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SRS Bermuda appoints Charles Scherer as SVP, ILS
SRS Bermuda has appointed Charles Scherer as senior vice president for insurance link securities (ILS) at its Hamilton office.
Reporting to Jonathan Reiss, chairman of SRS Bermuda, the independent captive manager said Scherer will be a key member of its Bermuda leadership team and will be responsible for further expanding SRS’ presence in the ILS sector.
“Chuck has a proven track record of developing ILS products across both property & casualty (P&C) and life sectors, especially with respect to structuring and licensing catastrophe bonds, transformers, sidecars, and life insurance securitisations,” Reiss said.
“Chuck also has considerable experience managing captives and commercial insurance and reinsurance clients in both Bermuda and the United States. His breadth of experience and versatility will be a huge asset to our growing team at SRS.”
Scherer has 20 years of experience in the financial services and insurance industries. Prior to joining SRS, he served as controller for a Florida-based surety insurance company.
Prior to that, he was SVP, ILS at Aon Bermuda where he spent seven years dedicated to the ILS sector.
He has also been a vice president at Marsh USA, managing special purpose financial captives and commercial insurance clients.
“I have long admired SRS’ independence and dedication to client service, and I noticed their commitment to the ILS sector which fits perfectly with my experience,” Scherer said.
“I am excited to have this opportunity in a dynamic and growing business.”
AM Best affirms ratings of BNY Mellon captives
AM Best has affirmed the financial strength ratings of A (Excellent) and the long-term issuer credit ratings of “a+” (Excellent) of Bermuda-based BNY Trade Insurance and The Hamilton Insurance Corp. (Hamilton) (Melville, NY).
BNY Trade and Hamilton are single-parent captives of their ultimate parent, The Bank of New York Mellon Corporation (BNY Mellon), a global financial services company.
In their roles as single-parent captives, both companies provide comprehensive reinsurance coverage and products to their parent. The outlook of the credit ratings (ratings) is stable.
BNY Trade’s balance sheet strength is assessed as strongest by AM Best, and is supported by risk-adjusted capitalisation at the strongest level, as measured by Best’s capital adequacy Ratio (BCAR), excellent liquidity measures and consistent surplus growth during the last five-year period.
AM Best said the operating performance assessment of strong reflects the company’s favourable combined ratio driven by excellent loss history and low expense structure.
Hamilton’s balance sheet strength assessment of very strong is supported by risk-adjusted capitalisation at the very strong level, as measured by BCAR, and strong liquidity measures exceeding industry composite averages.
In addition, the company benefits from the financial flexibility and support provided by BNY Mellon.
“BNY Trade and Hamilton also benefit from their parent’s robust, enterprise–wide policies and procedures in the areas of risk management, resiliency, corporate governance, compliance and ethics,” AM Best said.
Knauf appoints SRS to manage Luxembourg captive
Strategic Risk Solutions (SRS) Luxembourg has been appointed the manager of the Knauf captive.
Privately-held Knauf is a group of companies that form one of the world’s largest manufacturers of construction materials.
It formed Knauf Re in 2021 in response to the hard market conditions and originally appointed Aon as its captive manager.
Marcus Reichel, Knauf’s global head of insurance said: “We are delighted to work with SRS going forward, equally excited to embark on a long-lasting journey together with the SRS team and explore further risk financing solutions for our group.”
The company has 300 production facilities and sales organisations in more than 90 countries, as well as 41,500 employees worldwide.
Knauf has also owned a Vermont-domiciled captive in operation since 2018, which it inherited from an acquisition. It writes medical stop loss and terrorism and funds self-insured retentions (SIRs) for other property and casualty lines.
“We are delighted that our growth in Luxembourg and throughout Europe has been sufficiently strong to date to lead the SRS Luxembourg office to our first German client” said Maxime Schons, the SRS Luxembourg Managing Director.
“Knauf captive is a fantastic start, and we are already up-to-speed to provide the best in-class services from day one and throughout the relationship.”
SRS has been expanding its European operations over the past five years, with the company opening its first office in France in November last year as the country prepared to introduce captive legislation.
Alliant sees “tremendous” captive growth
Alliant Insurance Services has seen exceptional growth within its captive division over the past 18 months, Seth Madnick, managing director of the captive group at Alliant, told Captive Intelligence.
Alliant does not provide captive management, but works with captives on consulting and feasibility studies.
“We’re not the size of the largest global captive brokers,” Madnick said. “But we’re growing with our preferred clients, and I like to think we’re a niche player.
“In the last 18 months, we’ve seen tremendous growth in new captive formations, and it’s been quite significant across all the Alliant specialty segments.”
Madnick was speaking to Captive Intelligence following the news that Alliant Insurance Services had launched Alliant Re, a reinsurance brokerage division, which will include offering captive reinsurance solutions.
Alliant Re will leverage proprietary data and analytics, industry relationships and insurance expertise to navigate market conditions and provide customised risk transfer solutions to protect insurers from large losses.
He said he expects the Alliant and Alliant Re captive teams to work together closely going forward.
“Alliant is a very flat organisation which is fine and has not a lot of silos, so we’ve already started collaborating on a few projects,” he said.
He said Alliant had worked a lot with property captives due to the current difficultly of placing these risks in the commercial market.
“So, to us, it presents an opportunity to work with Alliant Re on placing some of the stop loss or second event coverage that we need for our property captives,” he said.
“Candidly, in the last week or so, we’ve already had conversations with them on how they can assist us on the property segment alone.”
Madnick noted that most of the company’s recent growth had been around single parent captives.
“We underwrite for a couple of captives that we manage, but the bulk of our growth has been in the single parent side, primarily commercial clients who are feeling the stress in the marketplace,” he added.
He highlighted that one of the biggest challenges is carrier risk appetite and their capacity for fronting risk.
“Property fronting capacity is an issue,” Madnick said. “There are not as many carriers fronting property as there are for the casualty lines.
“The other challenge is collateral, as the carriers are tightening up on their collateral requirements or how much collateral they want for risk transfer. Clients need to have a strong balance sheet to support the collateral commitments.”
He noted that almost all the company’s work for captive clients has been for US based clients, although Alliant was recently retained by a technology company out of Israel for a feasibility study.
“However, the captives themselves are domiciled primarily in Bermuda, Cayman or various states in the US,” he said.
“Some captives are small, some are large. We have a large group captive for a California quick service franchise owner group. It’s about 600 restaurants, so that’s one captive but it’s a large group.”
GCP Short: VCIA 2023 Preview
In this GCP Short, we preview the Vermont Captive Insurance Association conference being held in Burlington, Vermont from August 7 to August 10.
VCIA certainly is a must-attend item on the captive conference calendar, particularly for those active in the US captive market but Vermont is also home to many overseas owned captives as well.
Over twenty minutes, Richard is joined by VCIA president Kevin Mead and Aaron Hillebrandt, principal and consulting actuary at Pinnacle Actuarial Resources but also conference chair for this year’s event in Burlington.
Kevin and Aaron discuss some of the highlights on the 2023 agenda, including the content and activities particularly relevant for the large cohort of new captives formed in the domiciles over the past three years and a renewed effort to attract and engage the next generation of captive leaders.
To register for the conference, visit here. The discounted early bird registration ends on the 30th June.
California Franchise Tax Board issues Notice allowing abusive micro-captives reduced penalties
The California Franchise Tax Board (FTB) has offered taxpayers the opportunity to resolve potentially abusive micro-captives (831(b)) transactions and receive reduced penalties by entering into a closing agreement to reverse their deductions and related transaction costs.
Eligible taxpayers must submit a complete and signed FTB Notice 2023-02 closing agreement to the FTB between 10 July 2023, and 17 November 2023, which concedes all claimed tax benefits relating to eligible transactions.
The Notice offers the same mechanism to users of syndicated conservation easement transactions (SCE), which have no relevance to captive insurance but have similarly found themselves targeted by the Internal Revenue Service.
California taxpayers who directly or indirectly entered into an eligible transaction prior to the date of the Notice but have not yet realised the tax benefits from any of these transactions are not eligible to participate in the resolution.
“These taxpayers should be aware that they will be subject to all applicable penalties if at a later date they file a return claiming the tax benefits of an Eligible Transaction,” the notice stated.
Eligible taxpayers who do not participate in the resolution described in the Notice, or taxpayers who fail to comply with all the requirements of this Notice, will be subject to all penalties and interest applicable to that transaction.
The FTB Notice follows the IRS publishing proposals in April which, if implemented, would identify certain micro-captives as “listed transactions” and others “transactions of interest”.
Captive Intelligence published a long-read detailing whether the proposals would destroy the industry or be a refreshing change.
Domicile Wars: Third party risk expected to boost Labuan’s captive proposition
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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.
Iowa captive legislation advances
Iowa is likely to become the next US state to embrace captives, which would make it the 36th US jurisdiction to adopt captive insurance legislation (including the District of Columbia).
On April 24, the Iowa Senate unanimously passed Senate File 549 (SF 549), as amended, “a bill for an act relating to captive insurance companies,” which the House passed earlier in April.
Governor Kim Reynolds is expected to sign the Bill into law, with Bills signed into law normally going into effect 1 July following passage.
SF 549 authorises the formation of pure, association, protected cell, special purpose and industrial insured captives.
The Bill also charges the Iowa Insurance Division with the responsibility of administering the law and promulgating rules under it.
“With a modern, competitive bill that is comparable in many ways to the captive statutes of other jurisdictions, including with respect to premium taxes and fees, dedicated captive regulators and a robust underlying insurance industry, Iowa will be a captive domicile to watch in the future,” said Brian Thomas, associate attorney at Womble Bond Dickinson.
Each captive, including series and protected cell captives, must pay an initial registration fee and an annual renewal fee of $300.
The one-time non-refundable application fee is $200 and every captive must submit an annual report to the Insurance Division by 1 April each year and undergo regulatory exams at the discretion of the insurance commissioner, but no less frequently than every three years.
Annual premium taxes on direct premiums will be 0.35% on the first $20mn of direct premiums, and 0.25% on each dollar of direct premium over $20m.
Annual premium taxes on assumed reinsurance premiums will be 0.20% of assumed reinsurance premiums up to $20m, and 0.125% of assumed reinsurance premiums from $20m to $40m.
Assumed reinsurance premiums that exceed $40m will be taxed at 5%.
The General Assembly has set the minimum annual premium tax for all captives at $5,000, and like the vast majority of other captive jurisdictions, a captive domiciled in Iowa will be required to have a director or manager that is a resident of the state.
Additionally, the parties responsible for managing each captive will be required to hold an annual meeting in Iowa each year.
Iowa will also have dedicated captive insurance regulators, and the Insurance Division is expected to establish a captive insurance bureau to carry out its obligations.
The bureau will be staffed by three new full-time employees: a bureau chief, an examiner specialist and an examiner.
Relaunched Oklahoma association keen to drive captive growth and education
Oklahoma is a “sleeping giant” of captive potential, according to Renea Louie, COO at Pro Group Captive Management Services, and a new Oklahoma Captive Association (OCIA) board member.
There were 11 new captives formed in Oklahoma last year, taking its year-end total to 52, the Department of Insurance also signed up Steve Kinion at the end of 2022 as its new captive director.
“We will hustle and do it right and work hard,” she said. “Oklahoma is quietly becoming one of the fastest growing domiciles in the US. It’s a sleeping giant.”
Louie was speaking to Captive Intelligence following the recent news that the OCIA was being relaunched, chaired by Heather McClure, general council and chief risk officer at Helio Risk.
Louie joined the board earlier this month along with Randy Pierce, director of risk and insurane at local oil & gas company OneOK.
McClure highlighted that the state’s bylaws allow the association to have up to nine board members.
“We’ve got seven highly experienced leaders now that represent not just the service provider aspect, but we have captive owners on the board, and in committee chair leadership also,” she said.
“We’re looking to increase that ratio of captive owner membership on the board and on our committees as we grow, and that is already happening as others become aware of the re-launch.”
McClure indicated that one of the first things the Association needs to tackle is publishing and presenting the right education and materials to captives who are domiciled in Oklahoma, “as well as those that are actively considering domiciling here”.
She highlighted that the catalyst for revitalising the OCIA was two-fold.
“A number of experienced captive owners domiciled in Oklahoma, and the uniquely supportive energy of the Oklahoma Insurance Department in desiring to partner with industry,” McClure said.
McClure noted that she gets emails every week asking her about participating.
“So, it’s almost like there’s like this bottleneck of interest, and now we’re ready to take off,” she added.
“We’re in that fortunate position of a lot of high interest from a number of industries.
“Oklahoma has such diversity of industries and I think we get pigeon-holed in being mainly agricultural or mainly oil & gas, but we’ve got a lot going on here.”
Louie said that the overall goals for the Board will be a collective team effort “and I’m sure that all the board members have a big vision, and I can’t wait to combine all those visions to make it a very strong association”.
“The challenge is serving the industry well and doing it in the timeframe that the industry needs us to is going to be where hard work and innovation will be needed and we will get the work done,” Louie added.
The OCIA will be holding its annual captive conference on 15 – 17 April 2024.