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Marsh McLennan acquires HMS Insurance Associates, group captive capabilities 

Luke Harrison
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Marsh McLennan Agency (MMA), a subsidiary of Marsh, has acquired Maryland-based HMS Insurance Associates, one of the US’s largest independent agencies.

Terms of the acquisition were not disclosed.

John Stanchina, CEO of MMA’s Mid-Atlantic region, said: “The MMA goal has always been to partner with the best firms and together build a unique experience for colleagues and clients.

“With exceptional leadership, client satisfaction, long-term client retention, and decades of profitable growth, we are delighted to bring the HMS team on board.”

Founded in 1943, HMS provides businesses and individuals in the mid-Atlantic with P&C insurance, surety, group captive, and employee benefits.

All of the companies more than 120 employees will join MMA and continue to work out of the Maryland office.

Gary Berger, president and CEO of HMS Insurance Associates, said: “We are excited to join the MMA family given the alignment we share in our approach to customer service, employee engagement, and carrier partnership.

“This is an opportunity to continue to enhance our capabilities and deepen our industry relationships, as well as augment the training and career development resources available to colleagues, in turn equipping them to best meet client needs.”

Bill Fitzpatrick joins Granite as SVP, business development

Luke Harrison
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Bill Fitzpatrick joins Granite as SVP, business development

Bill Fitzpatrick, best known in the captive market for leading Deutsche Post DHL’s corporate employee benefits programme, has joined Granite Management Limited as senior vice president, business development, based in the United Kingdom.

He will be responsible for expanding Granite’s business relationships and enhancing Granite’s value proposition in Europe.

Granite is a Bermuda-based independent captive manager, which is led by Brian Quinn and specialises in international employee benefits consulting and management.

Bill was guest on GCP #8 in June, 2019 where he detailed the huge employee benefits programme financed by the DHL captive.

“We at Granite pride ourselves on being the ground breakers and global thought leaders in the underwriting of EB into captives, having been the first company to offer such services at our foundation over a decade ago,” the company said.

“We are constantly looking forward to enhancing our expertise and client management capabilities for the benefit of our current and future clients.”

Fitzpatrick brings with him more than 40 years of employee benefits experience, his most recent role overseeing the Deutsche Post DHL (DPDHL) employee benefit captive program, from 2006 to 2021, that currently reinsures risk from over 110 countries, covering in excess of 250,000 employees.

Before his role at Deutsche Post, he oversaw the European global employee benefits team for AIG.

Jennifer Santiago appointed RIMS president for 2023 term

Luke Harrison
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<strong>Jennifer Santiago appointed RIMS president for 2023 term</strong>

Wakefern Food’s Jennifer Santiago has been assigned the role of RIMS president for the 2023 term.

Santiago is currently the director of risk management & safety at Wakefern Food, the largest retailer-owned cooperative in the United States.

At Wakefern she is responsible for the strategic direction for corporate and member risk management, insurance risk financing, captive management and safety management programmes across the enterprise.

Previously, she was the assistant vice president & chief risk officer (CRO) at The Pennsylvania State University.

“The road to organisational resilience starts with leadership of the risk management professional,” Santiago said.

“Around the world, risk professionals have taken the initiative, stepping up to lead strategies that empower smart decision-making and innovation.”

Santiago has been a RIMS member for over 15 years, serving on the society’s board of directors since 2014.

“However, current risks show no sign of stabilising, and this highly uncertain environment will require risk leaders to lean on each other, to share experiences and embrace diverse thoughts and perspectives to successfully address them,” she added.

“RIMS is an invaluable platform for risk management collaboration, and I am honoured to help ensure that it continues to deliver opportunities that unite, inspire and build a safer, more resilient world.”

Paul Eaton appointed Artex International CEO

Luke Harrison
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<strong>Paul Eaton appointed Artex International CEO</strong>

Artex International has appointed Paul Eaton as its CEO, with Nick Heys transitioning to the role of chairman of the company.

As the new Artex International CEO, Eaton will serve on the Artex executive leadership team, driving the company’s strategy around talent, organic growth, M&A, and operational efficiency for Artex’s international operations, including Guernsey, Gibraltar, Malta, London and Singapore.

Based in Guernsey, Eaton joined Artex in 2004 after more than 13 years as an underwriter in the insurance market with RSA.

He spent his first 14 years at Artex in a variety of positions, ranging from client management to leading business development, and then moving into the role of managing director of Artex’s insurance linked securities (ILS) operations.

Following the acquisition of Horseshoe, Eaton moved into the role of commercial director for Artex Capital Solutions. Most recently, he led Artex’s European operations as the regional managing director, helping to drive growth throughout its Malta, Gibraltar and London offices.

Heys joined Artex in 2014 with the acquisition of Heritage Insurance Management. Since then, he has supported Artex’s international market teams and clients.

With 40 years of insurance industry experience, Artex said Nick will continue to be a critical part of the company’s DNA.

“We look forward to Nick’s continued success in this new and exciting capacity,” Artex said.

Mixed appeal for captives in alternative funds space

Will Wainewright
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Mixed appeal for captives in alternative funds space
  • Hedge funds have dabbled in reinsurance with mixed success, and captives have been a tough sell
  • Rising insurance costs could put captives back on the agenda
  • Family offices and private equity seen as more suited to captive strategies, but priorities hard to align

The question of whether asset management represents unexplored territory for the captive industry, or a sector with few practical use cases, has come round again as market costs rise.

Opinion remains split but hope seems to be building as conversations develop in this huge and untapped market, and debate continues over best practice.

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Fewer but larger captives promise innovative future for Cayman

Luke Harrison
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Fewer but larger captives promise innovative future for Cayman

The consolidation of healthcare companies is the primary reason there has been a reduction in the number of captives operating in Cayman over recent years, according to those speaking to Captive Intelligence during this year’s Cayman Captive Forum.

Experts from Strategic Risk Solutions, Artex, Kensington Management Group and USA Risk were featured in a GCP #78 report from the Forum.

Colin Robinson, director at Strategic Risk Solutions, said: “Certainly, consolidation has been a key driver of the decline in numbers of captives that we’ve had in Cayman. Going back 10 years ago, we would have had numbers in the 700s.”

However, Robinson noted that this isn’t a dissimilar story from what is happening in other mature jurisdictions where older captives come to the end of a natural cycle or M&A activity at parent level prompt re-evaluation of strategy and consolidation where appropriate.

Adrian Lynch, executive vice president, North America, Bermuda & Cayman at Artex Risk Solutions, explained that the consolidation began with the introduction of ObamaCare and healthcare reforms in the United States.

“You had a number of smaller community hospitals that were really struggling for cashflow and really struggling for sustainability,” he said.

“Some of the larger systems might have 180 days cash on hand, and some of the smaller systems were living hand to mouth.

“What ended up happening was a lot of the larger systems picked up some of these smaller systems, and then ultimately if they had captives, they ended up consolidating the captives.”

Captive consolidation in Cayman is also not necessarily viewed as a negative development, due to the new underwriting opportunities that larger captives allow.

“We have seen a lot of consolidation on the captive side, which means potentially less captives,” said Robert Leadbetter, senior vice president at USA Risk.

“Some people were concerned about that, but from my perspective, what you end up having is rather than have two smaller captives, you have one bigger or stronger captive.

“You now have captives that are bigger, stronger, more complex, and I think that’s a good thing.”

Due to the larger size of the captives, many of them are now able to add more lines of coverage.

“So, one of the things that we’ve seen over the last couple of years is a growth in the lines of coverage,” Robinson said.

He highlighted that medical stop loss has been growing and a lot of his clients, if they haven’t already implemented it “are looking to implement it at some point”.

Erin Brosnihan, president at Kensington Management Group, believes there are opportunities for captives across many different lines of coverage including cyber and E&O.

“There are always opportunities for new lines of coverage to assist companies with their risk management profile,” she said.

Robinson noted that there is more sophistication when it comes to captive structures.

“We’re not just seeing the plain vanilla, single-parent captives, we’re also seeing a lot more sophistication, whether it’s through ownership or whether it’s lines of coverages,” he said. “And I don’t see that slowing down for Cayman as a jurisdiction at all.”

Lynch believes it is a very interesting time for Cayman as a domicile.

“We have jurisdictionally, a lot of very well capitalised captives that are sitting on a lot of surplus,” he said.

“They’re in good standing with the regulator and as an underwriter of choice, they have some options as to what they do. It’s a very interesting time for the future.”

Medical stop loss captives on course to represent more than 25% of MSL market

Luke Harrison
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Medical stop loss captives on course to represent more than 25% of MSL market

Medical stop loss (MSL) captives are on course to account for more than 25% of the overall MSL insurance market in the United States over the next few years, according to Phillip Giles, managing director at MSL Captive Solutions.

“It’s not unreasonable to project group captives accounting for more than 25% of the total medical stop-loss market within the next few years,” he told Captive Intelligence.

He added that their research suggests group MSL captives currently represent more than $5bn of the overall $27bn MSL market, with significant growth expected to continue in this space.

The use of MSL captives has increased for a number of reasons, including the ability to optimise long-term rate stability for smaller self-insured employers.

Larger employers that have set up single-parent captives to help distance themselves from commercial market volatility in other lines are expanding their captive to include medical stop loss.

MSL is also an easy addition to a captive and, as a short-tail line of business, can serve as a substantial risk and financial hedge to augment the more traditional long-tail lines held in a captive.

“Adding MSL to the captive also helps the employer from a budgetary perspective,” said Giles.

“Rather than fund the self-insured plans through general assets, the employer can convert segments of retained risk into defined layers of medical stop loss and fund the coverage through regular premiums paid to the captive.”

He added: “This also helps facilitate the definition of and accumulation of surplus, which can be used to offset risk-related expenses further.”

Giles noted that MSL captives that employ sound risk selection (membership) guidelines and have a platform based on medical cost and risk reduction initiatives will continue to outperform the traditional stop-loss market and deliver the best results for their members.

MSL Captive Solutions, which was established in 2020, is one of the few captive service providers focusing specifically on medical stop loss insurance for captives.

 “Our first eight months were spent evaluating underwriting platforms and working through the due-diligence process with our carrier partners,” Giles said.

The company added a chief operating officer, a chief financial officer, and a new chief underwriting officer, earlier this year, along with two more senior-level captive underwriters.

“I have known our CUO, Peter Parent, for more than 20 years,” Giles added.

“He is among the most knowledgeable technicians that I have ever worked with. He has been an extraordinary and impactful addition to our leadership. We have a deep and exceptional team of five expert MSL captive underwriters.”

Lufthansa’s captive outlook revised from negative to stable by AM Best

Luke Harrison
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AM Best has revised the outlooks to stable from negative and affirmed the financial strength rating (FSR) of A- (Excellent) and the long-term issuer credit rating (long-term ICR) of “a-” (Excellent) for the Lufthansa-owned captive, Delvag.

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

The ratings also reflect rating drag due to its association with its financially weaker parent, Deutsche Lufthansa.

The revision of Delvag’s outlook to stable from negative reflect improvements in the creditworthiness of Lufthansa, which are tied to strong performances in 2022 thanks to the uptick in air traffic and to an improvement of the group’s liquidity position.

Furthermore, Lufthansa has raised its earnings forecast for 2022 by 50% compared with its previous forecast.

Tobias Winkler and Andreas Brügel, who work in senior positions for Lufthansa’s near 90-year-old captive, appeared on GCP #58, and gave listeners a comprehensive history of Delvag, its status today, the third-party lines it writes and recent restructuring projects.

Marsh on track for another “record year” of new captive formations

Richard Cutcher
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Marsh on track for another “record year” of new captive formations

Ellen Charnley, president of Marsh Captive Solutions, is expecting 2022 to have been another record year for new formations by the largest captive manager in the world once the final numbers are confirmed.

Marsh broke their own records in 2020 and 2021 when 200 new captives were formed during those two years and speaking on GCP #78, Charnley said appetite for new captives shows no sign of waning.

“We have not seen any signs of it cooling down yet,” she said.

“I ran the very draft numbers year to date so far, and we’re on track for another record year.

“I’m predicting another record year this year. I could be wrong of course, we could fall off the wagon for the next couple of months, but I doubt it.”

North America continues to drive much of the new captive growth, but Charnley emphasised emerging regions and all territories are experiencing a boom in activity.

“That’s been a real delight to see in the position I sit as a global leader,” she said.

“I see that not only in the client activity, but also in our employee headcount activity. We’ve added headcount and new employees across the globe, which has been a delight as well.”

It is also those domiciles that are willing and able to respond quickly to new applications and business plan changes that have benefitted most from the growth activity.

“I would say it’s really a speed to market that the clients have wanted to see,” Charnley added.

“We’ve seen real growth in those locations where domiciles can be nimble and that’s not just the regulator, I mean, but the actual infrastructure of the domicile itself.

“So where captives can be formed quickly and nimbly, those are the real winners for growth. That’s where we’re seeing high growth, not only in numbers of formations, but clients being able to add new lines of business and add new premiums to their captive.”

Charnley also expects to see the captive premium and assets under management (AuM) across their portfolio of more than 1,300 entities continue to increase, despite the commercial market showing signs of softening in most classes of insurance.

“That would be a logical assumption for sure,” she said. “Captives are formed regardless of necessarily what the commercial market is doing. In times when the commercial market is challenging, it tends to encourage more companies to form captives.

“Even when the commercial market starts to go into more of a softening phase, we’ll still see captives being formed for other reasons. As that graph [insurance rates] starts to drop off, it’s important to note that there’s still double digits of growth happening … and some of those lines in some parts of the world are still incredibly challenging for our clients.”

Lactalis the latest French captive licence, momentum continues

Luke Harrison
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Lactalis the latest French captive licence, momentum continues

Multinational dairy company Lactalis has received a captive licence from the French Prudential Supervision and Resolution Authority (ACPR).

The formation of Sorelac continues the momentum in France’s captive sector after the 2023 Budget (PLF) made progress, including provisions for introducing a new regulatory regime for captives.

Captive Intelligence understands Sorelac will begin by writing property damage and business interruption insurance. It is also Lactalis’ first captive.

It is understood to have been a 15-year project within the group, and has been completed by risk and insurance director Nicolas Incarnato, who joined in 2019.

Lactalis was keen to pursue the formation in France, despite the uncertainty surrounding the future regulatory regime.

“The demand will be high from new mid-sized players to set up their first captive,” one consultant working with several French captive prospects told Captive Intelligence.

“I’m quite optimistic to say that there will be a demand, especially if we now hear more about the world of captives in France.”

Captive Intelligence understands Strategic Risk Solutions will manage Sorelac, its first formation in France since opening an office in the country in November.

Maxime Schons, head of the Luxembourg office and licensed manager for the Luxembourg regulated entities under management, said: “SRS has recently opened its French office with a dedicated local service team specifically skilled to serve the current and future French regulated entities. It will be overseen by a new director to be appointed very shortly.”

Despite captive specific legislation only progressing last week, ACPR has not been hostile to captives, and since 2020 four new reinsurance captives had been formed in the domicile.

Multinational payment and transactional services company Worldline established a captive in 2020, while food processing business Bonduelle and consortium Groupe SEB set up captives last year.

In October 2022 multinational advertising and public relations company Publicis Groupe got its captive licence. Sorelac is the fifth establishment in that time.

French-owned captives have typically pulled towards Luxembourg and Ireland, while there are also French captives in Malta, Switzerland and Guernsey.

It remains to be seen whether captives already domiciled in a jurisdiction with a strong track record on captives will be tempted to re-domesticate now that the option is available, but experts expect the French market to be dominated by new captives initially.

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