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New VCIA Board approved with Gail Newman appointed chair

Luke Harrison
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VCIA’s 2024 annual general meeting was held during the 39th VCIA conference, where voting members elected the new 2024-2025 VCIA Board.

The new board includes Julie Bordo, PCH Mutual Insurance Company, Joe Carter, United Educators, re-elected to a second term, Aaron Ciullo, Marsh Captive Solutions, Gail Newman, Bright Horizons, re-elected to a second term, and Brenda Stewart, of AIG Captive Solutions.

The outgoing VCIA Board also approved Newman as chair, Carter as vice chair, Jason Palmer as treasurer, and Melinda Young as secretary.

“My fellow board members have put a tremendous amount of trust in me, and it’s great inspiration to help lead VCIA to new heights,” said Gail Newman, vice president of risk management at Bright Horizons.

The VCIA staff and board said it would like to thank outgoing board members Andrew Baillie, Lawrence Cook and Derick White for their great work over the years.

“I have a deep appreciation for the essential role captives play in supporting their members,” said Carter, United Educators’ vice president of business development and UE Experience.

“Helping lead VCIA is an opportunity to serve a wide spectrum of self-insurers across the country.” 

The next VCIA board meeting, planned for October, will focus on incorporating stakeholder feedback and building out VCIA’s plan ahead of VCIA’s 40th anniversary in 2025.

Overfunded plans could lead to more US captive pension transactions

Richard Cutcher
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Overfunded plans could lead to more US captive pension transactions

There have been more inquiries as to whether captives can be used to terminate or de-risk pensions plans in the United States, partly due to the current interest rate environment, according to Spring Consulting’s Karin Landry and Prabal Lakhanpal.

⁠Captive Intelligence reported in July⁠ that the US Department of Labor had tentatively authorised an ERISA exemption for the New York-based Memorial Sloan Kettering Cancer Centre (MSKCC), concerning a pension risk transfer to its Vermont-domiciled captive.

Spring Consulting Group worked closely with MSKCC on the application to the DoL and in the latest episode of the Global Captive Podcast, Spring’s Karin Landry and Prabal Lakhanpal discuss pension risk transfer to captives more broadly, how they work and whether we might see more activity in this area.

Explaining how the captive approach came about in the case of MSKCC, Landry explained: “We did an RFP, went to market and what we found was the market was charging substantially more to take the risk on because they were uncomfortable with the liability, the shape of the risk.

“We looked at utilising the captive, and because it’s an ERISA benefit, just as any other ERISA benefit funded in a pure captive, you had to go through a prohibited transaction exemption process, similar to any other process you’d go through for life or disability, structured in a similar way, fronted with an A rated carrier, ceded to the captive, and reinsurance on the back end.”

MSKCC already owns a mature pure captive in Vermont, so a separate cell was formed to keep the pension risk separate.

Concerning the broader landscape and motivations for US pensions plans, Lakhanpal said it can be viewed as similar to other lines recently seen going into captives.

“The way I think about captives in the pension transaction is similar to all the other lines where captives have been an extremely efficient tool for risk mitigation and creating an alternate program structure,” Lakhanpal said. “There is two plays to it.

“One is with the idea of leveraging a captive to take back control of underwriting risk and how you’re pricing for that risk. And then there’s the second aspect, which is having a better control on how investments are structured.

“A lot of pension plans in the US leverage illiquid investments as a core component of their investment portfolios.

“As you think about illiquid investments, a lot of pension plans are overfunded right now. To undertake a pension termination transaction, illiquid investments will need to be liquidated. 

“Doing so prior to maturity can be extremely inefficient and there’s a massive haircut attached to them.

“So, for organisations that are overfunded, are looking for a way to terminate the plan and have a fair amount of illiquid investments, leveraging a captive provides them a phenomenal alternative to going through with the commercial market.”

Lakhanpal added that there is a lot more interest compared to five years ago in exploring how a captive strategy could be deployed to support a pension plan termination or de-risking strategy.

“A lot of folks have been reaching out, trying to better understand how captives can help play a role in a pension transaction,” Lakhanpal added.

“It’s important to note that the exact programme structure, the exact policy structure, the exact captive structure will morph and evolve based on the fact patterns of each individual deal rather than copy paste an existing transaction.

“There’s a lot of nuance there and I think it’s important to work through all of those pieces, but certainly given how many pension plans are overfunded, the amount of folks out there that are sitting with actives on their pension plans, the amount of folks out there who have illiquid investments on their pension plans.

“I think we certainly are seeing a lot more interest than we did maybe five years ago. With the current interest rate environment, a lot of those pension plans are getting more aggressively overfunded than they were two years ago when interest rates were low. And I think that’s just starting to create a cycle of folks looking for potential ways to leverage a captive.”

Listen to the full episode with Spring Consulting’s Karin Landry and Prabal Lakhanpal here, or on any podcast app. Just search for ‘Global Captive Podcast’.

GCP Short: Captives and US pension risk transfer

Richard Cutcher
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GCP Short: Captives and US pension risk transfer
Karin Landry, Spring Consulting
Prabal Lakhanpal, Spring Consulting

This GCP Short, produced in partnership with Spring Consulting Group, is all about a groundbreaking transaction of pension risk to a US captive.

⁠Captive Intelligence reported in July⁠ that the US Department of Labor had tentatively authorised an ERISA exemption for the New York-based Memorial Sloan Kettering Cancer Centre (MSKCC), concerning a pension risk transfer to its Vermont-domiciled captive.

The client, MSKCC, worked closely with ⁠Spring Consulting⁠ on this transaction and application to the DoL, and so Richard caught up with Spring’s Karin Landry and Prabal Lakhanpal to discuss pension risk transfer to captives more broadly, how they work and whether we might see more activity in this area.

For the latest news, analyis and thought leadership on the global captive captive market, visit ⁠Captive Intelligence⁠ and sign up to our ⁠twice weekly newsletter⁠.

Hawaii to allow dormant captives as HB234 passed

Luke Harrison
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Hawaii Governor Josh Green signed HB234 into law this month, allowing certain captives to register as dormant in the jurisdiction.

A captive will now be able to apply to the Commissioner for a certificate of dormancy.

A certificate of dormancy shall be revoked if a dormant captive insurance company violates any of the provisions highlighted in the bill.

The certificate of dormancy shall be subject to renewal every five years and shall expire if not renewed by the captive owner.

An application for renewal must also not be submitted not less than ninety days before the certificate expiration date.

“The issuance of a certificate of dormancy shall automatically cause the certificate of authority of the captive insurance company to be placed in inactive status,” the bill states.

Risk Partners appoints Julia Schroeck and Cassie Bachman to captive team

Luke Harrison
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Risk Partners appoints Julia Schroeck and Cassie Bachman to captive team

New Jersey-based Risk Partners has added to its ranks with the appointments of Julia Schroeck as manager of captive business development, and Cassie Bachman as manager of captive operations.

Risk Partners is an insurance specialty firm and is part of Holman Enterprises, a 100-year-old family business with an automotive focus.

“We are delighted to welcome Cassie and Julia to our team and to introduce them to our clients and prospects as we build a team of dedicated professionals to meet the evolving needs of the alternative risk market,” said Gary Osborne, VP of Risk Partners.

North Carolina-based Schroeck was previously with Hylant Global Captive Solutions before taking up her new role at Risk Partners.

Schroeck also previously worked for Strategic Risk Solutions from November 2016 to June 2022 in South Carolina, where she managed single parent captives, cell captives, group captives and risk retention groups (RRGs).

Bachman also has previous experience in the captive industry with Elevate Captives and has acted as chairperson of Self-Insurance Institute of America (SIIA)’s Future Leaders Committee.

Captive Insurance in Labuan IBFC – In a Class by Itself

Labuan IBFC
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Captive Insurance in Labuan IBFC – In a Class by Itself

A risk management solution that offers infinite growth over time

Located off the Bornean coast in Malaysia, Labuan International Business and Financial Centre (Labuan IBFC) has emerged as a significant player in the global captive insurance industry.

Over the past three decades, Labuan IBFC developed a robust framework to attract captive insurance entities, contributing to its growth as Asia’s premier international financial hub for risk management solutions. Labuan IBFC remains an attractive financial intermediation hub with more than 800 licensed financial institutions operating currently.

Early beginnings and establishment of regulatory frameworks

Captive insurance was first introduced in Labuan IBFC in the early 1990s. Recognising the potential of captive insurance as a tool for risk management, the regulator, Labuan Financial Services Authority (Labuan FSA) introduced incentives to attract global businesses. The early days saw the establishment of a few captive insurance businesses, primarily from Asia, seeking a favourable regulatory environment and cost-effective solutions.

This was followed by introduction of Labuan IBFC’s regulatory framework which has been a cornerstone of its success in attracting captive insurance entities.

Likewise, the introduction of the Labuan Financial Services and Securities Act (LFSSA) in 2010 marked a significant milestone, providing a comprehensive legal framework for captive insurance activities including the introduction of the protected cell company structure.

This act lays down clear guidelines for the establishment, operation, and supervision of captive insurance businesses.

Collaboration between jurisdiction and key stakeholders

The jurisdiction’s central location in Southeast Asia, and its proximity to major markets such as China and Japan, designates Labuan IBFC as the ideal hub for regional and multinational businesses seeking efficient risk management solutions.

The jurisdiction’s flexible, business-friendly regulatory framework meets international standards and best practices, such as those set by the International Association of Insurance Supervisors (IAIS).

This streamlined reporting, coupled with features such as a risk-based regulatory approach low capital requirements and attractive and competitive tax incentives has led to a steady increase in the number of captive insurance businesses in Labuan.

This also grants convenient business flexibility and secures confidence for business owners to establish Labuan captive setups.

Furthermore, collaborating with industry associations such as the Labuan International Insurance Association (LIIA), the largest industry grouping comprising more than 200 insurance companies, as well as insurance and underwriting managers service providers and Labuan Trust Companies (LTCs) helps captive insurance businesses navigate the regulatory landscape and creates a supportive ecosystem.

These partnerships facilitate knowledge sharing, professional development, and the adoption of best practices.

Headline numbers and accolades

Labuan IBFC offers various types of captives, including pure captives, group/association captives, multiple captives, master rent-a-captives, and protected cell companies (PCCs) catering to diverse business needs.

The Labuan captive segment has been riding on an outstanding growth track by capturing Asia’s growing demand for a cost-efficient, alternative risk management solution. This is evident from the 9.4% growth in captive premiums since 2019.

As the region’s fastest-growing captive hub, as of 2023, it is home to 69 captives, and the segment has recorded a total premium volume of USD626.6 million, comprising more than 30% of the overall Labuan insurance industry’s premiums.

For a jurisdiction that began its self-insurance journey leveraging on self-insuring the risk of Malaysian-based corporates, the fact that most captive premiums now originate from overseas markets underscores how Labuan IBFC has become the hub of choice for captives. Accolades garnered by Labuan IBFC as a testament to this include:

•          the Highly Commended International Domicile award at the European Captive Review Awards 2022 and 2023,

•          the Best Asian Domicile award at the Asia Captive Review Awards 2021, and

•          the Top International Captive Domicile award at the European Captive Review Awards 2021.

Staying ahead of the curve

A significant milestone in terms of innovation for the Labuan captive industry is Labuan FSA’s issuance of the revised Guidelines on Captive Insurance Business, which was effective 1 January 2024.

The revised guidelines included provisions for the expansion of insurable risks of Labuan captives to include indirect insurable interest risks. Significantly, there was also the introduction of a new rental captive structure – External Rent-A-Captive.

The revision also included new structures for rental captives and streamlined procedures for the establishment of new cells under PCCs.

ACC 2024 – The captive event of the year

Labuan IBFC’s highly anticipated flagship event, the Asian Captive Conference (ACC) will be returning for its seventh year on 19th September 2024, at Sime Darby Convention Centre.

The ACC 2024 is expected to deliver an even more insightful conference taking into account the evolving needs of the APAC region’s captive segment with this year’s curated theme Asian Anchors: Leading the way in captive innovation.

The theme addresses the evolving needs of the captive insurance industry in the APAC region by promoting technological advancement, regulatory adaptation, risk diversification, market growth, sustainability, and customer-centric approaches.

By focusing on these areas, the conference aims to equip industry professionals with the knowledge and tools necessary to navigate the dynamic landscape and drive growth and innovation in the region.

The way ahead

Labuan IBFC has continued to innovate and adapt to the evolving needs of the captive insurance market. The introduction of digital insurance and insurtech solutions have opened new avenues for captive insurance businesses, enabling them to leverage technology for enhanced efficiency and customer experience.

Additionally, Labuan IBFC as an international business and financial centre has strengthened its focus on Environmental, Social, and Governance (ESG) principles. This focused has also spilled over into the jurisdiction’s captive segment, whereby key players are increasingly adopting ESG practices, thus aligning their operations with global sustainability goals.

Joe McDonald joins Captives.Insure

Richard Cutcher
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Joe McDonald joins Captives.Insure

Joe McDonald has departed South Carolina Department of Insurance (SCDOI) and joined consulting and underwriting firm Captives.Insure.

McDonald will be executive vice president, director of captive consulting and a shareholder of the firm. He was previously director of captives at the SCDOI.

“We are thrilled to welcome Joe McDonald to our team,” said Nate Reznicek, president of Captives.Insure.

“Joe’s reputation, expertise and deep understanding of the captive insurance landscape will be invaluable as we continue to expand our services and support our clients in navigating the complexities of captive insurance.”

McDonald will oversee the company’s consulting platform and advise on strategic initiatives to enhance Captives.Insure offerings.

“I am thoroughly excited to join Captives Insure and contribute to its mission of delivering unparalleled value to our clients,” said McDonald.

“I will effectively leverage my experience to help the company and support the impressive growth trajectory that Captives Insure is on.

“Working with such a dedicated team and trusted partners, I look forward to making a meaningful impact and accomplishing some really great things.”

Metals and mining companies assess captive utilisation as climate risk grows

Luke Harrison
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Metals and mining companies assess captive utilisation as climate risk grows
  • Greater risk financing maturity needed to combat climate risk and green transition exposures
  • Property, machinery risk frequently written in captives
  • Mining and metals captives have unique challenges when faced with significant claims

A growing number of companies in the mining, metals, oil and gas sectors are looking towards captive utilisation, particularly in the metals and mining middle market segment, with traditional carriers reducing capacity and increasing exclusions concerning climate risk.

These companies are also assessing captives to avoid increasing rates in the commercial market, especially for property risk.

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Heilo expands Texas presence with Grace Topete hire

Luke Harrison
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National captive manager and consultant, Helio, has further added to its team and expanded its presence in Texas with appointment of Grace Topete to its team.

She joins Helio with particular expertise in the nonprofit and education industries and was recently the director of leadership programs, spearheading the launch of the Nonprofit Impact Institute at Social Venture Partners Dallas.

“The expansion of our presence in the Dallas-Fort Worth Metroplex is a natural progression in Helio’s growth and a response to client needs and our prospect pipeline,” said Helio’s managing partner, Heather McClure.

“Grace’s addition is an important next step to increase our industry and geographic reach.”

She will primarily be responsible for providing captive management and advisory services to Helio’s clients, with a focus on the Texas market.

Helio’s chief operating officer, Jesse Olsen, said bringing Topete on board will help Helio provide “world-class” consulting and services to new clients who can benefit from captive solutions.

“Nonprofits in particular suffer from chronic underinsurance,” he said. “Her network in and knowledge of that space will add meaningful value with far-reaching positive ripple effects.”

At the start of last month, Helio hired Victor Gallardo, formerly with the Oklahoma Insurance Department.

Platform’s Walker to create “one-stop shop” captive offering

Luke Harrison
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Braedy Walker, practice leader for Platform’s new Captive and Alternative Risk Financing Practice Group, is planning to integrate the firm’s new captive offering with its current brokerage services, creating a comprehensive one-stop shop for all Platform clients.

The Canadian broker was founded in 2014 and provides insurance and bonding solutions to the development and construction community. In July, it launched its captive and ART practice.

Before undertaking his new role at Platform, Walker was previously vice president, national captive practice leader at HUB International.

“It my intention to establish a captive management shop from the outset, in addition to offering captive advisory services, a cornerstone of my work at previous shops,” Walker told Captive Intelligence.

“This is something I was unable to achieve previously in my career and the ability to accomplish this was a major factor in my decision to move over to Platform.”

The cornerstone of Platform’s offering is centred around construction, real estate, and infrastructure.

“What I like about the firm is that they’re not just shooting from the hip and trying to grow into other industries hastily,” he added.

“They want to ensure they have the best people before expanding into new areas.

“They are true masters of their domain in construction, infrastructure, and real estate, with some of the best people in the industry, a couple of whom I’ve worked with in the past.”

Walker said there have been a number of potential Platform clients and prospects who have previously expressed a desire for a captive offering from the company.

“Previously, we might have been unable to offer it to current clients, which is always tricky and may have hindered the firm’s ability to attract future prospects,” he said.

“By including this solution, Platform becomes a full-service firm for companies across Canada, no matter their size.”

Walker highlighted that his job will be to set up, grow and lead the captive team for Platform, where he will effectively build it from the ground up.

He will also be tasked with making sure all the necessary structures are in place in Barbados, Alberta, Bermuda, and Cayman, and eventually in the United States.

“I’m looking forward to building the team and processes from scratch as opposed to working with inherited structures,” he said.

“We’ll be working with the rest of the team at Platform to continue growing the company, both in existing and new verticals, ensuring that clients are well served and have the solutions they need.”

Platform is currently operating only in Canada, but many of the firm’s clients have US operations.

“Given that we are a fast-growing firm, expanding into the US seems like a logical move in the future,” he added.

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