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AM Best affirms rating of ITOCHU 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 Bermuda-domiciled NEWGT Reinsurance Company. The outlook for the ratings is stable.

NEWGT is the wholly owned captive owned by ITOCHU Corporation, one of Japan’s largest general trading companies.

The captive provides reinsurance protection against group-related risks across various regions.

A majority of NEWGT’s business comes from ITOCHU-related marine business, while the remaining portfolio consists of a diverse mix of non-life business lines, including theft, renters, and group personal accident.

Notwithstanding the volatility in the major lines of marine cargo due to the impact of commodity price fluctuations, AM Best expects that NEWGT’s operating performance will remain profitable over the intermediate term.

AM Best said NEWGT is well-integrated within the group with respect to risk management, corporate governance and internal control systems.

The company has a “moderate level” of reinsurance dependency, but its exposure to potential credit risk is partially mitigated by a diversified reinsurance panel.

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

NEWGT’s balance sheet strength is well-supported by its risk-adjusted capitalisation, which is assessed at the strongest level, as measured by Best’s capital adequacy ratio (BCAR).

The company’s capital base is expected to remain sufficient to support its underwriting portfolio over the medium term.

NEWGT’s operating performance has been consistently positive during the most recent five-year period.

For the fiscal year ended 31 March 2023, the company recorded notable growth in both premium income and net profit.

AM Best said negative rating actions could occur if NEWGT’s risk-adjusted capitalisation deteriorates, such as from heightened underwriting risk or an excessive dividend pay-out to its parent.

“Negative rating actions could also arise if there is significant deterioration in ITOCHU’s credit profile, including its operating profitability, financial leverage and interest coverage levels,” AM Best said.

“Positive rating actions could occur if NEWGT demonstrates sustained and notable improvement in its underwriting and operating profitability for a period of time, while maintaining a robust level of risk-adjusted capitalisation.”

GCP #96: Andy Jeckells at I-RE, Kirk Watkins and the London & Capital investments update

Richard Cutcher
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GCP #96: Andy Jeckells at I-RE, Kirk Watkins and the London & Capital investments update
Andy Jeckells, I-RE
Shadrack Kwasa, London & Capital
Rabbani Wahhab, London & Capital
Kirk Watkins, Prometheun Risk Solutions

In episode 96 of the Global Captive Podcast, supported by the ⁠EY Global Captive Network⁠, Richard brings three distinct segments including a quarterly investments update, and discussions on voluntary benefits and captive solutions for the US middle market.

01.25 – 19.55: Andy Jeckells, co-CEO at I-RE, discusses why he is targeting America’s middle market for further expansion and uptake of captive solutions. I-RE are captive underwriting specialists based out of London, Bermuda and Miami. Andy shares his history, the I-RE proposition and his views on the captive landscape more broadly for the US middle market.

20.27 – 32.14: We have our latest quarterly investments update from London & Capital with Shadrack Kwasa, executive director, and Rabbani Wahhab, senior fixed income fund manager.

32.56 – 43.54: Kirk Watkins, founder and president of Promethean Risk Solutions, discusses captive-backed voluntary benefits and affinity programmes with Gary Osborne and Dave Provost, two of his advisory board members.

For the latest captive insurance news, analysis and thought leadership visit ⁠Captive Intelligence⁠ and sign up for our ⁠twice-weekly newsletter⁠.

AM Best affirms ratings of Schlumberger captives

Luke Harrison
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0

AM Best has affirmed the financial strength rating of A (excellent) and the long-term issuer credit ratings of “a+” (excellent) of Bermuda-domiciled Castle Harbour Insurance and Harrington Sound Insurance. The outlook for the ratings is stable.

Both are single parent captives owned by oilfield services giant, Schlumberger Limited.

Each captive carries relatively large limits within its designated coverages in general liability and property, but each writes a broad scope of business and has considerable geographic diversification.

They also maintain “significant” retentions, but are readily manageable within their respective capital bases and organic surplus growth, offset by periodic sizable dividends.

The ratings of Castle Harbour and Harrington reflect their balance sheet strength, which AM Best assesses as strongest, as well as their strong operating performance, neutral business profile and appropriate enterprise risk management (ERM).

The ratings also take into consideration the captives’ strategic importance in providing insurance for the parent and its subsidiaries.

Castle Harbour and Harrington maintain the strongest level of risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), and display “excellent” liquidity measures.

The operating performance assessments reflect the companies’ underwriting results driven by good loss history and benefiting from inherently low expense structures.

“As captive insurers of SLB, the companies are an integral part of the parent’s ERM framework, which includes defined risk controls and optimization of the captives’ capital,” AM Best said.

“Further, AM Best recognizes the financial flexibility afforded by their parent company, and their strategic importance across SLB.”

Domicile Wars: Dublin “back on the radar” as regulatory changes likely

Luke Harrison
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Domicile Wars: Dublin “back on the radar” as regulatory changes likely
  • Ireland traditionally popular for direct writing captives
  • Solvency II led to a reduction in new formations
  • Ireland is facing increasing competition from other European domiciles
  • Long application process putting off prospective captives
  • Open dialogue under way with Central Bank to improve procedures

There is a sense of optimism that potential changes concerning captive regulatory procedures at the Central Bank of Ireland (CBI) could help put Ireland “back on the radar” after a period of stagnant captive activity.

Ireland was an early pioneer in direct writing captives in Europe, and experienced swift growth following the inception of its captive regulation, with the first direct writing captive formed in 1989.

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MGAs, insurtechs, embedded players target of Boost Re proposition

Luke Harrison
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The launch of Boost Re allows partner companies to reap the benefits of being full stack, without requiring them to be fully regulated, according to the company’s founder and CEO, Alex Maffeo.

Boost Insurance launched Boost Re in October as the latest piece in the company’s ‘insurance-as-a-service stack’.

“Working with us can provide them with the benefits of being full stack, without requiring them to become a fully regulated insurance company,” he told Captive Intelligence.

Maffeo said the insurance industry is heavily regulated, and building an insurance business from scratch is complex and requires a “significant investment of time and money”.

Maffeo said Boost is a six-year-old growth stage insurtech built for the sole purpose of making it more cost effective for companies to transact in the insurance industry.

“We always wanted to build back in the stack, and Boost Re is the milestone that we have been building towards,” he told Captive Intelligence.

“It is about having direct access to the capital to deploy reinsurance capacity for all of our programmes, and for our partners that sit in front of us and use our infrastructure.”

For managing general agents (MGAs), insurtechs, and embedded insurance customers, Boost Re’s captive-as-a-service solution offers the ability for partnered companies to build their own insurance operations.

For alternative risk capital providers, Boost Re offers a conduit to deploy reinsurance capacity across Boost insurance programmes through captive cells.

Boost Re has around 10 different reinsurer relationships, which take 100% of the quota share behind programmes that Boost supports as the administrator.

“If a client wants to provide their own capacity for their programme, rather than building a captive themselves from scratch, they can basically rent one of our cells,” he said.

Boost Re would then manage the captive on their behalf.

Maffeo said there are two main uses for the cells themselves.

“The first is to have direct access to capital,” he said. “Everybody knows about the ILS and alternative capital market strategy in the reinsurance world.

“If the client is any sort of asset manager or risk capital provider, they can deploy a dedicated cell through Boost to participate in the reinsurance alongside one of our trusted reinsurance partners that are on the treaties.”

The second use for the cells is for what Maffeo defined as full-stack embedded insurance programmes or captive-as-a-service.

“Companies that are on the distribution side, such as insurtechs, MGAs or embedded insurance partners, can participate in their own risk on the back end,” he said.

“For those programmes, both the distribution and capacity are provided by the same entity.”

SGS Bermuda captive receives ‘Excellent’ rating

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 Bermuda-domiciled Transmonde Services Insurance Company Limited. The outlook for the ratings is stable.

Transmonde is a single parent captive owned by Switzerland headquartered SGS SA, an independent inspection, certification, testing verification and training services company.

Transmonde provides professional, property, cyber, general and pollution liability coverages to subsidiaries of SGS SA.

The ratings reflect Transmonde’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.

Partially offsetting these factors are Transmonde’s high retentions and concentration in liability lines with significant loss severity potential, though the company has experienced favourable loss experience.

Transmonde has maintained conservative underwriting leverage ratios, as surplus has remained strong to support its business.

The captive has a history of conservatively distributing excess capital back to SGS.

“The company has posted low loss and loss adjustment ratios, which reflect SGS’ robust and effective risk management,” AM Best said.

“Its relatively high per-occurrence retentions are mitigated by significant deductibles and conservative reserving practices.”

Ed Koral to lead WTW captive consulting in North America

Richard Cutcher
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Ed Koral to lead WTW captive consulting in North America

Experienced captive consultant Edward Koral has been promoted to lead WTW’s captive consulting activities in North America.

Koral joined the broker in December 2021 as a director of risk and analytics, having previously worked for BDO, Deloitte and Marsh.

In July, he co-authored a Thought Leadership article for Captive Intelligence on premium and cost allocation: “The dismal science that pays dividends”

Koral has 35 years of experience with captives and alternative risk structures and started his career with Johnson & Higgins.

He served six years on the Vermont Captive Insurance Association (VCIA) board.

In 2019 Koral received VCIA’s Captive Crusader award in recognition of his service to the captive market.

David White joins EdRISK, edHEALTH as chief financial and operating officer

Luke Harrison
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David White joins EdRISK, edHEALTH as chief financial and operating officer

Former AIG captive specialist David White has been appointed the new chief financial and operating officer for EdRISK and edHEALTH.

EdHEALTH is a group medical stop-loss captive for higher education and secondary schools, which recently converted to a cell structure.

The captive has more than $325m of annual funding and more than $18m of capital reserves.

The edHEALTH programme is a part of edRISK, a sponsored captive domiciled in Vermont.

“I am so proud that David has agreed to join our organisation,” said Tracy Hassett, president and CEO of edRISK and edHEALTH.

“His broad skill set, intelligence, innovative yet pragmatic thinking, and commitment to the financial well-being of our member-owners will benefit our schools, captives, and business partner.”

White has more than 20 years of experience in the captive industry, including 13 years as vice president of US captive operations at AIG.

He has also served as edHEALTH’s captive manager since its formation and is the former chair of the Vermont Captive Insurance Association’s (VCIA) legislative committee.

“Education is so personally important to me,” White said. “Having this opportunity to join edRISK and edHEALTH full-time, especially as it is growing and increasing services offered to schools, is an honour.”

“I look forward to partnering with our schools to maximize opportunities for having their insurance perform well, both financially and how it serves employees’ overall health and well-being.”

EdRISK CEO Tracey Hassett was interviewed for episode 38 of the Global Captive Podcast in September 2020. Listen to the episode here.

10% of EU captives account for half the total premium – SCOR

Luke Harrison
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10% of EU captives account for half the total premium – SCOR

A study by SCOR of European Union-domiciled captives has found that around 10% of captives account for half the total premium, while a quarter write only one line of business.

The European Captives report has been researched using the latest data from Solvency and Financial Condition Reports (SFCRs) filed by 189 EU-domiciled captives.

The results highlighted a rise in the number of captives in Europe over the past two years, mostly driven by increasing premiums, higher retentions, and capacity constraints, particularly for emerging risks.

Eighty per cent of the captives in the report are domiciled in Luxembourg or Ireland.

These countries account for 67% of reported gross written premium and 69% of reported assets.

Other captives considered in the study are domiciled in Denmark, Germany, Gibraltar, Malta, the Netherlands, Norway and Sweden.

Around 10% of the captives account for half the total premium in the sample, and for the median captive, premium has grown by 7.1% since last year.

“A growing number of corporate groups in Europe believe that captives have a key role to play in their risk management strategies,” the report said.

“As a result, we have seen a rise in the number of captives in Europe over the past two years, which is mostly driven by increasing (re)insurance premiums, higher retentions, and the capacity constraints on the market for emerging risk as cyber.”

The headquarters of the captive owners were mostly based in western European countries, primarily France, Germany and Belgium.

All of the US-based groups in the sample domiciled their captives in Ireland.

Gross annual property and casualty premiums written by captives in the sample amount was €5.7bn, largely driven by a few major players.

Property was the most common line written, with 76% of the captives writing some form of property risk, amounting to an average of 46% of the premium.

Liability business is the second most frequent line, written by 67% of the captives, amounting to 16% of the premium on average.

A quarter of the European captives (23%) in the SCOR sample write only one line of business.

A third (34%) of the captives in the sample write direct business, while more than half (59%) of the captives were utilised for reinsurance.

Technical provisions (gross of reinsurance and net of recoveries) amounts to €8.2bn, which is €43m on average per captive.

“While we believe our selected sample is large enough to be representative of the European captive landscape, it is by no means exhaustive,” the report noted.

Rudnai expecting faster captive application process in Texas

Luke Harrison
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Rudnai expecting faster captive application process in Texas

The Texas Department of Insurance (TDI) has five pending applications for new captives, the State’s new captive specialist, Robert Rudnai, told Captive Intelligence.

The TDI re-hired Robert Rudnai as a captive specialist in October, where he is responsible for licensing and monitoring Texas-domiciled captives.

He previously worked at the TDI as a financial analyst, where he provided oversight to captives, and evaluated captive applications.

“Right now, we have five pending applications, and we recently met with several interested parties at the Texas Captive Insurance Association (TxCIA) annual meeting a couple weeks ago,” he said.

The appointment of Rudnai was the result of State lawmakers directing the TDI to employ a specialist to support captive insurance oversight after lobbying from the Texas Captive Insurance Association (TxCIA).

“It was primarily a push by the captive industry,” Rudnai told Captive Intelligence.

“As a state agency, we are restricted from advocating to the Legislature,” he said. “TDI viewed funding this position as clear direction from lawmakers and acted quickly.”

Rudnai believes his appointment should speed up the captive application process in Texas and hopefully make the State more attractive as a domicile option.

“Captives is all I do, and the only thing I deal with,” he said.

“If I have a new captive application, then I am available to look at it and process it a little bit quicker, but it all depends on the completeness of applications.”

Members of the Texas captive industry had previously expressed concern over the length of time it was taking to establish a captive in Texas compared to other domiciles.

“The issue in Texas right now is staffing,” Andrew Marson, managing director at Strategic Risk Solutions (SRS) and a TxCIA board member, told Captive Intelligence for our Texas long read published in January 2023.

Rudnai believes the TDI now has the capacity to get a captive application completed within 45 days, if provided with a complete application.

He also said he has familiarity with the larger captive managers and those based in Texas, which he believes will benefit the domicile.

“I’m somewhat of a known quantity to them, which hopefully should give them and their clients a little bit of belief, but it is up to them to take the first steps.”

Since his first stint at the TDI, he said there is more variety in the types of captives that the Department is seeing.

“There’s a lot more variety in the captive ownership, and more companies are starting to take advantage of this opportunity,” he said.

“We’ve seen premiums grow quite a bit over the 10 years or so, and I think folks are starting to take Texas seriously as a captive domicile.”

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