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GCP #89: Amrae’s Oliver Wild on French captive regime, and Gerry Willinger, of OneNexus

Richard Cutcher
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Oliver Wild, Amrae
Gerry Willinger, OneNexus

In episode 89 of the Global Captive Podcast, supported by the EY Global Captive Network, Richard is joined by Oliver Wild, President of Amrae, who explains why the French risk management association has lobbied hard for a captive regime and his reaction to the legislation now in place.

Developments in France is one of the stories we have covered most extensively since launching Captive Intelligence in December 2022, and Wild, who is also Group Chief Risk and Insurance Officer at Veolia Environnement, provides insight on how big the French captive market could be.

We also have an interview with Gerry Willinger, Co-founder and Chief Risk Officer of OneNexus, a captive owner in Oklahoma, that is providing risk transfer solutions for Asset Retirement Obligations (“AROs”) concerning the decommissioning of wells in the oil and gas sector.

2.24 – 17.55: Amrae’s Oliver Wild on the motivations for lobbying for a French captive regime, reaction to the results and the Association’s plan to start a Captive Federation.

18.53 – 32.27: Gerry Willinger, of OneNexus, explains the business plan behind their cell captive in Oklahoma.

32.30 – end: Amrae’s Oliver Wild on whether there could re-domestications of overseas captives back to France and the potential numbers of new captive formations.

For all the relevant news and analysis on developments in the captive insurance sector, visit Captive Intelligence and sign up to our twice-weekly newsletter here.

Limagrain and Naval Group form latest French captives

Luke Harrison
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Limagrain and Naval Group form latest French captives

Limagrain and Naval Group have received captive licences from the French Prudential Supervision and Resolution Authority (ACPR), following the recent publication of the French captive decree.

Limagrain is an international agricultural co-operative group that specialises in field seeds, vegetable seeds and cereal products, founded and managed by French farmers.

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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.

Loss ratio the “wrong instrument” to assess abusive transactions – CICA

Luke Harrison
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Loss ratio the “wrong instrument” to assess abusive transactions – CICA

The Captive Insurance Companies Association (CICA) has told the Internal Revenue Service (IRS) it believes that using a 65% loss ratio threshold as the measuring stick for whether a micro-captive transaction is abusive is the “wrong instrument”.

Captive Intelligence reported in April that the IRS had proposed new regulations for “micro captives”, which have divided opinion across America’s captive landscape and prompted a flurry of responses to the Service.

“The underlying premise appears to be that a small captive insurance company that writes property and casualty insurance must look something like an “average” non-captive insurance company,” Dan Towle, preside of CICA said in a letter to the IRS.

“The reality is that every commercial insurance company has its own risk profile, loss ratios, expenses, and profit and contingencies levels; and none of them are “average.’”

The Association said that the inherent problem is that losses are evidence of risk, “but lack of losses is not evidence of lack of risk.”

“If my house burns down, but my neighbour’s house does not, I have substantial losses, but my risk was no different than my neighbour’s.”

CICA said that it is imperative the IRS does not label transactions as “listed transactions” that are properly characterised as “transactions of interest”, and that the IRS does not label transactions as “transactions of interest” when they do not have the potential for tax avoidance.

“The proposed regulations do not accomplish this task,” Towle said.

CICA added the proposed regulations and their suggested tests for identifying abusive transactions will not succeed in identifying abusive versus non-abusive transactions.

The Association said the proposed regulations will not work because of a lack of a precise definition for “insurance” in a tax or insurance context, and the loss ratio is an improper test to identify a “listed transaction”.

The National Council of Insurance Legislators (NCOIL) has also submitted a comment letter to the IRS urging it to retract its proposed rule.

NCOIL said that the IRS proposals are a significant threat to the longstanding framework of the state regulation of insurance and violates the McCarran-Ferguson Doctrine.

NCOIL CEO, Commissioner Tom Considine, said: “We at NCOIL urge the IRS to retract the proposed rule and return to the drawing board to address its stated concerns in a way that is narrow, tailored, non-retroactive, and most importantly does not violate the McCarran-Ferguson Doctrine by infringing on the Congressionally-delegated rights of the States to regulate the business of insurance.”

Earlier this week, the 831(b) Institute launched in the US and asked for clarity from the IRS on how it regulates micro-captives, arguing that it “unfairly” scrutinises them.

Oklahoma’s Insurance Commissioner Glen Mulready recently called on the IRS to withdraw its Notice of Proposed Rulemaking (NPR) concerning micro captives and form a joint task force consisting of the IRS, regulators and representatives of the captive insurance industry.

Domicile Wars: D&O, cannabis potential growth areas for Oklahoma, re-domestications targeted

Luke Harrison
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Domicile Wars: D&O, cannabis potential growth areas for Oklahoma, re-domestications targeted
  • State is investing in greater captive regulatory resources
  • Insurance Commissioner wants OK businesses to know “it’s time to come home”
  • Oklahoma’s corporate law could be amended to allow Side A D&O to be insured by captives
  • Captives could solve remediation bond challenge in medical marijuana sector

Oklahoma is looking to expand its offering to captives by adapting its regulation to allow Oklahoma-domiciled captives to write Side A directors and officers insurance.

The use of captives by cannabis companies is also a potential growth opportunity for the State due to its relaxed laws around marijuana and increasing captive interest from the cannabis industry.

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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.

FERMA elects Charlotte Hedemark as its next President

Luke Harrison
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The Federation of European Risk Management Associations (FERMA) has elected Charlotte Hedemark as the next president of the organisation.

Hedemark is a risk management expert at SAP and is currently vice president and a board member of FERMA.

Her tenure as president will officially begin on 17 October at the closing of the FERMA Seminar 2023 in Belgium, where she will succeed Dirk Wegener following the completion of his four-year tenure as president.

“It is an honour to be elected President of FERMA,” said Hedemark. “During a period of unprecedented challenges for corporations across Europe, the criticality of FERMA’s role in representing the interests of its member associations and raising the profile of the risk profession has never been greater.”

“As we look forward during this time of uncertainty, FERMA will continue to act as a strategic radar for the industry, monitoring developments, informing associations, and addressing policymakers. In my role, I will work to ensure FERMA continues to be a rallying point for our members as we all strive to Be Risk Leaders.”

Her election was announced at the first meeting of the new FERMA board following the annual general assembly in Brussels on 27 June.

She is a well-respected risk professional and has been a strong figure in the ongoing development of FERMA in recent years.

She has worked in Global Risk & Assurance Services (GR&AS) at SAP for more than 15 years and is presently a risk management expert in Customer Success Risk Assurance Services.

“I am delighted that Charlotte has been elected to the position of President,” said Wegener.

“Her deep understanding of the risk management function and commitment to evolving and elevating the profession through her involvement with the wider risk community make her the ideal candidate to take the helm at FERMA as we help guide our members and represent their interests at all levels.”

The 831(b) Institute launches in US, demands clarity from the IRS

Luke Harrison
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The 831(b) Institute launches in US, demands clarity from the IRS

The 831(b) Institute has launched in the US and is asking for clarity from the IRS around how it regulates micro-captives, arguing that it “unfairly” scrutinises them.

Instead of creating guidelines that allow for micro-captive plans to be fairly regulated, the 831(b) Institute argues that the IRS is attempting to push forward harmful regulation that will make micro-captives less effective.

The 831(b) Institute said it was formed to bring the business community together and give them a voice around what true risk mitigation and insurance coverage means to small and medium-sized businesses.

“Insurance is an essential part of owning a business, but often complicated rules and lack of proper guidance from the Internal Revenue Service (IRS) result in confusion and misconceptions,” the Institute said.

“Our country is built on entrepreneurial spirit, and micro-captive insurance helps protect the livelihoods of America’s entrepreneurs.”

The Institute argued that micro-captives can serve as an excellent insurance option for small business owners, as they allow for self-reliance, independence, and flexibility for businesses.

“The inability of the IRS to create clear regulatory standards for micro-captives is harmful to good faith business owners looking to have an insurance plan in place that allows them to participate in the risk and premium of their insurance programs in the same manner as large enterprises,” said Nate Reznicek, president and principal consultant at Captive.Insure, and advisor to the Institute.

“This includes the ability to help to cover unpredictable expenses and potentially catastrophic events.”

Captive Intelligence reported in April that the IRS had proposed new regulations for “micro captives”, which have divided opinion across America’s captive landscape, with some saying they could destroy the industry, while others have branded it a refreshing change.

Oklahoma’s Insurance Commissioner Glen Mulready recently called on the IRS to withdraw its Notice of Proposed Rulemaking (NPR) concerning micro captives and form a joint task force consisting of the IRS, regulators and representatives of the captive insurance industry.

Unbundled fronting more prevalent, plays to AGCS’ strengths – Brian McNamara

Richard Cutcher
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Unbundled fronting more prevalent, plays to AGCS’ strengths – Brian McNamara

The rising popularity of unbundled fronting services for captive insurance companies is playing to the strengths of Allianz Global Corporate & Specialty, according to Brian McNamara, regional head of multinational, North America and global head of captive solutions at the carrier.

Speaking in an interview on GCP #88, McNamara outlined AGCS’ recent investment and further expansion into the captive space aligned with the group’s broader efforts to be a bigger player in the multinational market.

The insurer has had a significant presence in the captive market for the past decade or so through Allianz Risk Transfer (ART) and AGCS in both fronting and structure reinsurance programmes, but the rise in demand for captive services during the hard market has called for further investment and reorganisation.

AGCS has made a string of high-profile hires to lead multinational and provide captive services over the past 12 months, including Guy Money as global head of multinational business.

The carrier also brought in Salil Bhalla as a global captive fronting manager in Europe, added Nick Troxell, formerly global risk financing manager for Nike, to the fronting team and moved Jayesh Patel internally to global head of multinational market practice.

McNamara said the reduction in capacity and appetite in certain lines from the commercial market had pushed large multinationals “against the wall”, which has led to a greater utilisation for captives and more demand for unbundled fronting on global programmes.

“The unbundled fronting has been around for many years,” he added.

“It started really with the energy companies with established captives in Bermuda 50 years ago.

“I think what we are promoting and some of our competitors are promoting is the fact that you can unbundle the captive fronting services. If you’ve got a global franchise, it doesn’t necessarily mean that your main capacity provider is actually the best at providing those global services.

“It’s becoming more prevalent now, and obviously we want to capitalize on that and provide those services.

“Obviously there’s a high barrier to entry for doing it on a global basis, there’s probably five companies that can do it globally. We believe we’ve got the largest franchise, which includes our network partners globally of over 200, and I think we’ve got the biggest owned network as well. So that obviously plays to a strength that we’ve got.”

With the rise in demand for unbundled fronting, meaning the front is retaining no risk and ceding 100% to the captive, there is also increased possibility for bespoke wordings and more innovative coverage.

Although not a fronted programme, Captive Intelligence revealed in December that AGCS had worked with Meta on a Side A ‘Laser DIC’ policy backed by its captive.

“Traditionally, we have specialised in basically manuscript customized wordings for our clients,” McNamara added.

“We will essentially provide a multi-line policy and that’s not stapling five or six policy wordings together. It’s actually crafting a multi-line policy.

“We also try to have a global aggregate limit on that policy, and then also we’ll do it over a multi-year period. Generally, three to five years.

“It gives the risk manager some security that there’s continuity there. We have one client where we have seven lines of business in over 80 countries. Obviously putting together and crafting that programme initially is not easy, there’s a lot of work that goes into it, but once it’s up and running it’s a very effective programme for the risk manager to have.”

Listen to the full interview with Brian McNamara, regional head of multinational, North America and global head of captive solutions at AGCS, on GCP #88, either on the Captive Intelligence website or on any podcast app

National Grid captive rated Excellent

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 Isle of Man-domiciled National Grid Insurance Company Limited (NGICL). The ratings outlook is stable.

NGICL is the captive owned by National Grid, with AM Best saying the company is well-integrated into the group’s overall risk management framework, providing a broad range of property damage business interruption (PDBI), casualty and cyber cover to meet the company’s insurance needs.

NGICL has a track record of adequate operating performance, generating positive net results in seven of the past 10 years (2014-2023), underpinned by good underwriting performance over the cycle.

However, the captive reported significant losses on its PDBI book in financial years 2021 and 2022, which is reflected by the deteriorated five-year (2019-2023) weighted average combined ratio of 106%.

AM Best expects the captive’s underwriting performance to be robust over the longer-term, albeit subject to potential volatility given its high net line sizes relative to its premium base, supported by corrective actions taken by management following recent losses.

The captive’s balance sheet strength is underpinned by its risk-adjusted capitalisation at the strongest level, as measured by AM Best’s capital adequacy ratio (BCAR).

The ratings agency expects the captive’s BCAR scores to remain comfortably above the minimum required for the strongest assessment, reflecting its strategy to maintain sufficient capital buffers to absorb potential volatility from its exposure to low frequency, high severity losses.

A partially offsetting balance sheet strength factor is the captive’s reinsurance dependence, driven by the large policy limits needed by National Grid.

Counterparty credit risk is mitigated partly by the good credit quality of NGICL’s reinsurance panel.

Oklahoma calls on IRS to drop proposed 831(b) rules and form joint task force

Luke Harrison
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Oklahoma calls on IRS to drop proposed 831(b) rules and form joint task force

Oklahoma’s Insurance Commissioner Glen Mulready has called on the Internal Revenue Service to withdraw its Notice of Proposed Rulemaking (NPR) concerning micro captives and form a joint task force consisting of the IRS, regulators and representatives of the captive insurance industry.

Captive Intelligence reported in April that the IRS had proposed new regulations for “micro captives” at the same time as obsoleting Notice 2016-66, having had it struck down by the courts in March 2022.

The proposed regulations for 831(b) captives have divided opinion across America’s captive landscape, with some saying they could destroy the industry, while others have branded it a refreshing change.

The call from Oklahoma came in a letter to IRS Commissioner Danny Werfel, written by captive regulator Steve Kinion on behald of by Commissioner Mulready, as part of the State’s comments in response to the NPR.

One mission of the task force proposed by Oklahoma would be to enhance the IRS’ knowledge on captives and why they are important for risk transfer.

“Once a level of mutually enhanced knowledge exists, the task force’s next mission will be to consider the feasibility of the NPR’s proposals as those proposals relate to captive insurance,” the letter, penned by Kinion, stated.

Under the Notice, the IRS proposed regulation which would see certain micro-captive transactions deemed “listed transactions” and other micro-captive transactions labelled “transactions of interest”.

The majority of captives that record a loss ratio under 65% would be considered a “listed transaction”.

The 65% loss ratio calculation and limit has attracted the attention of many across the US captive market since it is not uncommon for captives, whether taking the 831(b) tax election or not, and commercial insurers to perform at or better than that level.

The Oklahoma insurance Department (OID) said it opposes the NPR for the reason that captive insurance transactions, which insure low frequency but high severity risks, will be “needlessly” designated listed transactions or transactions of interest.

“Low frequency risks will very likely fail the 65% loss ratio test applied to the captive insurer’s most recent nine taxable years,” Kinion said.

“Legitimate insurance coverages like terrorism or pandemic risks thankfully have few claims meaning they are low frequency. However, when claims occur, they are severe in dollar amounts.”

Kinion said that captive insurers that insure such risks for legitimate reasons should not be burdened with the administrative and legal expenses associated with being in the category of tax evasion or avoidance by failing the loss ratio test.

The letter noted that Commissioner Mulready is willing and ready to engage with the IRS to find agreeable solutions to the IRS’ concerns with captive insurance.

The comments from the OID follow those provided by the Tennessee Captive Insurance Association (TCIA) last week.

“The IRS should not attempt to impose a 65% loss ratio on micro-captive transactions as only Congress has the authority to impose loss ratios on the insurance industry under the McCarran Ferguson act,” The TCIA said.

The letter also follows comments from The Self-Insurance Institute of America (SIIA), which said the proposals will “severely limit access to captive insurance programs for small- and medium-sized businesses in the US”.

PSI only the start of ESG journey for International SOS captive

Richard Cutcher
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PSI only the start of ESG journey for International SOS captive

Becoming a signatory of the United Nations’ Principles for Sustainable Insurance (PSI) should only be the start of the captive journey in contributing to the group’s ESG objectives, according to Franck Baron, group deputy director of risk management and insurance at International SOS.

Captive Intelligence reported in March that the healthy and security service firm’s Singapore-domiciled Odeon Insurance Re Pte Ltd had become the third captive to sign the PSI, and the first from Asia.

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