Subscribe to Ci Premium to continue reading
Captive Intelligence provides high-value information, industry analysis, exclusive interviews and business intelligence tools to professionals in the captive insurance market.
DARAG completes two captive legacy transactions
Legacy acquirer DARAG Group has completed two undisclosed captive legacy transactions in Bermuda and the Cayman Islands.
Each portfolio insured workers compensation, general liability and auto liability exposure.
The first transaction involved a Bermuda-domiciled captive for insured risks through to 2016 and was completed at the end of 2023.
The second was an undisclosed Cayman-domiciled captive for insured risks through 2015 and was concluded in early 2024.
“Completing these transactions is an excellent way to begin 2024,” said Tom Booth, CEO of DARAG.
“They demonstrate the busy year DARAG North America has had and show that there is increased interest for bespoke legacy solutions that enable insurers to achieve finality for their books of business.”
Both transactions were executed by way of novation with the captives and their respective fronting carrier.
Earlier this month, DARAG acquired a Hawaii-domiciled captive carrying a portfolio of workers’ compensation business.
In October, DARAG concluded a novation agreement between an undisclosed Benelux based captive, the captive’s policyholder and DARAG’s German insurance carrier DARAG Deutschland AG.
In July, it was announced that DARAG had concluded two transactions with undisclosed North American captive insurance companies.
“Agreements like these are vital in supporting our clients, allowing our counterparties to release capital, achieve full legal finality and operate more efficiently,” said Joel Neal, executive vice president, M&A, at DARAG North America.
“The conclusion of these deals also shows the continuation of a successful partnership with Guy Carpenter’s captive segment, who advised both sellers.”
Luxembourg licences five new captives in 2023
Luxembourg licensed five new reinsurance companies in 2023, of which the majority are considered captives.
There were also five reinsurance company closures in 2023, meaning the total number of reinsurance companies domiciled in Luxembourg in 2023 remained the same as in 2022 at 195.
Luxembourg’s total gross written premium for 2022 was €12bn, and its assets under management (AuM) was €25.6bn. The 2023 figure will be available later this year.
Luxembourg is the largest captive domicile in the European Union, well known for its equalisation provision which makes it a popular destination for reinsurance captives.
The regulator does not publicly distinguish between reinsurance captives and reinsurance companies, but the vast majority of its 195 reinsurance licences are considered captives.
The potential introduction of PCCs in Luxembourg has been debated in recent years, but one barrier to progress is figuring out how it would work in tandem with the equalisation provision.
Valerie Scheepers, head of the non-life and reinsurance department at the Commissariat aux Assurances, previously told Captive Intelligence that PCCs are “clearly on the radar” and the regulator is open to developing new regulation to the extent that there is demand for it.
Captive Intelligence published an article in December, detailing that Luxembourg’s established and attractive equalisation provision, in addition to its long-standing reputation, are expected to maintain the jurisdiction’s popularity as an EU domicile choice for reinsurance captives, despite increasing competition from new European domiciles such as France and Italy.
Switzerland sees trend in captives re-domesticating from Liechtenstein
A number of Swiss owned captives that were previously domiciled in Liechtenstein are now launching new captives or re-domesticating back to Switzerland.
Switzerland and Liechtenstein are heavily intertwined, and Swiss companies have historically registered their captives in Liechtenstein as a means of accessing freedom of services as Liechtenstein is in the European Union, while being able to write in their home country.
Daniele Zucchi, managing director at Sigurd Rück, said that one reason for this new trend is because the business models that these companies have no longer requires cooperation with the EU market.
“We have seen a wave of re-domiciliation from Liechtenstein, but we have also seen a wave of captives redomiciling from other places like Bermuda.” Zucchi told Captive Intelligence.
Captive Intelligence reported last year that telecommunications company Swisscom had re-domesticated its Liechtenstein reinsurer to Switzerland, first establishing a new subsidiary and then merging in the existing vehicle.
Swisscom Re AG has received a C1 reinsurance licence, rather than a C3 typical for a Swiss captive, and is self-managed.
Matthias Rittmeier, senior captive insurance consultant at Marsh Captive Solutions, said that some Swiss companies that are or were previously active in Liechtenstein, or other domiciles, are under a lot of public scrutiny, and must be seen to be doing everything in best practice.
“I think the base erosion and profit shifting (BEPS) initiative and this public scrutiny have contributed to internal re-evaluations of the captive’s location and supported the board decisions to move their captives back to Switzerland or at least to consider it as a serious alternative to the status quo,” he said.
Despite some captives looking to leave the country, Rittmeier said Liechtenstein is still in demand.
“It’s a very small domicile, but it is very good at filling a particular niche for direct writers, not just captives, as it’s the only country where you can direct write without any issues straight into Switzerland and into the European Union,” he told Captive Intelligence.
“If you have a company in Switzerland, you need to open branches in the various EU member states.”
Rittmeier said that as far as he is aware there are no new captives from Switzerland setting up in Liechtenstein.
“If anything, it’s on the reverse, but there are other companies that are still interested in Lichtenstein.”
Captive intelligence published a long read in February detailing that Switzerland has all the infrastructure to be a leading European captive domicile, but the jurisdiction could benefit from greater self-promotion on the international stage.
Peter Strauss pleads guilty to fraud, captive premiums implicated
Peter Strauss, a captive insurance author, lawyer and principal of South Carolina-based Hamilton Captive Management (HCM), has pleaded guilty to aiding and abetting the transfer of funds from the owners of a renewable energy company, to prevent the government from taking the funds into its control.
Strauss was also the owner of law firm, Strauss Law Firm, that specialised in estate and tax planning, asset protection and the implementation of captive solutions.
He has published several books on captive insurance, including Captive Insurance Companies for the Small Business Owner, and The Definitive Guide to Captive Insurance Companies.
On 9 February, the U.S. Attorney’s Office in the District of South Carolina published a statement stating that evidence had revealed Strauss knowingly transferred millions of dollars for Jeff and Paulette Carpoff, two individuals who have since been convicted and sentenced for their roles in the large criminal fraud scheme.
The Carpoffs owned California-based renewable energy products company, DC Solar Solutions, and DC Solar Distribution.
Following the execution of search and seizure warrants related to an investigation into the Carpoffs’ company, Strauss received $11m from the Carpoffs.
The first $5m was transferred into Strauss’ interest on lawyers’ trust account (IOLTA) and distributed to various criminal defence attorneys and bankruptcy counsel, as well as to Carpoffs’ captive insurance funds, managed by Strauss’ captive management company.
On 28 December, Strauss received an additional $3m, used to pay the Carpoffs’ captive premiums.
On 15 January 2019, the Carpoffs wired Strauss $3m into Strauss’ IOLTA account, and the funds were comingled in Strauss’ IOLTA account and spent over the next few months.
By pleading guilty, Strauss admitted that by the time of the $3m transfer, he knowingly transferred and aided and abetted the transfer of funds from Carpoff to prevent the government’s authority to take such property into its control.
Strauss has agreed to pay $2.7m in restitution to the Federal Clerk of Court at or before the sentencing.
On 24 January 2020, Jeff Carpoff pleaded guilty in California to money laundering and wire fraud and was sentenced to 30 years in prison, while Paulette Carpoff pleaded guilty to conspiracy to commit an offense against the US and money laundering.
She was sentenced to 11 years and three months on 28 June 2022.
US District Judge Richard Gergel accepted Strauss’ guilty plea and will sentence him after reviewing a sentencing report.
Strauss faces a maximum penalty of five years in federal prison. He also faces a fine of up to $250,000, restitution, and three years of supervision to follow the term of imprisonment.
On 18 December 2018, the FBI and other federal law enforcement agencies executed numerous search warrants on the businesses associated with DC Solar, as well as the personal residences of the Carpoff’s.
Several seizure warrants were also executed on bank accounts and assets associated with DC Solar and its principals.
The search warrants were conducted in conjunction with a large-scale investigation regarding an investment fraud and money laundering scheme being operated by the principals of DC Solar.
At the time, federal authorities alleged that the Carpoff’s committed wire fraud and tax fraud and diverted investors’ money for personal use.
The Federal authorities also alleged that DC Solar manufactured only a small percentage of the mobile solar generators and created fictitious lease agreements to show their investors in order to obtain investments.
North Carolina licence 49 new captives in 2023
North Carolina licensed 49 new captives in 2023, while there were 32 surrendered licences, taking the total number of captives in the domicile to 311, compared to 294 in 2023.
There were also 28 new cells and series licensed by the State, taking the total to 758 compared to 730 in 2022.
The number of single parent captives increased by 19 to 234 in 2023, while the number of special purpose vehicles increased by three to 21. The number of protected cell companies declined from 51 to 46.
Of the 311 year-end total, 234 are single parent captives, 46 are protected cell companies, 10 are risk retention groups, and 21 are special purpose captives.
North Carolina’s total gross written premium for 2022 was $1.3bn. The 2023 figure will be available later this year.
“Since the passage of the Captive Insurance Act 10 years ago, North Carolina’s program has experienced tremendous growth,” said North Carolina’s Insurance Commissioner Mike Causey.
“I am excited that the Department’s captive insurance program continues to attract businesses to our state.”
The licences granted by the State during 2023 were both for new insurer formations as well as re-domestications to North Carolina from other domiciles.
Licenced captive insurers represent a wide variety of industries including healthcare, construction, financial services and insurance.
Missouri adds four new captives in 2023
Missouri licensed four new captives in 2023, while seeing three surrender their licence, taking the total number of captives in the domicile to 55 at year end.
There were 54 active captives at the end of 2022.
Of the four new captives licensed in Missouri last year, three were single parent captives, and one was a special purpose life reinsurance captive (SPLRC).
Of the 55 year-end total, 44 are single parent captives, one is a cell company, one is an individual cell, one is an agency captive, one is a group or association captive, two are branch captives, and six are SPLRCs.
Missouri’s total gross written premium for 2022 was $3.5bn and its assets under management was $14.1bn. The 2023 figures will be available later this year.
PoloWorks launches new Guernsey captive manager
Insurance services provider PoloWorks has announced the launch of Polo Insurance Managers (PIM) in Guernsey in a bid to fill the gap left by recent consolidation in the captive management market.
PIM has received ‘approval in principle’ from the Guernsey Financial Services Commission (GFSC) and will be supported by Polo Commercial Insurance Services which employs 350 UK based insurance specialists.
Mark Elliott, an experienced ILS and captive manager who is also CEO of new legacy insurer Marco Re, has been announced as CEO of PIM.
Elliott said: “We see a tremendous opportunity as a truly independent insurance manager to offer our existing and future clients with a comprehensive and bespoke insurance management service”.
Captive Intelligence reported in January that Strategic Risk Solutions had agreed to buy Robus from Adonagh Group, while we understand two of the remaining independent insurance managers in Guernsey are in advanced discussions with proposed acquisition partners.
PIM said its aim is to provide existing and prospective captive owners with “an unparalleled level of personalised and comprehensive service, tailored to meet their unique insurance needs”.
Paul Andrews, CEO of PoloWorks, said: “As part of the PoloWorks business, PIM will be able to leverage substantial in-group expertise and modern technology to offer a market beating insurance manager proposition.”
Guernsey licences four captives, one PCC in 2023
Guernsey licensed four new pure captives and protected cell company (PCC) in 2023, while eight pure captives surrendered their licences.
At 31 December, 2023 there were 199 active pure captives compared to 203 at year end 2022.
Six PCCs also surrendered their licence and there was no change in the number incorporated cell companies (ICCs).
At 31 December, 2023 there were 46 active PCCs and 15 ICCs. Within these cell companies there are 216 active cell, of which 123 are classed as doing captive business.
The domicile has historically been a go-to jurisdiction for UK-based corporates, as well as a strong option for international businesses.
Outside of captives, Guernsey has 55 commercial general insurers, 24 commercial reinsurers, 19 commercial life insurers and 42 special purpose vehicles.
Butler re-domiciles captive to Vermont, transforms into cell company
Butler University’s student run captive insurance company has completed a domicile move to Vermont and been transformed into a protected cell company as it eyes collaboration with other educational institutions.
Butler first formed its captive in Bermuda in 2017 as the MJ Student-Run Insurance Company, Ltd. It insures livestock mortality, inland marine risk and product liability.
Since inception, the captive has played a key role in supporting students on the Lacy School of Business risk management and insurance course, giving them hands on experience of underwriting real loss exposures, undertaking feasibility studies and business plans, analysis losses and adjusting claims.
Vermont’s captive regulators licensed The Davey Captive Insurance Company, managed by Hylant Global Captive Solutions, on 16 November, 2023.
Speaking on the Global Captive Podcast Victor Puleo, chair of risk management and insurance at the Lacy School of Business, and Craig Caldwell, Dean at the School, explained the latest evolution of the captive.
The captive’s formation in 2017 was based on a five-year feasibility study so having reached the end of that business plan cycle, they reached out to Claire Richardson, a captive consultant at Hylant, who had been a student at Butler and president of the captive in its early years.
“We got together and said: ‘What’s the next step? There is so much more we can do with this captive,” Puleo said.
“We had Hylant complete a strategic review and part of that was reviewing potential domiciles, including staying in Bermuda.”
Students in the risk management class completed the domicile review and Vermont was in the final two.
Puleo explained that some of Butler’s business partners have captives domiciled in Vermont, while the State’s former captive regulator David Provost had previously spoken at the University and its current deputy commissioner for captive insurance, Sandy Bigglestone, had also visited the campus.
Cell captive
Aside from the domicile move, the other big change for Butler’s captive is the change of type into a sponsored captive insurance company, known as a protected cell company (PCC) in other jurisdictions.
“By having the cell structure in the model that we’ve redomesticated to Vermont it does allow us a couple of opportunities,” Caldwell said.
“One is the education of our own students. They’re going to get an opportunity to explore some new techniques and new ways of reducing total cost to risk. But we also then have a curricular piece that we are well positioned to share with other universities.”
Butler is a private university, but Puleo explained most of the risk management and insurance courses in America, particularly the larger ones, are at state schools.
It is Butler’s proposal to offer use of the cells to these state schools so they can be included in their own curriculum and courses.
“What we really wanted to do is give a platform for the other universities with risk management and insurance programmes, where they could use a cell in their curriculum,” Puleo said.
“They could literally adopt a course in captive management and actually help to insure the risk at their universities – do a feasibility study, do the analysis, the whole nine yards.
“That is a huge educational opportunity for the students at the other universities that may not be getting that experience because they don’t have a captive.”
Puleo said they are not excluding universities that do not have risk management and insurance programmes, so if a risk manager at a university does not have their own captive but wanted to utilise a Butler cell that would be a possibility.
“Our goal though really is to expand to the undergraduate and graduate space in risk management insurance, the world of captives and actually have them use this experiential model that was developed by Butler University.”
Richardson believes this latest evolution of the Butler captive journey is a demonstration of the broader opportunity present in higher education for captives.
“The sponsored cell structure is going to aid in not only bringing the captive world into higher education, but also higher education to captives,” she said.
“We are going to be able to get really involved with the students and work not only with Butler students, but as the captive structure grows and evolves bringing on other schools’ and universities’ cells to the structure.
“So while we’re focused here on Butler and want to make sure Butler students are serviced and the Butler captive is also up and running and very significantly innovative, the next portion of that is bringing in additional students to Butler University, to other universities and showcasing the wonderful industry that captive insurance is.”
Listen to the full podcast with Butler’s Craig Caldwell and Victor Puleo and Hylant’s Claire Richardson on Captive Intelligence here, or on any podcast app. Just search for ‘Global Captive Podcast’.