In this GCP Short, produced in collaboration with Marsh Captives Solutions, Richard is joined by two experts to discuss the pros and cons or writing cyber insurance through a captive.
Payal Patel, a Senior Vice Presifent and Cyber Practice Leader for the Northeast at Marsh in America, and Mike Serricchio, Americas Sales & Advisory Leader at Marsh Captive Solutions, discuss the state of the commercial market for cyber, the different roles and options captives are providing to corporates, why using a captive for cyber is not always the answer, and the response of underwriters when captives are utilised.
In this GCP Short, produced in collaboration with Swiss Re Corporate Solutions, Richard is joined by Andre Martin, Head of Innovative Risk Solutions for APAC, to discuss captive utilisation in the Asia Pacific Region.
Richard and Andre debate whether changing market conditions have impacted the appetite for captives in the region, how a captive opens up many more risk financing options for corporates and if a boom in captive formations is just around the corner.
Belinda Fortman has left her position as Tennessee’s captive insurance section director just over one year after taking up the regulatory role. Fortman was appointed to lead the fast growing captive jurisdiction in June 2020 after a long and varied career in captive management. Fortman will be joining Innovative Health Holdings as the company’s executive vice president.
She said on her departure: “I leave the captive section with a broad bench of very talented captive insurance regulators and am confident they will continue to reflect the Tennessee captive section’s reputation of being service oriented and business friendly.” The Tennessee Department of Commerce and Insurance (TDCI) has struggled to find a long term captive section leader since Michael Corbett, who held the role for nine years, left in 2020.
Kevin Doherty, chairman of the Tennessee Captive Insurance Association (TCIA), said that Fortman’s “contributions to the TDCI’s captive section include expanding the team, promoting talent to leadership roles, and providing expert guidance to the TDCI to build upon Tennessee’s tradition of ‘regulating to yes.’” He added: “We welcome her continued support as she transitions back into the private sector.”
Heineken chose to form a new captive in 2021 to write international employee benefits for the group.
Rogier Bouwman, Global Pensions and Benefits Manager, Heineken
Heineken, a long time captive owner in the Netherlands, went live with its second captive in 2021 as it embarked on a new financing strategy for international employee benefits.
The Dutch brewing giant chose to form Haystack Re Designated Activity Company (DAC) in Dublin, Ireland, instead of restructuring its 15-year-old self-managed property & casualty captive, Roeminck Insurance NV.
Speaking in an exclusive interview on GCP #65 Rogier Bouwman, global pensions and benefits manager, explained that they were keen for the employee benefits captive to use an outsourced management model. In addition, adding EB to Roeminck would have required converting it into a reinsurance captive.
When asked why they chose to establish a new, separate captive Bouwman admitted that it was not their first thought. “Indeed in the beginning, we also thought to leverage upon our existing captive.”
As the project continued, however, it became clear that there were a number of motives to go down the standalone EB captive route.
Roeminck Insurance, domiciled in the Netherlands, is a direct writer and to add employee benefits would have required it be converted into a reinsurance captive.
“Another reason was that we wanted to do a fully outsourced model for our employee benefits offering,” he added. “We did not want to create extra roles internally to manage and deal with all the operational aspects of the captive.
“… Of course there are financial benefits to combine the captives, but overall, the captive in itself needs to be a standalone business case. It needs to make sense of course from a qualitative nature as we discussed before, but also from a financial perspective.”
Bouwman said that the group will continue to assess over time “whether the current set up is the most effective and logical one” or if they want to combine the two captives in the future.
Employee benefits control
One of the “key” reasons Heineken decided to form its Dublin-domiciled captive was to improve the company’s employee benefits offering by reducing terms, conditions and exclusions.
“The reason why we chose to go captive is to be fully in control of the process,” Bouwman said. He believes Heineken’s captive will also provide financial benefit for the company but stressed that is not the “primary concern”.
“We do think that there are options to save a bit of money, to be more effective, to have better cost control mitigations and to have more stable premiums, but the key reason for this is from a qualitative perspective,” he added. “To further our people agenda and to strengthen our employee benefit.”
Fanny Behrens, global pensions & benefits specialist at Heineken, also detailed a number of advantages its employee benefits captive provides.
Firstly, she highlighted that the captive had allowed the company to align the renewal process with its annual budget planning. “So that of course could actually better indicate the plan costs that are related to the insured benefits programmes.”
Secondly, she said the captive had allowed Heineken to “evolve” its broker model. “In some countries we have completely removed broker arrangements or we have replaced the broker arrangements by targeted consultancy arrangements,” she said.
Finally, Behrens noted that Heineken had also used its employee benefits captive to remove common exclusions around alcohol abuse, HIV, and suicide.
Joe McDonald, South Carolina Department of Insurance
In episode 65 of the Global Captive Podcast, supported by legacy specialists R&Q and hosted by Richard Cutcher, our guest co-host is Grant Maxwell, Global Head of Alternative Risk Transfer at Allianz Global Corporate & Specialty (AGCS). In an in-depth discussion, Grant discusses structured reinsurance programmes and fronting for captives.
Our captive owner interview is with Heineken’s Rogier Bouwman, Global Head of Pensions and Benefits, and Fanny Behrens, Global Pensions & Benefits Specialist. Rogier and Fanny explain to Richard why they formed a new, separate captive in Ireland last year solely for international employee benefits programmes.
The final interview of the episode is with Joe McDonald, Director of Captives for the South Carolina Department of Insurance. Richard caught up with Joe at CICA and he tells listeners about his new regulatory role.
In this GCP Short, produced in collaboration with Spring Consulting Group, Richard is joined in a 15 minute conversation with Karin Landry, Managing Partner at Spring Consulting, and Fredrik Finnman, Head of Group Risk Management at the Swedish global engineering giant Sandvik.
Karin and Fredrik debate the differences between the European and US captive markets, specifically with regards to regulatory culture, the impact of the hard market and Karin also provides an update on growing activity at the Department of Labor with reference to ERISA benefits.
Washington State’s Office of the Insurance Commissioner has published further information as to how it plans to implement new legislation mandating the self-procurement tax passed by legislators earlier this year. Senate Bill 5315 was signed into law by Governor Jay Inslee on May 12 and imposes a 2% tax on all premium relating to Washington risks with the methodology for calculating the allocation made available to the Commissioner.
Mike Kreidler
Captives will need to register with Commissioner Mike Kreidler’s office, incurring a $2,500 fee, and demonstrate that captive assets exceed liabilities by $1 million. The first draft of regulations, published on August 20, provide further information on how Kreidler’s office is planning to implement the new law. Of particular interest will be the interpretation of the ‘principle place of business’ of the captive owner.
The proposed rules suggest that Washington State-based subsidiaries of corporates headquartered in another state will have their premium taxed. “Except where the parent corporation is the alter ego of the subsidiary, subsidiaries are analyzed separately from their parent or holding companies,” the regulations state. “For example, if a captive insurer insures a subsidiary that is headquartered in Washington, then this state would be the principal place of business for the insured subsidiary, even if the parent company was headquartered elsewhere.”
Such an interpretation is likely to concern captive owners around the United States that have operations in Washington and ensures this is no longer just a challenge for corporates headquartered in the state. The regulations also stipulate that a registered captive insurer can only provide property & casualty insurance and cannot provide medical stop-loss insurance or workers’ compensation coverage directly to workers.
Again, this is likely to be a challenge for several captive owners with significant operations in Washington State. Stakeholders can provide comments on the proposed regulations until 10 September.
American food giant Kraft Heinz has appointed Aon to provide investment services to its Dublin-domiciled captive Noble Insurance Company. Noble was formed in 1994 and is managed by Aon. Aon’s global investment division will partner with Goldman Sachs to provide a ‘one-stop shop’ of investment services.
“Liquidity management is critical to the safe operations of all insurance entities and we continue to see significant interest in the array of cash management solutions and technology services offered by the Mosaic portal,” said Michael Siegel, global head of the insurance and liquidity asset management businesses at Goldman Sachs. “We look forward to broadening our work with Aon as it continues to provide its expansive array of solutions to the captive and insurance world.”
Tim Currell, partner and head of insurance solutions, Global Investment at Aon, said: “We look forward to building on this foundation – the service already has a strong pipeline of interest both in Ireland and in the other locations where we are planning to make it available in the coming months.”
Ohio-based medical group captive specialists Roundstone has distributed nearly $10m in cash back to business owners participating in its group medical captive. The company said the $10m represented 17% of total premiums in the pool.
“Two-thirds of Roundstone customers save enough in their first four years with us to pay the claims for their entire fifth year, and 100% save money,” said Roundstone’s president Mike Schroeder. “For employers who must attract and retain employee with great benefits, the need to control health insurance costs over the long term is an imperative. We are committed to helping them and this latest distribution shows that.”
Roundstone’s group medical captives are designed for small to mid-zed employers across sectors in the United States.
South Africa’s Prudential Authority (PA) and Financial Sector Conduct Authority (FSCA) published a guidance note on 30 August providing further clarity on the definition of a foreign captive insurer insuring first party risks and conducting insurance business in the country.
The note states that a “captive insurer” is an insurer that is only insuring the operational risks of the group of companies of which the insurer is a apart, any associate of the a company that is part of the group, or any joint arrangement that a company that is part of the group of Companies.
Having provided these definitions the guidance goes on to state that in most cases foreign captives insuring South African businesses will need to be licensed. Captives can apply for an exemption from licensing, but can only submit this request alongside a licensing application.
