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VCIEL raising profile of captives among Vermont’s students, wider industry

Richard Cutcher
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VCIEL raising profile of captives among Vermont’s students, wider industry

The new Vermont Captive Insurance Emerging Leaders (VCIEL) group is keen to raise the profile of its sector across the State among both students and those working in other industries.

VCIEL was launched in March, in partnership with the Vermont Captive Insurance Association (VCIA), and is being led by a group of younger captive professionals who are keen to tackle the demand for talent in the industry.

Speaking on episode 90 of the Global Captive Podcast Jennifer Gagnon, paralegal at Primmer Piper Eggleston & Cramer PC, and Danielle Brown, captive account manager at Hylant Global Captive Solutions, explained the ambitions and activity of the group.

“We’re really targeting a couple of different demographics,” Gagnon, who chairs VCIEL’s education committee, said.

“We are really interested in targeting younger individuals, students who are looking at their careers and how they want to progress.

“There’s so much variety in the captive industry in terms of how you can serve the industry that we want to make sure that people know it exists and know that it’s here and why it’s so great to be a part of this community.”

The group, however, is also focused on broadening awareness of the captive market to other parts of the State’s economy so a wider pool of talent can be tapped into.

“We’re also targeting people who are also already in certain fields that work well in captives and just may not realise that those jobs are available or that this industry is there for them,” Gagnon added.

“For example, we are working on trying to let attorneys here in Vermont know captive exists. It’s a huge industry in Vermont, you know nothing about it, learn a little about it. It might be something you might be interested in looking into, especially if you have a corporate or insurance background.”

Brown chairs the resources and marketing committee for VCIEL and said success in five years time for the group would be to have raised the profile of the captive industry in Vermont and made it appealing to the next generation.

“I think just having kids from universities seeing the opportunity here and not feeling like they have to leave the State to get a new job and that there’s opportunity here,” she said.

Listen to the full interview with Jenni Gagnon and Danielle Brown on episode 90 of the Global Captive Podcast on the Captive Intelligence site here, or on any podcast app. Just search for the Global Captive Podcast.

Hard market still driving most captive, cell activity in Vermont

Richard Cutcher
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Hard market still driving most captive, cell activity in Vermont

The hard market remains a “significant driver” of new captive formations in Vermont with the jurisdiction on track for another strong year of growth, according to Jim DeVoe-Talluto, assistant director of captive insurance at the State’s Department of Financial Regulation.

Captive Intelligence reported last week there had been 22 new captives formed in Vermont in the first half of 2022.

DeVoe-Talluto said of these, 15 are pure captives, five are sponsored with one association captive and one risk retention group (RRG) too. In addition, there has also been 20 new cells approved.

“I anticipate that cell growth will remain strong as the cell facilities can offer tailored programmes with lower barriers to entry,” he said in a Global Captive Podcast interview at the VCIA conference last week.

There has also been seven captive dissolutions this year, one of which was a re-domestication after merger at the corporate level led the parent to align the group’s headquarters and captive domicile in the same location.

“The resulting net growth through June 30 is 15 captives, which really compares favourably,” said DeVoe-Talluto.

“Over the entirety of 2022 we had net growth of 19 captives, compared to the 41 licences.

“So we’re really thrilled with this growth and it’s resulted in our recognition by several publications as the top domicile in the world measured by active captives so we take pride in that and we take that responsibility seriously, and we’re very excited for that continued growth and commitment to our domicile.”

Looking ahead to the rest of the year, DeVoe-Talluto said plenty more activity is expected this year with applications currently under review and a strong pipeline of inquiries in place.

In the United States it is common for most captive formations to take place in the second half of the year.

“We’ve had several new business meetings, we have active reviews in process,” he added.

“Typically, a lot of companies that are making these decisions for fiscal year end, they’ll reach out to us in the Fall, early November, they’ll get the application going. We definitely see an uptick.

“We do also see companies that will have these initial meetings in the latter part of the year, but they’re looking to target a January 1 licensure. So the bulk of the work then will be done in this year, but then those numbers will be reflected in the subsequent year.”

Four of the new captives formed this year have been from the real estate sector, which DeVoe-Talluto said was “really in response to the challenging property market”.

“We’re definitely seeing that the hard markets a significant driver, particularly in these property placements in high risk regions,” he added.

“And really the problems extend to pricing and availability. So we’re seeing enquiries about ground up coverage, which is an interesting space, because you’re looking at pretty significant capital requirements, but companies are willing to make that commitment because they know that the market is just very, very challenging.

“In some cases, just complete lack of availability with market exits from key traditional players.”

Listen to the full interview with Vermont’s Jim DeVoe-Talluto on episode 90 of the Global Captive Podcast on the Captive Intelligence site here, or on any podcast app. Just search for the Global Captive Podcast.

QBE launches Vermont PCC for MSL business

Richard Cutcher
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QBE launches Vermont PCC for MSL business

QBE North America has established a sponsored protected cell company (PCC) in Vermont with the initial purpose to support medical stop loss programmes.

Champlain Insurance PCC was licensed by the Vermont Department of Financial Regulation on 15 June and is managed by Advantage Insurance Management.

QBE has a long history in America’s medical stop loss market, today supporting 27 captive programmes, including single parent and group captives.

Dale Sagen joined QBE as vice president in accident & health as business development leader, cell captive, in May 2023 and speaking on the Global Captive Podcast at the VCIA conference in August, said adding the option of utilising Champlain was an “opportunity to drive greater results for our clients”.

“It’s very difficult to set up a captive programme,” Sagen said. “So we set this up to essentially make it easier and more efficient for our customers to utilise captives.

“Not necessarily just the rank and file captive programme you see here at VCIA, where sometimes it’s just one large employer, but making it easier for those smaller employers, those smaller advisors that technically don’t have a lot of options out there in the marketplace.

“We see the Champlain Insurance PCC programme as an opportunity for us to provide a better service for our clients and really utilising it from a variety of ways is what we’re most excited about.”

Sagen said that the PCC would make QBE’s service model more efficient and support clients wanting to utilise their own captive or build a group captive within a cell.

“It’s a very effective model for employers and advisors that essentially want somebody to be their risk management partner,” he added.

“As you advance down the supply curve of captive solutions supported by QBE, you’re going to find an area in which you can create your own agency branded programme, a white labelled approach to a group captive.

“You can move to a model where it’s a single parent captive programme using our vehicle. It’s a cell facility, which means that it’s pretty open to just about any risk that our clients are interested in.”

While the focus now is on using Champlain for medical stop loss, Sagen believes it will become useful for property & casualty captives programmes in the future.

“From our perspective, we’re starting with medical stop-loss, but we are a global insurance company,” he said.

“So it’s an area where we will look towards more property and casualty opportunities as they materialise. But our facility now is really focused solely on medical stop-loss.”

The full interview with Dale Sagen will be included in episode 91 of the Global Captive Podcast.

AM Best affirms Saipem captive rating

Luke Harrison
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AM Best has affirmed the Financial Strength Rating of B++ (Good) and the long-term issuer credit rating (long-term ICR) of bbb+ (Good) of Sigurd Rück AG, the Switzerland domiciled captive owned by Italian multinational Saipem. The outlook for the ratings is stable.

Sigurd has a material exposure to credit risk driven by a cash-pooling agreement with the Saipem group, which acts as a partially offsetting factor in the assessment.

As of 31 December 2022, the funds Sigurd allocated to the cash-pooling with Saipem represented 47.7% and 70.3% of the company’s total assets and capital and surplus, respectively, down from 59.8% and 78.6% in 2021.

AM Best said the ratings reflect the captive’s balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.

The ratings agency said Sigurd has a strong operating performance record, evidenced by a five-year (2018-2022) weighted average return-on-equity and combined ratio of 10.4% and 67.8%, respectively, calculated by AM Best.

“Profitability has been supported by a low and stable expense ratio and a good, albeit volatile, loss ratio,” the ratings agency said.

“While operating profitability declined in 2022 as a result of a large claim incurred during the year, with the company’s combined ratio increasing to 97.7%, profitability is expected to remain strong prospectively.”

Sigurd’s very strong balance sheet strength assessment is underpinned by its risk-adjusted capitalisation at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR).

AM Best expects Sigurd’s risk-adjusted capitalisation to remain at the strongest level, supported by the captive’s conservative reserving policies, its moderate exposure to catastrophe losses and its comprehensive retrocession programme with well-rated retrocessionaires.

Sigurd’s business profile benefits from geographic and product diversification derived from Saipem’s wide-ranging commercial activities.

LCSWMA captive elevates risk management, adds credibility

Richard Cutcher
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LCSWMA captive elevates risk management, adds credibility

Owning a captive insurance company has put more emphasis on developing and improving risk management initiatives at Lancaster County Solid Waste Management Authority (LCSWMA), according to CFO Dan Youngs.

LCSWMA established its Vermont captive, Sustainable Assurance Company in January 2021, in response to the hard market and speaking on the Global Captive Podcast at the VCIA conference last week, Youngs said now in its third year of operation, the captive has been a success.

“We formed the captive somewhat out of a desperate situation,” he said.

“We have power generation facilities and those facilities are not too appealing to underwriters, so we had a collapse in the capacity to underwrite us.

“The captive proved to be a very viable solution for us and having a strong liquidity position, financial strength of the parent company, it really made sense to go this route.”

The captive is now underwriting $850m of LCSWMA’s property and it is considering adding medical stop loss and an excess layer for cyber in the future.

One the big impacts made by the captive, however, has been the focus it has put on risk management within the organisation.

Youngs said risk management is now one of LCSWMA’s six key pillars for success, but previously “it was two words we never really talked about”.

“We’ve hired in staff around risk management,” he added. “Obviously we have skin in the game now, but it’s at the forefront of our thought and I think, at the end of the day, that that makes us a more resilient business.

“And not just the human element, safety side of our business, but reputation risk, brand risk, all those things that play a part into our success as a company.”

Youngs said having the captive has also given the organisation more “credibility and leverage” in the insurance market.

“It forced us to hone in on a lot of procedures and processes that we can now speak to those commercial markets, the reinsurance markets, at their same level, in the same language perhaps,” he said.

“It shows the investment of our management team to those underwriters and it has brought markets to the table that maybe previously had no interest in us.”

Listen to the full interview with Dan Youngs, CFO of LCSWMA, in GCP #90 on the Captive Intelligence website here, or on any podcast app. Just search for ‘Global Captive Podcast’ and hit subscribe on your podcast app of choice.

GCP #90: Regulator Jim DeVoe-Talluto, LCSWMA CFO Dan Youngs and Vermont’s Jenni Gagnon, Danielle Brown

Richard Cutcher
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Jim DeVoe-Talluto, State of Vermont
Dan Youngs, LCSWMA
Jenni Gagnon, Primmer Piper Eggleston & Cramer PC
Danielle Brown, Hylant

In episode 90 of the Global Captive Podcast, supported by the EY Global Captive Network, we bring you the first set of interviews recorded at the Vermont Captive Insurance Association (VCIA) annual conference.

Richard is joined by Jim DeVoe-Talluto, Assistant Director of Captive Insurance at the Department of Financial Regulation.

We also catch up with Dan Youngs, CFO of Lancaster County Solid Waste Management Authority (LCSWMA), which formed a Vermont captive in 2021. Dan updates us on the organisation’s captive journey and how having a captive has re-focused efforts around risk management.

Finally, Richard speaks to Jennifer Gagnon and Danielle Brown, two captive professionals heading up the new Vermont Captive Insurance Emerging Leaders initiative.

For more information on the State of Vermont, visit its Friend of the Podcast page on Captive Intelligence.

For the latest news, analysis and though leadership from the global captive market, sign up to the twice-weekly Captive Intelligence newsletter.

Avalara exits insurance tax compliance, software services

Richard Cutcher
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Avalara has contacted clients to inform them it will be “retiring” its insurance tax compliance services and software solutions to “focus on its core tax and compliance products and services”.

The firm, which also provides tax and software services to the retail, manufacturing and energy sectors, among others, has been working with direct writing captives and commercial insurers.

In a letter sent to clients on 24 July, and shared with Captive Intelligence, Avalara said it was retiring the following products: AvaTax for Insurance, Managed Returns for Insurance, Fiscal Rep for Insurance, and Avalara Tax Research for Insurance.

“Avalara is no longer renewing contracts for the products listed above. Existing contracts will be terminated by 31 January 2024,” the firm said in its letter co clients.

“We encourage you to explore and adopt new insurance tax compliance services.”

There are several players that offer tax compliance and software solutions to captives, particularly direct writing captives, including TMF Group and the big four firms.

Consistent, well staffed regulators helps Vermont to top spot

Richard Cutcher
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Consistent, well staffed regulators helps Vermont to top spot

The State of Vermont has cited its consistent high level of regulatory staffing, pro-active approach to captive regulation and expert local infrastructure as key reasons for becoming the number one domicile by number of captives.

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

Bermuda had previously long been the largest domicile by this measure, but is now second with 625 active captives. Cayman Islands has 559 active captives.

“Our status as the leading captive insurance domicile is a direct result of the expertise within our robust regulatory framework and the intentional culture within our department to continuously evolve, consider ways we could be better, and work with the industry along the way,” said Commissioner Kevin Gaffney, Vermont Department of Financial Regulation.

The hard insurance market has prompted a dramatic increase in captive formations around the world, but Vermont has been well placed to capitalise on this growth.

Forty-one new captives were established in the State during 2022 and the last three years have been amongst Vermont’s top 10 years of growth in its 41-year history in the industry.

The first half of 2023 has seen 22 new captives licensed, taking its current total to 654. Traditionally, the last quarter of the year is when most captive formations take place in the US domiciles.

Assets under management in Vermont captives stands at $212bn and they write $42bn in gross premium.

“We’re excited to now be considered the top captive insurance domicile in the world,” said Vermont Governor Phil Scott.

“This status is testament to the work of Vermont’s expert regulators and strong network of highly skilled service providers, who have been committed to supporting captive insurance companies for over 40 years.”

Kevin Mead, president of the Vermont Captive Insurance Association (VCIA), said:  “It’s no surprise that Vermont has taken the lead in the industry. The ‘Gold Standard’ infrastructure here of regulators and service providers have provided stable, quality wrap around support for captive insurance companies for decades and will continue to do so for decades to come.”

Rated captives increase premium, outperform commercial market – AM Best

Luke Harrison
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Rated captives increase premium, outperform commercial market – AM Best

Rated captives continue to outperform commercial insurers in both underwriting and operating profitability, according to AM Best’s latest Market Segment Report.

The ratings agency data highlighted that the five year-average combined and operating ratios of captive insurance companies (CIC) outperformed those of the commercial casualty composite (CCC) by substantial margins.

CIC’s recorded five year combined ratios before dividends of 83.9%, compared with the CCC’s combined ratio of 98%.

Premium

Prior to 2022, premiums had been relatively flat, with a compound annual growth rate of just under 2%

“Lower premium growth has long been a feature of captives, as these companies have more control managing and monitoring their risks and setting actuarial pricing,” the ratings agency said.

In 2022, however, the segment saw the largest increase in direct premiums written (DPW) in ten years at approximately 21%.

AM Best said the rise in premiums was due to rate increases stemming from inflationary pressures and the continued hardening of the reinsurance market, which forced many captives to take on higher retentions than the year before.

This was particularly true for single parent captives (SPCs), which saw a 59% jump in net premium in 2022.

“Unlike some of their peers in the commercial market, captives have not been materially impacted by the higher frequency or severity of weather and natural catastrophes in the past five-year period,” the report said.

One of the fastest growing insurance products considered by captive is group medical stop loss coverage.

AM Best said this is primarily due to rising health insurance costs in the US and organisations wanting to take control in-house via the captive.

The report also highlighted that cell facilities continue to grow as a result of being “faster and more cost-efficient” to establish.

“Interest in cell facilities continues to grow due to the flexibility the structure provides,” the report said.

“In most of these structures, captive sponsors provide platforms accessible to cell owners that seek a variety of coverages while carrying no obligation to absorb losses arising from the cells, as the operating agent of the cell platforms.”

Spring Consulting appoints T.J. Scherer

Richard Cutcher
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Spring Consulting appoints T.J. Scherer

T.J. Scherer has joined Spring Consulting Group as vice president, having previously been with NFP.

Scherer’s focus will be on property & casualty and captive business, working closely with Spring’s captive consulting and actuarial teams.

He has more than 10 years of experience in captive and risk management services, including roles at Artex and NFP.

Scherer is a Certified Public Accountant (CPA) in California, holds an Associate in Captive Insurance (ACI), and is a RIMS-Certified Risk Management Professional.

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