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Shipping and mining captives among new Vermont formations

Luke Harrison
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Shipping and mining captives among new Vermont formations

Vermont has licensed five new captives in the third quarter of 2023, taking the state’s total number of new licences for the year to 27.

The five new captives for Q3 include: Corrugate Country Insurance Corporation, Blue Canary Inc, 1920 Risk Assurance Inc, Steelshield Insurance Company, and RVC RE, LLC.

Captive Intelligence understands Corrugate Country Insurance Corporation is owned by Wisconsin-based shipping and packing supplies company Uline, while Blue Canary is owned by Alabama-based coal mining company, Warrior Met Coal.

Corrugate Country Insurance Corporation is managed by Strategic Risk Solutions (SRS), 1920 Risk Assurance is managed by Marsh, and RVC RE, LLC is manged by Artex.

Blue Canary and Steelshield Insurance Company are both managed by Aon.

Of Vermont’s 27 new captives registered in 2023 to date, 20 are pure captives, five are sponsored structures, one is an association captive, and one is a risk retention group (RRG).

According to Captive Intelligence’s data on the number of captives in each major domicile, at the end of 2022 Vermont had reached number one with 639 active captives at year-end.

In August, Captive Intelligence published a long-lead highlighting that the state is notresting on its laurels after taking top spot, with a focus on “quality over quantity” and a continued recruitment drive both within the regulator and across the local industry.

EIOPA publishes opinion on cash pooling, outsourcing and governance

Richard Cutcher
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EIOPA publishes opinion on cash pooling, outsourcing and governance

The European Insurance and Occupational Pensions Authority (EIOPA) has published a draft opinion concerning the supervision of captive (re)insurance undertakings, with a focus on intra-group transactions, the prudent person principle and governance.

EIOPA said the published opinion is seeking to facilitate “a risk-based and proportionate supervision of captive (re)insurance undertakings and further support the convergence of supervisory expectations in the context of creating a level playing field within the EU”.

Stakeholders are invited to provide comments by responding to questions in an online survey by 5 January, 2024.

The consultation arises in the context of planned alterations to Solvency II which should benefit a select number of captives, while new domiciles within the European Union, such as France, with a desire to regulate captive business. Similar efforts are also underway in Italy and Spain.

Concerning the use of cash pooling by captive-owning corporates, EIOPOA said regulators should “ensure that (re)insurance captive undertakings recognise and classify in the

Solvency II Balance Sheet the asset and liability descriptions according to the economic substance of the cash pooling arrangement and also apply the proper calculation of the Solvency Capital Requirement (SCR)”.

In its opinion, EIOPA sets out the different treatment of a cash pooling arrangement depending on whether it is classed as a loan or cash at the bank.

“In addition to the SCR calculation, NCAs should ensure that the captive (re)insurance undertakings assess all risks and benefits brought by intra-group transactions, for example assessing the impact on liquidity and concentration risks linked to a material reliance on these types of transactions,” it explained.

“In cases of material reliance on these types of transactions such assessment should be reflected in the Own Risk and Solvency Assessment. Furthermore, the risk exposure relating to the availability of the funds in a cash pooling needs to be evaluated in a stress scenario and depends on the role of the cash pool leader managing the cash pooling.

“Regarding cash pooling agreements, limits should be set by the group in particular concerning assets held to cover liabilities towards policyholders.”

The opinion also turns the spotlight on governance in the context of Administrative, Management, Supervisory Board (AMSB) composition and outsourcing of key functions.

EIOPA said regulators should ensure that the governance and management structure “possesses the necessary seniority, competency, skills and professional experience” and reinforced that there is no exception for captives.

“Key function tasks can be outsourced, however the captive undertaking should designate a person within the undertaking with the overall responsibility for the outsourced key function who is fit and proper and possesses sufficient knowledge and experience regarding the outsourced key function to be able to challenge the performance and results of the service provider,” it stated.

EIOPA believes regulators should ensure the person designated as responsible for outsourced key functions should have an employment contract with the captive, be a person under supervision of the regulator regardless of their employee status with the captive, or employed by the captive owner in a role that is “properly documented within the outsourcing arrangements and fitness and propriety process”.

“NCAs (national competent authorities) should ensure that, in case of multiple services provided by the same service provider or captive manager from captive undertakings, the segregation of duties is clearly agreed and documented,” EIOPA added.

“Given the high degree of outsourcing operated by captive (re)insurance undertakings, NCAs should ensure that the initial and ongoing due-diligence on the service provider operated by the captive on the service provider is embedded in strong processes and procedures which shoud be made available to the NCA upon request.”

UPDATE: Gibraltar elects Feetham, GSLP Liberal Alliance with captives on horizon

Richard Cutcher
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UPDATE: Gibraltar elects Feetham, GSLP Liberal Alliance with captives on horizon

Experienced insurance lawyer Nigel Feetham has been elected to the Gibraltar parliament and is expected to be appointed the country’s next Minister of Financial Services by Chief Minister Fabian Picardo.

Captive Intelligence reported in September that Feetham was running for election as a member of the GSLP and wanted to reinvigorate Gibraltar’s captive sector with renewed legislation suitable for its role outside of the European Union, post Brexit.

Prior to Brexit, Gibraltar had a unique captive and insurance offering, being able to passport across Europe and into the United Kingdom. It was, however, restricted by the EU’s Solvency II regime.

Feetham, in the GSLP Liberal manifesto, has proposed new legislation that would update Gibraltar’s regime and make it more attractive.

“Post-Brexit, an opportunity has arisen for Gibraltar to establish a captive regime for international business, an initiative which was unattainable within the EU,” it states.

“If elected, the GSLP Liberals commit to passing legislation enabling a captive regime for international (non-UK and non-EU passported) business. This significant move would enhance Gibraltar’s insurance sector, offering unprecedented opportunities.”

Feetham has also proposed the formation of a Gibraltar government-owned captive insurance company to “obtain the most competitively priced insurance for the Government and addressing any public interest insurance needs linked to the Government not available locally, such as travel insurance for our elderly citizens”.

Authentic “overwhelmed” by interest in Captive in a Box concept

Luke Harrison
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The genesis behind the formation of Authentic was the realisation that embedded players were only offering “very small” commission splits to their distribution partners.

New-York and Ohio-based Authentic announced in September that it had raised $5.5m in a seed round.

The company is touting a ‘Captive in a Box’ platform it says allows any vertical software as a service (SaaS) company, franchise or association to launch captive programmes in a matter of weeks.

Authentic offers business owner’s policy (BOP) coverage and is also targeting businesses in food and beverage, salon and spa, retail, fitness, and professional services.

It is utilising Montana as a captive domicile and its series business unit (SBU) regulation.

Cole Ricarrdi, founder and CEO at Authentic, told Captive Intelligence that he had questioned why companies with distribution capabilities had not formed their own programme, or their own captive.

“When I went through the process of mapping that out, I realised that is incredibly challenging,” he said.

He said no one had ever previously packaged underwriting, legal work, reinsurance and capital together as a product before.

Ricarrdi noted that the current trend in the software industry is the attempt to bundle in more financial services, “so it’s a very natural fit”.

“If a client is a software company, their entire goal is to sell more products and services into their gyms, or their restaurants or salons,” he said.

He said the client is essentially the operating system from a technology standpoint.

“Because the owners are logging in every day, they realise that they have incredible shelf space to add other financial products, and we want to be that insurance offering on the shelf for SaaS companies,” he said.

Since Authentic’s New launch, Ricarrdi said the company has been “overwhelmed”.

“We had strong interest before we launched in our software channel, but what’s neat is all the interest we’ve had from other channels, including brokers or agency captives,” he said.

“Some brokers have reached out for a more tech enabled solution or a more turnkey solution to a captive for their client.”

Ricarrdi said at first the expectation was to mostly go direct to software companies, agencies, or credit unions but “we’re actually being contacted by brokers to use our services to stand up a captive for a client”.

Peter Carter retains WTW captive leadership role, leads new climate practice

Richard Cutcher
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Peter Carter retains WTW captive leadership role, leads new climate practice

Peter Carter, global head of captive and insurance management solutions at WTW, will lead a combined climate, risk and analytics practice at the broker.

Carter, who has been leading the global captive practice since November 2019, will remain in that position while taking on the new climate role.

“Clients are looking for ever greater support in understanding what climate risk means for their organisations,” Carter said.

“WTW has significant climate expertise, which combined with the company’s core risk and analytics capabilities and risk management strengths, makes us ideally qualified to help clients navigate this growing challenge.”

WTW said climate risk “presents a significant risk and growing concern for businesses globally” and it was focused on combining its strength in data and analytics with its climate expertise to “help clients quantify, mitigate and transfer climate related risks”.

John Merkovsky, WTW’s head of risk and analytics, said: “The re-focused climate practice is another step in delivering on our “smarter way to risk” commitment through ongoing investments in superior data, technology, and talent.”

Fiji signs up for parametric policy from PCRIC

Luke Harrison
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Fiji has signed a commitment letter for the country’s first parametric insurance product with the Pacific Catastrophe Risk Insurance Company (PCRIC).

Fiji’s Deputy Prime Minister and Minister for Finance, Biman Prasad, and Sarah-Jane Wild, chair of the PCRIC board signed the letter in Morocco on Monday.

PCRIC is a regionally focused captive insurance company owned by Pacific Island nations through the Pacific Catastrophe Risk Insurance Foundation (PCRIF), based in the Cook Islands.

Prasad noted the product is “very timely” for Fiji as the cyclone season approaches.

“Fiji is highly vulnerable to disasters which causes extensive damages to our infrastructure, affects livelihoods and imposes substantial financial bearing on Government’s balance sheet almost every year,” he said.

He said the reality is Fiji must “fork out more money from Government’s coffers” towards responding in times of emergencies, building climate resilient infrastructure and relocation of population affected by rising sea levels and loss of arable lands.

Fiji has been trying to expand its options for cover and has taken up a concessional standby loan from JICA with disbursement contingent upon declaration of a state of disaster.

The Fiji government has also added the World Bank Catastrophic Drawdown Option (CAT DDO) to its disaster risk financing options to assist it with quick disbursement after natural disasters.

Country members of the PCRFI are Cook Islands, Fiji, Marshall Islands, Samoa, Tonga and Vanuatu.

All other member nations of the Pacific Island Forum Secretariat (PIFS) are eligible and are encouraged to become members.

Elke Vagenende to re-join Allianz as commercial MD for Benelux and Nordics

Luke Harrison
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Elke Vagenende to re-join Allianz as commercial MD for Benelux and Nordics

Allianz Commercial has appointed Elke Vagenende as commercial managing director for Benelux and Nordics.

Vagenende will re-join Allianz from her current role at AIG in the first quarter of 2024 to lead the newly established region.

She has been global head of multinational at AIG since February 2021. Prior to that Vagenende worked at WTW as head of FINEX for western Europe, and she was previously with Allianz Global Corporate & Specialty (AGCS) from 2012 to 2018 in various roles.

Back at Allianz Vagenende will report to Dirk Vogler, board member of AGCS SE and Allianz commercial chief regions and markets officer, in conjunction with Joos Louwerier, CEO of Allianz Benelux.

This Benelux and Nordics region will service customers across Belgium, Netherlands, Luxembourg, Sweden, Denmark, Finland, and Norway.

“I am delighted to welcome Elke back to Allianz, she’s a top executive in the market with a proven track record of delivery,” Volger said.

“With her appointment, this also marks a significant milestone, the completion of our regional leadership team across our 11 regions.”

Allianz revealed back in March that it will serve the global commercial insurance segment as one business, combining the AGCS with the insurance businesses of Allianz’s operating entities.

The company will now introduce this model to its AGCS and national businesses across the Benelux and Nordics region, using the trading name of Allianz Commercial under Vagenende’s leadership.

“It is good to have Elke on board,” Louwerier said.

“With her leadership we will be able to build an even stronger and more integrated team to serve the Allianz Commercial specialty clients, large corporations- and mid-sized companies in the future in the Benelux and Nordics regions.”

Fitch revises outlook for Credit Agricole’s captives

Luke Harrison
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Fitch Ratings has revised the outlooks for the long-term issuer default (IDR) and insurer financial strength (IFS) ratings of CAMCA Assurance (CAA) and CAMCA Reassurance (CAR) to stable from negative and affirmed the ratings at ‘A+’.

CAA and CAR (jointly CAMCA), both domiciled in Luxembourg, are ultimately owned by Credit Agricole’s 39 regional banks (caisses regionales).

CA is a cooperative banking group encompassing its 39 caisses regionales, Credit Agricole S.A. (CA S.A.), the group’s listed central body, and Credit Agricole Corporate and Investment Bank (CACIB).

The ratings agency has the same IDRs for CA, CA S.A. and CACIB. Fitch does not rate the regional banks, but CA’s IDRs would also apply to them if they were rated.

The ratings reflect Fitch’s view that CAA and CAR (jointly CAMCA) are core captive companies of CA, as CAMCA’s goals are tied to CA’s risk management.

“We believe that CA’s regional banks will provide support to their core captive insurance subsidiaries, if needed,” Fitch said.

“This is highlighted by previous capital injections by the regional banks into CAA. CAMCA’s ratings are therefore aligned with CA’s long-term IDR.”

Both companies rely on their parent for their role in insuring the group’s guaranteed housing loans, their business position, and their strategic direction.

Fitch said that profit-reallocation mechanisms and reinsurance programmes further strengthen their integration with CA.

CAA and CAR were well capitalised at the end of 2022, with CAA reporting a Solvency II ratio of 250% (end-2021: 265%), while CAR had a Solvency II ratio of 315% (306%).

CAA’s premium volume increased by 7.7% to €417m in 2022, supported by strong home loan production from CA’s network during the year. However, Fitch expects CAA’s premium volume to decline in 2023.

CAA and CAR reported strong operating profits on continued low cost of risk. CAA’s Fitch-calculated net combined ratio improved to 65.2% in 2022 (2021: 66.2%) and reported a net income of €21m in 2022 (2021: €20.2m).

CAR’s net income before allocation to the equalisation reserve was €40m in 2022 (2021: €70m).

Haskell’s pure captive move a success, adds new lines

Richard Cutcher
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Haskell’s pure captive move a success, adds new lines

Jacksonville-headquartered Haskell Company made the right decision establishing its own pure captive after 16 years participating in a group, according to Haskell CFO Bradford Slappey and Jeff Caudill, vice president of risk management.

The Haskell Company is a privately-owned engineering, construction and architectural firm, which had joined the ACIG group captive in Bermuda in 2006, insuring general liability, auto and workers’ compensation.

In early 2021, it began exploring whether establishing its own single parent captive was feasible and completed the formation last year.

Speaking on an episode of the Global Captive Podcast, Slappey and Caudill were joined by Spring Consulting’s Prabal Lakhanpal to discuss the project and its performance to date.

AEC Diamond Casualty, Inc was licensed in Vermont in May 2022, with Spring Consulting Group working closely with Haskell on the feasibility and formation of the new captive.

ACIG was formed in 1981 for three construction companies and also formed the United States’ first risk retention group (RRG), American Contractors Insurance Company Risk Retention Group (“ACICRRG”), in 1986.

Today, ACIG is rated ‘A’ (Excellent) by AM Best, has around 40 members and in December 2021 reported it had $236,254,000 of shareholder equity. It was inducted into the Bermuda Captive Hall of Fame in September 2022.

“It was really a safety related move,” said Slappey, discussing the original decision to join ACIG.

“We wanted to get better at safety and their group was 40 general contractors focused on safety and I think we achieved that goal and got much better at safety over the years.”

As the Haskell Company continued to grow, however, its insurance and risk financing needs became more complex, with Slappey explaining it became obvious the company’s profile did not fit as well as it had done previously.

“I thought we were at a point in time and we had enough scale that we could start our own,” he added.

Caudill joined Haskell in October 2020 and was approached by Slappey shortly after to assess the viability of forming their own captive.

“That’s when I reached out to the Spring Group and engaged them in a feasibility study. We took our time, we didn’t really go through it in a big hurry,” Caudill said.

“We could have probably done the process in four to six months, but we stretched it out to really almost a year to match up with our current renewal structure. Timing made a whole lot of sense.”

Lakhanpal, senior vice president at Spring, said a detailed review and extensive due diligence of the risk profile and group arrangement was required to assess whether establishing a new, single parent captive was the optimum solution for Haskell.

“As we went through the process, our intention was to look at it both from a qualitative perspective, which is to say, policy language, ensuring there’s going to be no gaps in coverage,” Lakhanpal said on the podcast.

“If there were gaps in coverage, we wanted to lay those out clearly, as well as articulate how those gaps could be covered within a single parent captive model.

“Then from a quantitative perspective, certainly there was an evaluation of costs, a comprehensive review of what it’s going to take to structure a programme like this, what sort of capitalisation will be needed, what collateral will be needed.

“Given their long relationship with the group captive, it was important to acknowledge all the existing surplus that sat within the programme, lay out the cashflow implications of moving away from the group captive towards a single parent captive and how all of that would play out over the next few years.”

AEC Diamond Casualty has begun by writing auto, workers’ compensation and general liability, replicating the lines it previously placed with the group captive, but Haskell has also moved its medical stop loss straight into the captive.

Caudill said professional liability is a coverage they are looking to add to the captive as the capital base builds, and the first year of operation was a success.

“We’ve had a successful first year,” he added. “We have had great experience in those lines for many years. It was not unexpected that we would have a very good result at the end.

“From a cash flow standpoint, we’re able to reduce our fees, we reduced our insurance premiums overall, changed the structure of our programme.

“We’ve been able to move our medical stop loss in there right away and we’re not done. We’re looking to do some more in the future.”

ClearPoint launches MSL captive for small to mid-sized employers

Luke Harrison
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A medical stop-loss captive and employer services platform has been launched by South Carolina-based ClearPoint Health to provide insurance to benefit advisors and small to mid-sized employers.

ClearPoint’s captive platform is designed for employers ranging from 10 to 1,000 employees as well as to partner directly with benefit advisors.

The captive was founded by a group of clinicians, underwriters, technologists, and risk management experts, led by co-founder and CEO, Jeb Dunkelberger.

“Phenomenal things happen when you bring brilliantly passionate people together and agree on a core mission to serve employers rather than sell them,” said Dunkelberger.

“We’re excited to announce a number of new partnerships as we approach the 2024 plan year.”

Those using the ClearPoint Health Platform can pick their preferred service partners, including third party administrators, pharmacy benefit managers, networks clinical cost management and clinical quality improvement enhancers.

The company said that by grouping employers with 10 to 1,000 employees into a shared vehicle, they are able to stabilise the cost of all necessary components for self-funding, while generating a better experience and cost for its members.

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