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NFP RISC hires Wescott as director of US captive management operations

Luke Harrison
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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.”

Fitch assigns financial strength ratings of ‘A+’ to Athene captives

Luke Harrison
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Fitch Ratings has assigned insurer financial strength (IFS) ratings of ‘A+’ to Athene Holding’s recently formed captives Athene Co-Invest Reinsurance Affiliate 2A and Athene Co-Invest Reinsurance Affiliate 2B (collectively ACRA 2). The rating outlook is stable.

Similar to Athene’s existing ACRA entities, ACRA 2 will reinsure qualifying transactions from Athene to support growth in Athene’s core business, although Athene will retain the ultimate liability for the policies.

Both ACRA 2 vehicles are licensed as Long Term Class 2 insurers in Bermuda.

Qualifying transactions include substantially all new inorganic transactions, pension group annuity transactions, funding agreement transactions and certain flow reinsurance transactions and retain annuity business.

ACRA 2 is a Bermuda-domiciled reinsurer, with 100% of its voting shares and 50% of its economic interest is owned by Athene Life Re (ALRe).

The remaining 50% of the economic interest is owned by third-party investors through non-voting shares held by the Apollo/Athene Dedicated Investment Program II (ADIP II).

Fitch expects that Athene will eventually sell additional economic interest to ADIP II such that its ownership is approximately 33%-37%.

Fitch said the ‘A+’ IFS rating reflects application of the captive’s rating methodology contained within its insurance rating criteria and Fitch’s assessment that ACRA 2 meets the standards to be considered a core captive.

As a result, the ratings agency has assigned the IFS rating of Athene’s insurance operating subsidiaries to ACRA 2. The ratings assigned to ACRA 2 are consistent with those assigned to Athene’s previously established ACRA entities.

Fitch’s treatment of ACRA 2 as a core captive is driven by Athene’s willingness to support the entities, while ACRA 2’s strategic goals are tied to Athene’s while also serving a clear economic purpose.

ACRA 2 will derive 100% of its business from Athene through reinsurance from Athene’s existing operating subsidiaries.

Fitch said future capital needs to support the business may be drawn from both Athene and ADIP II. Currently, ACRA 2 has capital commitments of approximately $2bn, with the expectation that total commitments will exceed the roughly $4bn committed under the first ADIP program.

Athene will manage ACRA 2 to the same standards as its other operating subsidiaries from a capital and underwriting perspective while also having full control over ACRA 2’s day-to-day operations.

Qualifying transactions will also be fully priced and underwritten by Athene prior to being ceded into ACRA 2.

Fitch said it views Athene’s ability to voluntarily recapture business ceded to ACRA 2, should ACRA 2’s capital fall below certain defined thresholds, as critical to its ability to provide support,” the ratings agency said.

“Athene’s ability to execute this support mechanism does not require approval of ADIP II as long as the defined capital conditions are met,” the ratings agency said.

“Under Fitch’s criteria, the ability to provide support decreases if it is contingent on approvals of minority capital contributors.”

Underperformance of the business ceded to ACRA could lead to capital strain at Athene.

“Such risks are reflected in Athene’s ratings and may become more pronounced as the amount of business ceded to Athene’s ACRA entities grows,” Fitch said.

Data, pricing key for extended warranty success, Deere considers European captive

Richard Cutcher
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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

Richard Cutcher
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GCP Short: The John Deere captive, evolution and future
Aileen Krehbiel, John Deere
Sammi Jones, John Deere
Heidi Rabtoy, State of Vermont

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.

For the latest breaking news, analysis and thought leadership from the global captive market, visit Captive Intelligence and sign up to our twice weekly newsletter here.

ZGEBS to launch ‘Underwriting Year’ customer reporting capability

Luke Harrison
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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

Luke Harrison
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Large corporates dominate increasing captive activity in Latam
  • Captive use increasing but market commanded by large business
  • Single parent most common captive structure but cell use rising
  • Offshore domiciles such as Bermuda, Cayman and Barbados remain popular, Vermont targets Mexico
  • Captive education and fronting capacity pose key challenges for Latam growth

The use of captives by companies based in Latin America is increasing, but a significant gap remains between the number of large corporates using captives compared to the number of medium and smaller businesses utilising them.

Despite proliferating captive use, it is generally considered that the number of companies with captives in Latam is lower than other regions such as the United States and Europe.

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Pure captives rise in Cayman

Luke Harrison
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The Cayman Islands Monetary Authority has published its latest captive figures for the second quarter of 2023, showing an increase in pure captives and segregated portfolio companies (SPCs) compared to its 2022 year-end figures.

The number of pure captives domiciled in Cayman is now 281, an increase of four compared to 2022.

There were 155 SPCs in Cayman at the end of 2022, with this number dropping to 153 during the first quarter of 2023, before a further two were added in Q2 to bring the total back to 155.

The number of group captives has remained steady at 127. There was a drop off by one in the first quarter, with one new licenced last quarter.

Pure captives in Cayman are now writing $4,252,138,860 in total premium, while group captives are writing $3,645,978,371. SPCs are responsible for $2,700,382,688 in premium.

Assets under management (AuM) totals $18,740,592,193 for pure captives, $10,541,990,658 for groups and $10,718,644,872 for SPCs.

Captive Intelligence’s data on the number of captives shows that there was a total of 33 captive formations in the Cayman Islands in 2022, which took the total number of captives in the domicile to 559 at year-end.

WTW hires Adrian Chua as APAC regional lead for captives

Luke Harrison
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WTW hires Adrian Chua as APAC regional lead for captives

WTW has appointed Adrian Chua as APAC regional lead for captive & insurance management solutions, strengthening the captive manager’s presence in the region.

Chua brings 20 years of insurance business experience, including recent roles as chief financial officer and chief strategy officer at Cigna Singapore.

He is a committee member with the Institute of Singapore Chartered Accountants, providing insights to the Insurance Committee and the IFRS 17 Workgroup.

“Adrian’s experience and insights will be critical in bringing our captive and alternative risk transfer solutions to meet companies’ risk financing needs in this region,” WTW said.

WTW’s appointment of Chua follows the news back in May that previous WTW director of captive and insurance management for Asia Pacific, Lawrence Bird had left the broker to join Marsh Captive Solutions in the newly created role of captives consulting leader, Asia.

Bird began working for Marsh last month and will be leading strategic client conversations on captives across the region, including feasibility studies, strategic captive reviews, and long-term captive strategies for clients.

Asia remains a key growth area for captives. Three new captives were established in Singapore in 2022 with five formed in Labuan.

For more captive domicile statistics, visit the Captive Intelligence data page.

IRS demands PCC provides documents in 831(b) tax case

Luke Harrison
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IRS demands PCC provides documents in 831(b) tax case

The Internal Revenue Service has filed a lawsuit asking an Arizona District Court to force Coral Beauty Insurance PCC to provide documentation for its investigation into potentially abusive micro-captive transactions between the captive and Radiologic Associates of Northwest Indiana P.C. during 2019 and 2020.

While the Respondent has provided some of the documentation requested, the IRS has claimed the PCC has not provided all.

According to Court filings, Coral Beauty was originally formed and licensed in Anguilla in 2011, before receiving a licence in Delaware in 2018.

Coral Beauty Insurance PCC is no longer licensed in Anguilla, while in Delaware the structure now appears to have been transformed into a series captive and named Fortress Coral Beauty Series.

“It has failed to produce all documents required by the summons and has thus failed to fully comply with the Summons,” the IRS said.

The IRS said that the summoned documents for years 2015-present will bear on whether Coral Beauty made valid section 831(b) exclusions or whether they were abusive.

Respondent’s exclusions were specifically for insurance premiums of approximately $800,000 and $750,000, paid by Radiologic in 2019 & 2020.

Some of the documentation Coral Beauty has provided to the IRS include its 2018 Delaware licence, and its 22 December, 2015 and 26 September, 2018 management services agreements with Artex.

“Examination of documents from these years will provide Revenue Agent Schiffer with a comprehensive outlook of Respondent’s arrangement with Radiologic over the years and its “insurance” related activities, dating back to its inception,” the IRS said.

The IRS claims Coral Beauty could be acting as an abusive tax shelter for Radiologic rather than paying legitimate insurance premiums.

In April, the Delaware Department of Insurance (DDOI) lost its latest attempt to block an IRS summons concerning 831(b) captives managed by Artex Risk Solutions and Tribeca Strategic Advisors, wholly owned by Artex, in the State.

The IRS originally issued its summons to the DDOI on 30 October, 2017 during its investigation into Artex and Tribeca, seeking filings and communications between the Department and the captive managers.

The IRS said that Coral Beauty should be ordered to appear and show cause before the court why it should not be “compelled” to produce the books, records, papers, and other data as specified in the pending Summons document requests.

The Court has agreed, and Coral must now appear before it to show cause as to why it should not be compelled to obey the request of the Summons.

QBE launches group medical stop loss programme

Richard Cutcher
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QBE launches group medical stop loss programme

QBE North America has launched Agora, a new group captive programme for medical loss insurance targeting organisations with at least 50 employees, and backed by a Vermont protected cell company (PCC).

Captive Intelligence revealed last week the insurer had formed a sponsored captive in Vermont, Champlain Insurance PCC, in order to support its medical stop loss products and services.

QBE said among the advantages of Agora would be the provision of fully flexible plan design, cost containment solutions, stop loss policy terms, transparent underwriting and monthly experience reporting, and a lack of adverse contract language and restrictive long-term commitments.

“We saw an opportunity to better support employers who self-fund their health plans by expanding our captive service model,” said Tara Krauss, head of accident & health at QBE North America.

“Our new model provides improved efficiencies to reduce unnecessary costs, long-term commitments, and potentially adverse contract terms. Many employer-groups lack the resources and fundamental knowledge to effectively launch a captive solution for their self-funded health plan.

“With Agora, QBE’s segregated cell company, these employers now have an easy point of entry to the captive space as well as the ability to customize a solution to meet a variety of stakeholder needs. It’s about as turn-key as you can get for captive participation.”

In the carrier’s expanded service offering, The QBE Captive Curve, it will provide solutions including agency branded captives, closed group captives, single-parent captives, and insurance management services for employers that already own a captive.

“In addition to having significant fixed cost savings, captives can address specific risk management needs, which is why approximately 90% of Fortune 500 companies have established wholly owned captive subsidiaries,” said Matt Drakeley, vice president of specialty markets for QBE’s accident & health business.

“Organisations with self-funded health insurance plans in a captive have a better view of the factors driving medical claims, which can facilitate more proactive and cost-effective healthcare.

“Smaller employers can also obtain the benefits of captives by joining a group captive. Counting both wholly owned and group structures, nearly 3,400 captives in the U.S. insure a wide range of insurance risks. We’re thrilled to offer Agora to customers as an easy-to-access and flexible group captive solution for medical stop loss insurance.”

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