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GCP #92: Vesttoo and its relevance, impact on cells, captive collateral & fronting
In episode 92 of the Global Captive Podcast, supported by the EY Global Captive Network, Richard is joined by three guests to debate what impact and relevance the unfolding fraudulent collateral scandal concerning insurtech Vesttoo has for cell structures and collateral in the captive market more broadly.
04.22 – 16.13: Joseph Holahan, Partner at BakerHostetler, reacts to the Vesttoo case and explains some of the potential legal ramifications for cell structures in Bermuda and beyond.
16.18 – 22.00: EY’s Andrew Christie explains the different types of collateral captives typically use, shares insight into how captives and fronting companies usually work together on collateral and what impact, if any, the Vesttoo fallout might have on fronting and collateral arrangements for captives.
22.00 – End: Sandy Bigglestone, Vermont’s deputy commissioner for captive insurance, explains why she took the step of writing to local captive managers requesting they report if they have any exposure to the Vesttoo case.
Further reading: Richard recommends the Artemis.bm coverage of the ongoing Vesttoo story and to keep up to date with each development.
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Africa Specialty Risks launches captive solutions offering
Pan-African focused reinsurance group Africa Specialty Risks (ASR) is rolling out a new Captive Solution offering on the continent.
Mikir Shah, CEO of ASR, said the company’s captive offering is focused on a partnership model, backed by ASR’s underwriters.
Captive Solutions will include establishing, managing and administering the captive, while ASR is deploying its own capacity and sharing the risk alongside the captive owner.
“This unique captive structure can proactively lower total cost of risk, enhance risk management, and also turn the captive into a profit centre,” Shah said.
Krishna Bheenick, managing Director of ASR Mauritius, said: “Companies operating in and across Africa are faced by a sustained lack of insurance capacity.
“With the launch of this new captive solutions offering, we are now the go-to partner, helping companies de-risk investments and business operations by alleviating capacity constraints and improving speed to market.”
To date, ASR has written around $1.1bn in risk exposure in Mauritius across a range of coverages such as construction, energy, liability, property, political violence and terrorism, and trade credit and across industries including hospitality, financial services, real estate, trading, infrastructure, transport and logistics.
It is not clear how ASR is facilitating its new captive offering, but Mauritius is the only African jurisdiction with protected cell company and captive legislation in place.
CAPINASIA partnership brings ICCIE education to Asia Pacific, Middle East, Africa
CAPINASIA Knowledge Services, India, has entered into a strategic partnership with the International Centre for Captive Insurance Education (ICCIE) to promote ICCIE’s captive insurance certification programs across the Asia Pacific, Middle East, and Africa regions.
CAPINASIA said it is dedicated to advancing captive insurance education in these regions and has identified several distribution partners for each area.
ICCIE executive director Mitch Cantor expressed his enthusiasm about the new partnership.
“While we have had some students in Asia and the Far East, we are eager to expand our efforts in this region,” he said. “There is a tremendous opportunity for growth for us there.”
In Southeast Asia (SEA), the Singapore College of Insurance (SCI) has been appointed as a distribution partner, and a tripartite agreement was established between ICCIE, CAPINASIA, and SCI on in August 2023.
Andrew Christie, director of ICCIE, highlighted that these markets are currently underserved by captive insurance.
“While some jurisdictions still need to develop captive regulation, there are existing and future opportunities for professionals in the captive industry across these regions,” he said.
The Singapore College of Insurance (SCI) is a not-for profit professional training and education body set up in 1974, as part of Singapore’s efforts to develop as a financial hub.
Shalini Pavithran, CEO of the SCI, stated that this partnership provides an “excellent opportunity for captive insurance aspirants in the region to comprehend the global captive insurance industry and acquire the necessary knowledge to work in and with the sector”.
The SCI will be participating in the Asia Captive Conference on 7 September, 2023 to raise awareness about SCI, ICCIE and the relevant programmes available to build the capacity of captives.
The SCI is a not-for profit professional training and education body set up in 1974, as part of Singapore’s efforts to develop as a financial hub.
NFP RISC hires Wescott as director of US captive management operations
Amanda Wescott has joined NFP’s Risk and Insurance Strategy Collective (RISC) as vice president, director of US captive management operations.
In her new role, Wescott will assist with the growth and advancement of risk management solutions for new and existing clients, while leading a team of captive insurance professionals. She will report to Jonathan McKenzie, head of US captive management operations
Wescott will collaborate with Kara Tencellent and Tracy Stopford, co-leaders of RISC, along with Jonathan McKenzie, to advance operational and business development initiatives.
“I feel very fortunate to bring my industry experience and knowledge to this extremely talented and dynamic team,” said Wescott.
“With an impressive foundation and shared vision for growing the captive practice, we will further differentiate the value we offer to clients, colleagues and industry service professionals we work with closely.”
RISC is a specialty practice that provides a range of captive management solutions.
Wescott joins RISC with more than 15 years of captive and risk management experience.
She recently served as vice president and senior client team leader at Marsh in Vermont, where she coordinated the efforts of client services teams, helped guide clients’ captive programmes and worked with them through the captive formation process.
Wescott is an active member of many trade associations and will continue to serve on various committees within the captive industry.
“Adding an industry veteran like Amanda will help us build on our momentum in the alternative risk solutions space,” said Stopford.
“The breadth of her experience, depth of captive market knowledge and extensive industry relationships will help drive growth and enhance our ability to help clients identify and understand creative and innovative alternative risk solutions that align with their needs.”
Data, pricing key for extended warranty success, Deere considers European captive
John Deere’s Vermont captive has grown significantly in the past four years, both in extended warranty and corporates lines, according to Aileen Krehbiel, manager of captive insurance programs at the manufacturing and agricultural equipment giant.
John Deere Indemnity was originally set up in 2004 to support the group’s extended warranty business, but today also writes lines including casualty, some of the group’s property deductible, product liability, trade credit and accesses the US government’s Terrorism Risk Insurance Program, commonly referred to as TRIA.
Krehbiel moved into her current role overseeing the captive programmes in 2019, where she was tasked with exploring how else the group could utilise the captive.
“In the past four years I’ve been involved, we’ve actually doubled our written premium, we’ve grown our extended warranty portfolio, we’ve added some product liability coverage, property deductible, trade credit,” she said on the Global Captive Podcast.
“This past year we moved our qualified self-insured workers’ compensation programme into the captive, which was a significant undertaking.
“And we’re always looking for new opportunities to just better optimize our risk financing, especially with the hard market conditions and thinking about ways to better utilize our captive.”
The captive plays a key role in the extended warranty programmes Deere offers its customers and Sammi Jones, senior financial analyst at the company, said this puts the captive in a central position within the business.
The extended warranty products are big piece of an enterprise wide initiative which is growing lifecycle solutions and recurring revenue.
“With us managing extended warranty in our captive, we’re really connected directly to this vital company initiative, so we can use our data and our understanding of the programmes to collaborate with the various business teams involved,” Jones said.
“Utilizing our captive to manage these, we’re also able to help streamline on the financial reporting side. We have the data, we understand the data, so we can pull it together to see a full picture of our extended warranty financial performance.”
Krehbiel said getting the structure right for extended warranty is key, while pricing is an area that needs a lot of attention.
Deere has a C corporation warranty company that writes the product as a service contract with the captive then reinsuring some of the risk.
“On average I’d say our extended warranty contract length is around four to five years,” Krehbiel explained.
“So pricing is very important because you don’t understand if you are profitable or not until a ways down the road, so making sure you’re analysing data, understanding what your expected claims will be and that you’re pricing appropriately.
“We are definitely getting quite a bit more involved in data analytics with our programme. It’s just trying to understand the right amount of data that you have and how to analyse it to help with that pricing.”
Heidi Rabtoy, chief examiner at the Vermont Department of Financial Regulation, said for regulators looking at extended warranty, pricing is also key.
“We always are looking at the pricing, how the premium’s getting earned over the warranty period,” she said. “What do the losses look like? Certainly the more historical your programme is, the more information you have to gather, analyse, and then assimilate that into your pricing policies and reserving policies.
“That would be, I would say, the biggest challenge and what we take a look at from a regulatory perspective.”
European step
The captive has grown significantly over the past four years, particularly as it moves into more corporate insurance lines for the group.
There are other projects the Krehbiel is keen to evaluate, however, including international employee benefits, cyber and directors and officers insurance.
“The key area of focus right now for us though is looking at the European captive landscape,” she added.
“We’re actually considering adding a second captive over in Europe to support our extended warranty business. So that’s taken quite a bit of time for our captive team at Deere.”
GCP Short: The John Deere captive, evolution and future
In this GCP Short, produced in partnership with the State of Vermont, Richard has another really interesting, and high profile, captive case study, as listeners hear from the John Deere captive team.
The manufacturing and agricultural equipment giant has owned a captive in Vermont since 2004.
Aileen Krehbiel, manager of captive insurance programs at John Deere, and Sammi Jones, senior financial analyst at the company, discuss the captive’s profile today, and how its grown and evolved over near 20 years.
We also hear from Heidi Rabtoy, chief examiner at the Vermont Department of Financial Regulation, to provide some perspective on how they regulate older, larger captives and the unique considerations concerning extended warranty business.
For more information on the State of Vermont’s captive sector and regulation, visit their Friend of the Podcast page.
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ZGEBS to launch ‘Underwriting Year’ customer reporting capability
Zurich Global Employee Benefits Solutions (ZGEBS) is launching an ‘Underwriting Year’ customer reporting capability which it said is a response to a growing demand for the product.
The new Underwriting Year information will allow customers, including captives, to receive insights detailing how their local insurance policies with ZGEBS’ network partners are performing from a profitability perspective consistent with the renewal term; for example 1 April to 31 March.
Premiums and claims can be allocated to the correct underwriting period and customers will have an accurate view of a policy’s underwriting performance.
Daniele Zucchi, managing director of Sigurd Ruck AG, said ZGEBS has been making a “positive step” change in this area for some time and the captive has been “enjoying the steadily increased accuracy and benefits of Underwriting Year information for a number of years.”
Sigurd Rück AG is a Switzerland domiciled captive owned by Italian multinational Saipem.
Collaboration within its global network will allow ZGEBS to deliver Underwriting Year information across 95% of its portfolio.
Zurich said that industry standards were previously limited to a calendar year view and inconsistent across geographies, reducing the ability to conduct a clear assessment of the programme performance.
“Underwriting year data is critical to understand the true performance of your programme,” said Sebastian Willmanowski, Mercer Marsh Benefits multinational financing leader, Europe.
“Zurich has been providing high quality data for many years enabling informed decision making. It is pleasing to see that this standard is now available across almost the entire portfolio.”
ZGEBS is part of Zurich Insurance Company Ltd’s business unit Zurich Integrated Benefits, which brings together the various Zurich businesses providing global expertise in employee benefits (EB).
Gilles Finkestein, head of customer and distribution management for ZGEBS, said: “ZGEBS has, for several years, been working with its network insurer partners and operations professionals to fill data gaps which have been holding back this full capability.
“We are delighted that we are now 95% complete across our entire portfolio, complementing our network covering almost 150 territories, by far the broadest coverage of any Global Benefits Network.”
Large corporates dominate increasing captive activity in Latam
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Captive Intelligence provides high-value information, industry analysis, exclusive interviews and business intelligence tools to professionals in the captive insurance market.