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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.

Captive interest in parametric solutions increasing – Descartes

Luke Harrison
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Captive interest in parametric solutions increasing – Descartes

Interest from captives in parametric solutions is increasing, particularly in the property market where insureds are looking at managing rising insurance costs.

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.

“We’ve seen a growing interest from captives in parametric solutions,” Meryl Bermond, business development manager at Descartes Underwriting, told Captive Intelligence.

She said a key driver is parametric structures allowing captives to charge the “real price” of a risk for the period covered.

“We always price the risk itself, according to past events, not past losses,” Bermond explained. “That makes all the difference, because it allows the captive manager to understand the real price of the risk.”

Bermond said this is important when a captive is involved, because “at the end of the day, the captive pays the losses”.

Descartes is a carrier that primarily writes natural catastrophe related parametric policies in more than 60 countries around the world.

The company underwrites and innovates against natural catastrophes across a number of trade sectors to provide insurance for events such as floods, earthquakes, cyclones, hurricanes, hail and wildfires.

“In terms of natural catastrophes, captives are usually very interested in covering the perils that are difficult to model, such as flood and hail, because they are very complex,” Bermond said.

“Some traditional insurers struggle to price them, and some of the models are not up to date for these risks.”

Bermond highlighted that hail risk in France is currently heavily under-priced by the traditional market.

“We are waiting for the next round of losses, when we expect the market price will realign and exceed the real price of the risk, then begin to decline again,” she said.

“Parametric prices, in contrast, are much more stable.”

Bermond said when underwriting for a captive, the first job is to price the pure peril risk.

“That could be, for example, that the level of water in the Seine River in Paris exceeds six metres,” she said.

“To do this, we model maybe 150 years of historical data to recreate thousands of possible years of loss experiences.

“Then, with all those potential scenarios, we set the price to insure Seine River flooding above six metres.”

She explained that for the second step, they utilise the captive’s own data on its past losses, and back-test the solution based on actual experience.

Bermond told Captive Intelligence that the services Descartes can offer captives are quite “diverse” and includes options such as fronting and captive protection.

“With insurance captives, the captive writes the policy and then we reinsure the captive,” she added.

“We also have cases with reinsurance captives, where we front the parametric policy, keep part of the risk, and reinsure the rest into the captive.”

Jan Bachmann to join SRS Altitude as CUO

Luke Harrison
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Jan Bachmann to join SRS Altitude as CUO

Strategic Risk Solutions has appointed Jan Bachmann as chief underwriting officer of SRS Altitude effective 1 April.

The company announced the launch of managing general underwriter Altitude in November, to be led by former Swiss Re executive Loredana Mazzoleni Neglén.

Bachmann will oversee Altitude’s underwriting portfolio and will be responsible for structural solution design.

“Joining this innovative company marks a thrilling chapter in my professional journey,” said Bachmann.

“I’m also excited to be part of Strategic Risk Solutions which I have known for many years for its forward-thinking approach.

“Together, we’ll navigate new horizons, foster creativity, collaboration, and a shared commitment to excellence in alternative risk transfer solutions.”

Bachmann brings more than 20 years of experience to his new role and most recently worked at Swiss Re.

He has held various technical and leadership positions across underwriting, natural catastrophe modelling and alternative risk transfer.

“With his extensive knowledge and expertise, I am confident that his addition to the team will greatly contribute to the success of the company,” said Ron Sulisz, president of SRS.

In January, Thomas Keist joined SRS Altitude as chief commercial officer, with the confirmation of Keist following the appointment of Paul Fitzgerald as chief operating officer.

Strategic Risk Solutions also acquired captive and insurance manager Robus from the Ardonagh Group in January, further strengthening its presence in Guernsey and adding Gibraltar to its list of domicile options.

PoloWorks, PwC UK joint venture to focus on captive solutions

Richard Cutcher
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PoloWorks, PwC UK joint venture to focus on captive solutions

PoloWorks, which launched a new independent captive manager in Guernsey last month, has announced a joint venture with PwC UK – PoloPartners – with an initial focus on captive solutions.

Captive Intelligence reported in February Mark Elliott would lead Polo Insurance Managers (PIM) in Guernsey, with the new firm keen to leverage its existing insurance services infrastructure in the London Market, Lloyd’s and its legacy business Marco Capital.

PoloPartners has been launched to provide a “bespoke, tech enabled, differentiated offering” for insurance clients, with the two firms stating captive solutions for corporate clients will be “an early focus”.

PoloPartners is particularly interested in captive developments at Lloyd’s of London, where it already owns a managing agency.

“PoloPartners epitomises our commitment to innovation and client-centric solutions, leveraging cutting-edge technology and industry expertise,” Richard Lawson, CEO of Polo Commercial Insurance Services (PCIS), said.

“The seamless combination of PoloWorks’ and Marco’s regulated platforms and service resources with PwC’s insurance practice which brings scale, market insight and a reputation for quality and technological innovation to the partnership, provides PoloPartners with an unparalleled customer proposition – adding value to the insurance market.”

The partnership will provide a “tech-enabled end to end insurance management service”, including services such as  actuarial, claims management, risk and compliance and finance.

Alex Bertolotti, head of insurance at PwC UK, said: “This partnership is an exciting opportunity for us to create value for our clients in a new way and is fully aligned with our strategy to work with insurance businesses to help solve challenges, build trust, unlock value and transform.

“We are particularly excited to be working with PoloWorks on this journey, who are a respected and growing player with a strong track record.”

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