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AM Best affirms rating of Sony 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 PMG Assurance. The outlook for the ratings is stable.

PMG is owned by Sony and writes commercial property, marine, directors and officers, cyber risk and employee benefits insurance for Sony and its affiliates.

The ratings reflect PMG’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 (ERM).

As an integral component of Sony’s ERM, PMG’s role is to meet the global insurance requirements of the parent while also providing risk management services to Sony group members.

PMG exhibits strengths that are derived from its underwriting expertise and emphasis on risk management controls, which are well-integrated with those of its parent.

Although the captive is susceptible to volatility in earnings due to the low frequency and high severity losses for the risks it insures, PMG has a comprehensive reinsurance programme in place.

Strong operating performance reflects PMG’s consistent results in its combined and operating ratios that continue to outperform industry averages.

The rating also reflects PMG’s risk-adjusted capitalisation at the strongest level, as measured by Best’s capital adequacy ratio (BCAR).

DARAG acquires Hawaii captive

Luke Harrison
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Legacy specialists DARAG have acquired a new Hawaii-domiciled captive carrying a portfolio of workers’ compensation business.

The book was put into run-off in 2023 and will be transferred to one of DARAG’s existing US domiciled entities, providing full legal finality.

Tom Booth, CEO of DARAG, said there is a continued interest in the North American captive market for bespoke legacy solutions that enables companies or groups of companies to achieve finality for self-insured liabilities.

“DARAG’s onshore infrastructure enabled us to complete this acquisition effectively and we are pleased to be able to consolidate further our leading position within the US self-insured market,” Both added.

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.

“Our strong historical track record and relationships meant that we could complete the acquisition, including regulatory and fronting carrier approvals, in a highly efficient timeframe,” said Joel Neal, executive vice president, M&A, at DARAG North America.

“We also thank the Lockton alternative risk practice for its role as the seller’s intermediary, contributing to the successful conclusion of this transaction.”

European consultation launched on corporate sustainability reporting

Luke Harrison
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The European Financial Reporting Advisory Group (EFRAG) has been instructed to develop a suitability reporting standard for SMEs that are public-interest entities, including captive insurance companies.

A similar exposure draft (ED) is also being carried out for non-listed SMEs. The EFRAG is carrying out the work as part of its mandate to provide technical advice to the European Commission on European Sustainability Reporting Standards (ESRS).

The consultation period will run until 21 May 2024, and EFRAG is inviting all stakeholders to provide comments through the online consultation questionnaires.

Interested parties are also invited to participate in the field test that will be run in parallel to the public consultation.

The purpose of the ESRS is to set reporting requirements that are proportionate and relevant to the scale and complexity of the activities and to the capacities and characteristics of captives.

The aim is to support captives in getting better access to finance and avoid discrimination against them on the part of financial market participants, as it will enable availability of standardised sustainability information.

The ESRS will be issued as a delegated act and will be effective from n 1 January 2026 with an additional two-year opt out.

“SMEs are a crucial part of the European economy,” said EFRAG SRB chair, Patrick de Cambourg.

“After the completion of the ESRS for large undertakings, EFRAG releases today these two proposed standards to support SMEs in being part of the transition to a more sustainable economy, getting appropriate access to finance and reducing the burden of dealing with uncoordinated data-requests while preparing decisions-useful information for all.”

HDI sees fruits of captive investment in Europe – Nuno Antunes

Luke Harrison
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HDI sees fruits of captive investment in Europe – Nuno Antunes

HDI Global sees captives as a “significant and expanding” opportunity for the carrier, both in the Iberian market and across Europe, according to Nuno Antunes, managing director at HDI Global Portugal.

HDI opened an operation in Lisbon in October, which the company said would complement its existing customer and broker platform in Iberia.

“We have made substantial investments to enhance our capabilities in the captive sector, and we are now witnessing the fruitful results of our dedication and hard work,” he told Captive Intelligence.

Antunes said that companies and risk managers may currently feel that the traditional insurance market is falling short when it comes to their risk financing needs.

“The truth is that alternative risk transfer (ART) and captives always allow for more tailor-made solutions and work outside of the classical insurance world,” he added.

HDI Global has been operating in the Portuguese market for more than two decades under a Freedom of Services (FoS) licence, but until now the Portuguese business has been handled by the Madrid office.

“As the business grew, we have seen an ever-increasing demand for our products and service, so the new branch in Lisbon, is a natural evolution of the existing portfolio, and will complement the existing customers and broker platform in Iberia, allowing HDI Global to be much closer to its Portuguese customers and partners,” Antunes told Captive Intelligence.

Antunes said HDI strongly believes in the importance of having a local presence.

“However, our decision to open an operation in Lisbon was primarily driven by the need to be in close proximity to the risk managers, rather than specifically being influenced by discussions surrounding Spanish captive legislation,” he said.

Similar to other countries around Europe, there has been growing discussions around the possibility of Spain introducing its own captive legislation.

“Speaking in a broader sense, we view the increased focus on captives by regulators and the growing public discussions as positive developments,” Antunes said.

Antunes said the introduction of Spanish captive legislation could particularly benefit those who are currently hesitant to utilise certain domiciles.

“By providing an additional option, it would enhance the flexibility and attractiveness of the captive insurance industry,” he said.

“For HDI, captive business is a strategic priority and therefore we are keeping a very close eye on all legislative developments on this matter.”

Helio launched to fill regional gap for captive management

Luke Harrison
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Helio launched to fill regional gap for captive management

A key reason behind the launch of independent captive management firm Helio was the large market for captive business in the middle of the United States, where there is limited choice for captive owners in the region.

Captive Intelligence reported the launch of Helio in March 2023, when experienced captive operator Heather McClure was appointed general counsel and chief risk officer.

“What I saw was an underserved community here in Oklahoma specifically,” Blake Kerr,  Helio CEO, told Captive Intelligence.

The firm is managing captives in multiple domiciles and working with businesses across the country.

Kerr said captives based in the region were previously being served by offices on either coast, and as a result, Helio wanted to provide a more robust captive manager option.

Kerr said that since its launch, Helio has experienced a growing pipeline of new business, largely due to the hardening commercial market.

“I don’t really believe much in luck, but there could not be a better time to launch a captive management and risk consulting firm than now,” Kerr added. “The phone has been ringing non-stop.”

Jesse Olsen joined Helio as chief operating officer in December and said the types of captives he is seeing has become increasingly broad.

“We have irons in the fire right now on association captives, agency captives, and pure captives, for example,” he said.

Olsen revealed that Helio has established captives in multiple states over the past few months, including Oklahoma and Tennessee. 

“That said, we remain domicile agnostic, and we are going to go where the clients want to be and what makes the most sense for them. We objectively help them with that selection process.”

Olsen said there has been interest from faith based and non-profit organisations, as well as healthcare which has been aided by McClure’s extensive experience in that sector.

“With Heather having that healthcare background and the network that she does, there’s a lot of interest in domiciles that are far afield from where we are physically located,” he said.

Earlier this month, Captive Intelligence published a long-read highlighting that companies seeking property coverage will continue to be the driving force behind captive formations in the US in 2024.

 Olsen said property has always been one of the most popular coverage lines for captives.

“However, five years ago they were very targeted property placements, whereas now it is much broader.”

“Captive owners are looking at all other perils, wind and hail deductible buy downs, other natural catastrophe type coverages and participating on those risks in a way that we were not seeing captives do previously.”

AM Best affirms rating of Telefonica captive

Luke Harrison
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0

AM Best has affirmed the financial strength rating of ‘A-‘ (excellent) and the long-term issuer credit rating of “a-” (excellent) of Luxembourg-domiciled Nova Casiopea Re S.A. (NCRe). The outlook for the ratings is stable.

NCRe is a single parent captive owned by multinational broadband and telecommunications provider, Telefónica, S.A.

The company is based in Spain with operations in Europe and across the Americas, with the captive benefitting from Telefonica’s geographic diversification.

The captive has a broad portfolio mix, but as a pure captive its business profile remains constrained to Telefonica’s operations and strategic decisions.

Recent changes to Telefónica’s business model have not materially impacted the captive’s operations, but AM Best noted that potential spin-offs of Telefónica’s major businesses in Latin America will likely impact the captive’s profile, reducing its natural catastrophe exposure, among other impacts.

In 2023, NCRe restructured its reinsurance programmes and further increased some of its net exposures in response to hardening reinsurance market conditions.

NCRe’s balance sheet strength assessment is underpinned by the strongest level of risk-adjusted capitalisation, on both a standard and catastrophe-stressed basis, as measured by AM Best’s capital adequacy ratio (BCAR).

This assessment is supported by NCRe’s “conservative and liquid” investment portfolio, as well as capital buffers in the form of equalisation reserves.

An offsetting factor is the company’s exposure to natural catastrophe risk, which has the potential to introduce volatility to capitalisation levels.

In 2022, NCRe generated a pre-tax profit of €5.9m compared with €12.4m in 2021, with the reduction being driven by a year-on-year increase in the loss ratio to 69.7% in 2022, from 38.6% in 2021.

Overall, in 2022, NCRe’s combined ratio stood at 89.4%, well above its five-year weighted average combined ratio of 70.4% (2018-2022).

SRS agrees Robus acquisition from Ardonagh Group

Richard Cutcher
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SRS agrees Robus acquisition from Ardonagh Group

Strategic Risk Solutions has acquired captive and insurance manager Robus from the Ardonagh Group, subject to regulatory approval, strengthening its presence in Guernsey and adding Gibraltar to its list of domicile options.

SRS’ acquisition of Robus adds a significant office in Gibraltar, which manages captives, motor insurers, protected cell companies and other commercial (re)insurers.

Brady Young, CEO of SRS, told Captive Intelligence: “The acquisition supports our long-term commitment to Europe and underlines the excitement we feel about growth opportunities for the next 10 years.

“The organic growth of our European business over the last five years has been hugely encouraging. Our recent expansion into the MGA space with SRS Altitude and now the acquisition of Robus will take us to the next level of our development on the continent.

Ardonagh acquired Robus in December 2020 through Geo Underwriting, but the acquisitive broking group has since struggled to expand its presence in the captive sector.

Captive Intelligence understands Ardonagh had previously explored acquiring SRS before the latter’s ultimate investment from private equity firm Integrum last year.

Ardonagh, through Robus, had also been interested in acquiring Allied Risk Management in Dublin, Ireland, which was bought by Artex in May 2023.

Steve Quinn, Executive Chairman, Robus Group said: “Joining a business that is renowned for its specialist insurance management solutions is the natural next step in the development of our business.

“Robus has been on a remarkable journey over the past few years with Ardonagh, which will remain an important trading partner. We’re excited to now work with SRS, a business that shares our same high standards of service, as we continue to deliver some of the best possible captive management solutions available on the market.”

Gibraltar’s captive sector is currently anticipating confirmation of its much-trailed “dual captive regime” which could breathe new life into the domicile in an increasingly competitive European landscape.

Speaking to Captive Intelligence Peter Child, CEO of SRS Europe, said he was excited to further investigate the opportunities in Gibraltar.

“We already provide insurance management services to commercial insurers within the EU, so expanding that commercial insurance practice to include Gib will bring scale that we can immediately leverage,” said Child.

“For instance, SRS already employs a team of actuaries that provide pricing, reserving and capital modelling services to clients in a Solvency II environment.

“I’m sure those skills will be transferable to the Gib client base, and there will be other skills that will be transferable in the other direction.”

Robus’ Gibraltar office is led by Paul Cole, managing director for Gibraltar and group chief operations officer.

In Guernsey, Robus has more than 20 captives, general insurers and PCCs under management by a team led by Jamie Polson, managing director for Guernsey and group finance officer.

“In terms of Guernsey, the addition takes us to a size that will provide greater resilience and flexibility when it comes to applying our resources to an expanded client base,” Child added.

“That client base will be significantly diversified and will enable us to promote specific centres of excellence for different types of licensed insurers: captives; commercial insurers; commercial reinsurers and ILS/SPI vehicles all of which have fundamentally different needs.”

Captive USA 2024 Part II: More 831(b) captives to close, cells continue to prosper

Luke Harrison
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Captive USA 2024 Part II: More 831(b) captives to close, cells continue to prosper
  • Large unknows remain concerning IRS’ next move on 831(b) regulation
  • Service providers distancing themselves from 831(b) captives
  • At least 25% of new Marsh managed captives expected to be cells
  • New states could introduce cell legislation as captives become more mainstream

Further 831(b) captives in the United States are expected to shut down as a result of the proposed regulations from the Internal Revenue Service (IRS), while the popularity of cells is expected to grow further.

Captive Intelligence published part one of our USA trends long-read series last week, highlighting that companies seeking property coverage will continue to be the driving force behind captive formations in the United States in 2024.

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Alberta’s captive legislation can rival established domiciles – Finance Minister

Luke Harrison
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Alberta’s captive insurance programme now rivals established captive jurisdictions such as Barbados, Bermuda and Vermont, according to Alberta’s minister of finance, Nate Horner.

Captive intelligence published an article in December detailing that following the introduction of captive legislation in Alberta, a greater number of prospective captive owners are expected to pick the domicile over the more traditional offshore domiciles, which have historically been popular with Canadian businesses.

“In fact, only a few months after legislation was passed, a captive insurance company moved from Barbados to Alberta,” Horner said.

He said Alberta provides an additional insurance option for businesses that may struggle to find the right coverage at a manageable cost through other traditional insurance providers.

“As more captives are established in Alberta, we expect to see a growing hub of specialised skills, including experts like captive managers and actuarial services,” Horner added.

The Energy Province introduced its captive legislation in July last year, and already has 17 captives domiciled in the jurisdiction.

“Alberta’s business-friendly environment continues to prove itself, offering a unique advantage for businesses seeking effective risk solutions in a challenging global insurance market,” Horner said.

Alberta is the second province in Canada to introduce captive legislation after British Columbia.

“I am proud that we are one of only two provinces to provide the captive insurance option,” Horner said.

Horner said that in conversations he has had with people from different industries companies are choosing Alberta as their captive domicile for several reasons, including the province’s six-week turnaround time for licence approvals, and low costs.

“In addition, Alberta’s captive insurance programme allows companies to cover business risks from outside the province within Alberta,” he added.

“Companies have also told us they have an easier time navigating our captive regulation because Alberta’s Superintendent of Insurance is easily reachable, responsive to feedback and prudent in its reviews.”

“With ongoing interest from diverse industries, Alberta’s government will continue to ensure that our captive insurance environment thrives and that businesses view Alberta as a top destination for risk management.”

In episode 97 of the Global Captive Podcast, Rick Da Costa, partner and national leader for corporate and regulatory insurance & reinsurance at Borden Ladner Gervais LLP, discussed Alberta’s appeal as a new captive domicile for Canadian businesses.

“The cadence with which Canadians have established their own captives, and with Alberta being an option, I think we are going to start to see a higher proportion of people choosing that domicile over the usual Bermuda, Barbados or Cayman,” Da Costa said.

Enel’s Gabriele Frea expecting more Italian captives to follow

Richard Cutcher
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0
Enel’s Gabriele Frea expecting more Italian captives to follow

Gabriele Frea, head of insurance and risk financing at Enel Group, the owner of Italy’s first captive, believes “now the path is traced, other groups will follow”.

Enel Erre, owned by Italian multinational manufacturer and distributor of electricity and gas, Enel, received a reinsurance licence from the Italian regulator IVASS on 21 November last year. Aon and local law firm Bonelli Erede supported the project.

Enel’s Italian captive completed the merger with its existing Netherlands-domiciled captive, Enel Insurance NV, completing the re-domestication process and being assigned a financial strength rating of ‘A-‘ (Excellent) by AM Best.

“Now the path is traced other groups will follow us,” said Frea, speaking on episode #99 of the Global Captive Podcast.

“Other captives will soon be set up in Italy, stimulating a more conscious approach to the risk management and the risk financing activities, especially moments of market hardening as the one we are living through today.”

He added that risk managers from other organisations have been in contact and expressed interest in forming or re-domesticating captives to Italy.

“Due to these factors, Italian captives are expected to increase significantly in the very near future,” he said.

Last month, multinational cable specialists Prysmian Group SpA received authorisation for Italy’s second captive, which it plans to merge with its existing Dublin captive.

Captive Intelligence reported in January 2023 that several Italian-owned captives had begun discussions with IVASS on the possibility of re-domesticating captives back home.

Frea said there was a long and intensive period of analysis before a decision was made regarding Enel’s Italian captive.

“We had to calculate all the pros and cons of this solution and all the opportunities and the difficulties,” he said.

“As a matter of fact, I do not believe that everyone at the time was confident that the success would be achieved.”

Listen to the full, exclusive interview with Enel’s Gabriele Frea on GCP #99 here, or on any podcast app. Just search for ‘Global Captive Podcast’.

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