive manager, Pacific Risk Solutions

Luke Harrison
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Hylant partners with Hawaii captive manager, Pacific Risk Solutions

Hylant has partnered with Pacific Risk Solutions to enhance its reach with an on-island presence in Hawaii.

Pacific Risk Solutions was one of the first locally based independent captive management firms established in Hawaii and provides management and consulting services in the western United States and the Pacific Rim.

Hylant said the collaboration marks a significant milestone in its strategy to bolster its captive capabilities and service offerings in Hawaii.

“We are thrilled to join forces with Pacific Risk Solutions as we expand our presence in Hawaii,” said Anne Marie Towle, CEO of Global Risk and Captive Solutions at Hylant.

“This partnership underscores our dedication to providing clients nationwide with captive consulting and management services.”

Pacific Risk Solutions has a portfolio of clients encompassing Hawaii, Montana, Oregon, Washington, California, Arizona, Nevada and Texas in the US and internationally in Japan, Guam, Philippines and Micronesia.

“Anne Marie and I have known each other for over 20 years and cultivated a strong relationship built on trust and integrity,” said Tony Schmidt, founder of Pacific Risk Solutions.

“We are excited to embark on this journey together and deliver unparalleled value to our clients.”

Regulatory concessions under Solvency II for “small and non-complex undertakings”

Richard Cutcher
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Regulatory concessions under Solvency II for “small and non-complex undertakings”

Captive (re)insurers domiciled in the European Union may experience some regulatory relief from 2026 after the European Parliament circulated its agreed amendments to Solvency II.

A vote on the proposals is scheduled for 23 April and while reform has not gone as far as identifying and defining captive insurers under EU regulation, lobbyists are pleased with the progress made.

Captive Intelligence reported in December Europe’s captive market was awaiting the final text on Solvency II reform after agreement was reached between member states, but until now it had not been made public.

Charles Low, head of EU affairs at FERMA, told Captive Intelligence: “We are keen on any change to the legislative framework that would result in enterprises having more and better options for risk transfer.

“It’s possible that the amendments to Solvency II could improve the situation for captives in different Member States, and the implementation of the changes will be a focus of FERMA’s work going forward.”

Captive Intelligence has seen the amendments, although they have yet to be published alongside the existing rules.

FERMA had lobbied and hoped for a new “captive undertaking” to be defined under Solvency II, but the EU has not gone down this route.

It does, however, cite captives under its definition of small and non-complex undertakings: “‘Small and non-complex undertaking’ means an insurance and reinsurance undertaking, including a captive insurance undertaking and a captive reinsurance undertaking, that meets the conditions set out in Article 29a and has been classified as such in accordance with Article 29b.”

It is expected the majority of European-domiciled captives will fall into the new small and non-complex undertakings class, which would benefit from increased proportionality from supervisors.

The amendments state: “Undertakings complying with the risk-based criteria should be able to be classified as small and non-complex undertakings pursuant to a simple notification process.

“… Once classified as small and non-complex undertaking, in principle, it should automatically benefit from identified proportionality measures on reporting, disclosure, governance, revision of written policies, calculation of technical provisions, own-risk and solvency assessment, and liquidity risk management plan.”

The reforms do go on to specifically mention captive insurance and reinsurance undertakings in the context of the new “small and non-complex undertakings”.

“Captive insurance undertakings and captive reinsurance undertakings which only cover risks associated with the industrial or commercial group to which they belong, present a particular risk profile that should be taken into account when defining some requirements, in particular on own-risk and solvency assessment, disclosures and the related empowerments for the Commission to further specify the rules on such requirements,” the text outlines.

“Moreover, captive insurance undertakings and captive reinsurance undertakings should also be able to benefit from the proportionality measures when they are classified as small and non-complex undertakings.”

FERMA’s Low added: “What we would have liked, and what we were shooting for, was for captives to be recognised as a distinct class of insurer under Solvency II.

“The European legislators have not gone that far, but from what we understand a lot of captives will fall into this small and non-complex undertaking definition, which is great.

“Provided they meet specific criteria and qualify as small and non-complex undertakings, captives will have less regulatory red tape to deal with and the Solvency II environment should be more adjusted to the reality of being a captive.”

One of the more significant changes that would impact qualifying captives is an exemption to the requirement for audit of the annual solvency and financial condition report.

“Because of the particular risk profile and specificity of captive insurance undertakings and captive reinsurance undertakings, it is appropriate not to impose on them the audit requirement.”

Another specific example of exemptions from reporting is on climate change risks and scenarios.

“In particular, while the assessment of the materiality of exposure to climate change risks should be required from all insurance and reinsurance undertakings, long-term climate change scenario analyses should not be required for small and non-complex undertakings,” the amendments state.

It is unlikely further changes will be made to the text with vote scheduled for 23 April. If successful, the reforms will come into effect in 2026.

AM Best affirms rating of JP Morgan captive

Luke Harrison
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AM Best has affirmed the financial strength rating of A (excellent) and the long-term issuer credit Rating of “a” (excellent) of Vermont-domiciled Park Assurance Company. The outlook for the ratings is stable.

Park is a single parent captive owned by JPMorgan Chase Holdings, a subsidiary of JPMorgan Chase & Co.

The captive provides JPMorgan with global property coverages, including terrorism, cyber and banker’s blanket bond.

These coverages are important components of JPMorgan Chase’s risk management strategy and the captive benefits from the support of the group’s significant resources.

AM Best considers Park’s business profile to be limited due to its product concentration risk, offering limited lines of coverage on a net basis.

Partially offsetting these factors is the credit risk associated with Park’s extensive use of reinsurance, which mitigates its exposure to oversized losses on substantially valued insured locations, as well as its reliance on the protection from the Terrorism Risk Insurance Program Reauthorization Act (TRIA).

The ratings reflect Park’s balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, limited business profile and appropriate enterprise risk management.

Park’s strongest level of risk-adjusted capitalisation, as measured by AM Best’s capital adequacy ratio (BCAR), reflects its conservative loss reserving practices and favourable development trends, along with its conservative investment portfolio and strong liquidity measures.

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