Cyber Stars

SOV-stars

We all know that Vermont’s captive regulators epitomize the Gold Standard the state embodies when it comes to captive insurance domiciles. Dave Provost, Sandy Bigglestone and the captive team at Vermont’s Department of Financial Regulation (DFR) are considered objectively as the best in the business. One reason for their star status is their desire to keep learning and moving ahead with the industry as it evolves. Being highly knowledgeable experts requires active learning.

This week, VCIA coordinated a ½ day educational session with the captive team from DFR (along with many of their colleagues from traditional insurance, banking and securities) on the subject of cybersecurity. VCIA board chair Heather McClure and Lynn Sessions from the law firm of Baker Hostetler lead the session on cyber liability, threats that create cyber exposure, regulatory scrutiny giving rise to claims and best practices when responding to these events. The goal of the session was to instill a depth and breadth of cyber knowledge in the Vermont staff that will be another benefit for Vermont captives.

Heather’s day job is executive director of operations at OU Physicians, and she is a licensed attorney in Oklahoma and Texas with an LL.M. in Health Care Law. She is also the Chief Operating Officer of OU Physicians’ captive professional liability insurer, Academic Physicians Insurance Company, which covers approximately 750 faculty physicians, 700 resident physicians and 700 medical students at the University of Oklahoma College of Medicine.

Lynn is a leading privacy and data protection attorney with Baker Hostetler with over 22 years of involvement in the healthcare industry. She has handled nearly 400 data breaches and over 100 regulatory investigations.  She was awarded a Burton Distinguished Writing Award at the Library of Congress for her article, “Anatomy of a Healthcare Data Breach.”

These two highly experienced professionals provided the DFR team with actual cyber liability claims and data breach responses, and provided a forum to ask questions of a leading privacy and data protection attorney and an insured who has experienced cyber incidents first hand.  The audience asked great questions and dug deep into what cyber policies should include and how best to regulate them for the good of the captive. Seeing this it is not hard to understand why Vermont remains the Gold Standard!

I look forward to hearing from you.

Rich Smith
VCIA President

CRO’s Nest

Rich-Sparrow

A little while ago, I wrote a blog on the growing emergence of the Chief Risk Officer, or CRO, in the c-suite of many organizations across the globe.  Risk and how to handle it has become much more than an afterthought by today’s organizational leaders.  One example I cited was a study published by BNY Mellon which stated that over 80 per cent of institutional investors expect risk management to play an even greater role in the investment decision process in the future.

Now it seems the term CRO as Chief Risk Officer is being expropriated by CRO as Chief Resiliency Officer.  One definition of this CRO is someone who will lead the creation of a cohesive resilience strategy and will plan, coordinate, and direct those efforts across the enterprise, guiding the creation of a resilience vision and strategy document.  I guess I am OK with this, although it might muddle the terminology somewhat. Perhaps it’s an attempt to focus on the “bouncing back” from a negative event rather than focusing on the negative event itself? Resiliency and risk management, if not exactly the same concept, share the same goal: to prepare and guide an organization in the face of potential perils it faces.

So here’s to the growing influence of the CRO – whichever one it may be!  I look forward to hearing from you.

Rich Smith
VCIA President

Cyber Bully Pulpit

four-types-of-hackers-video-games

According to a report from a recent Captive.com article, a full 50 percent of US firms do not have cyber insurance, despite the fact that 61 percent of US firms expect the volume of cyber breaches to increase in the next year. Further, more than a quarter of US firms say they are not planning to purchase cyber insurance. These findings come from a new survey from analytics firm FICO, which also reveals that even among those that have insurance only 16 percent said they have cyber insurance that covers all risks. This puts the United States well behind the United Kingdom and Canada in cyber protection, among other countries.

This corresponds to a report released at the 2017 Risk & Insurance Management Society’s (RIMS) Conference earlier this year. According to the 2017 Cyber Risk Transfer Comparison Global Report, written by the Ponemon Institute, most organizations spend four times more on insurance protecting their physical plants, properties, and equipment than they do their information-based assets. The report indicates that most organizations spend much more on fire insurance premiums than on cyber insurance, despite stating in their publicly disclosed documents that a majority of the organization’s value is attributed to intangible assets.

This is where captives make sense: the majority of survey respondents said that cyber insurance was inadequate to meet the needs of their organization, too expensive and has too many exclusions. That’s practically the mantra for captive formations!  Over time, the traditional insurance market will likely meet the need of many insureds with cyber policies, but it’s a little scary how unprotected we currently are – the time is nigh!

Come to the VCIA Conference this year and learn more about Cyber for captive with Cyber Security and Captives: How to Stay One Step Ahead (part 1 & 2). Click here for more information. This is just one of dozens of great captive topics being covered at VCIA August 8–10.  Hope to see you there!

I look forward to hearing from you.

Rich Smith
VCIA President

Sometimes it Works!

compromise

There are too many horror stories about dealing with government bureaucracies, but here is a “shout out” to the State of Virginia as well as an important lesson to always keep trying.

VCIA and NRRA wrote letters regarding the proposed changes to the Virginia Fair Claims Act. The Act threatened to effectively eliminate any ability to write coverage on a “claims-made and reported” policy form and would have negatively impacted RRGs doing business in the state. Our letters addressed the fact that the language of the proposal could have been interpreted to include a requirement that all insurers must demonstrate prejudice in order to deny coverage based on the insured’s failure to comply with time-limited policy notice provisions.

Somewhat surprisingly, the letters generated a personal call to me from the Virginia State Corporation Commission the following day, and we were invited to work with them to fix the issue.  Drawing on the expertise of VCIA members Joe Holahan, Jon Harkavy, Kathy Davis and Skip Myers, we suggested a slight change to the proposal that satisfied the state’s needs while protecting RRGs. It’s heartening to me when a state responds quickly and openly to comments, and it’s a good reminder on just how vigilant we need to be!

I look forward to hearing from you.

Rich Smith
VCIA President

Steve and Carol

new-positionsTwo important people to us at VCIA have recently announced new positions in the captive insurance community.

As many of you saw from the Captive Review report last week, XL Catlin has appointed Steve Bauman as head of global programs and captive practice in North America. Steve is a longtime VCIA board member, formerly with Zurich North America, and has been a high-profile figure in America’s captive industry, having worked at Zurich as head of captive services in the US from 2007 to 2017.  Hiring Steve is a sure sign that XL Catlin is very interested in growing its captive programs in North America after making significant investment in its captive expertise over the past two years mostly in its European operation.

Secondly, Kroll Bond Rating Agency (KBRA) announced today the appointment of Carol Pierce to the role of director in KBRA’s insurance group with a focus on captives, reinsurers, and alternative capital providers. Carol joins KBRA’s analytic team after thirteen years with Munich Reinsurance America, where she was responsible for market, competitor, and client analysis, initially for the specialty-markets division and more recently for the reinsurance division. Prior to Munich Re, Pierce worked at A.M. Best, where she managed the team responsible for expanding ratings among captive insurers. Carol is a former member of our board of directors and was a past recipient of the VCIA Captive Crusader Award.

We are excited to have Steve and Carol continuing to bring their experience and support to the captive industry in their new positions!

I look forward to hearing from you.

Rich Smith
VCIA President

Its spring… so let’s party

 

2017-spring-mixerVCIA hosted a Board meeting and our Spring Mixer at the beautiful Hotel Vermont this past Wednesday night. We had a great turnout and a great evening outdoors with friends from the VCIA community.

At the board meeting, I provided an update on our activities since the beginning of the year and reported on legislative activities VCIA is heavily involved with at the State and Federal levels. Ian Davis, the newish Director of Financial Services for Vermont’s Department of Economic Development gave what I would call “the first 100 days” report and thanked all in the industry who have welcomed him and provided guidance and support. We all look forward to working with Ian going forward!

Dave Provost and Sandy Bigglestone from Vermont’s Department of Financial Regulation (DFR) hosted a Q & A with members where they covered topics ranging from the provision in the newly enacted updates to Vermont’s captive statute that allows agency captives to be licensed, to how quickly we might see a captive licensed for the emerging marijuana industry – just a hint: not that soon.

Then it was cocktail hour (or so) with our members, old and new, on the outside patio of the hotel Vermont overlooking the lake – a perfect way to end a busy day!

I look forward to hearing from you.

Rich Smith
VCIA President

Happy Cinco de Mayo!

Rich-CincoMay has been a very good start for us here in Vermont. First, and foremost, spring is here and we all start getting pretty excited about warmth and sunshine.

But, second, VCIA’s registration for our August conference opened officially on May 1st!  Our theme this year is Mission Possible! So, whether you are new to captive insurance or have many years of experience, there is something for you to learn and someone for you to meet at VCIA.  Register today at our website www.vcia.com to join us in August for great captive education and opportunities to connect with risk professionals from around the world!

Third, but not least, on May 1st I joined Governor Phil Scott as he signed new legislation passed in the 2017 session strengthening Vermont’s captive legislation in a variety of areas including adding agency captives to the portfolio of captives types allowed in Vermont. An agency captive is a reinsurance company controlled by an insurance agency or brokerage. Through a reinsurance agreement with a traditional insurer agency captives create a long-term relationship between the agency and the insured, where interests are aligned: risk appetite, selection, pricing, loss control, claims management, etc. Besides the agency captive provision, changes to Vermont’s captive law allows broader accounting systems, expands dormant captives and clarifies risk retention governance standards among other things.

Now you see why we are celebrating! Thank you all very much, and I look forward to hearing from you.

Rich Smith
VCIA President