Is Gridlock Good for Captives?

Not surprising news that Capitol Hill continues to be the most dysfunctional place in the United States. Even must-pass bills or bills where there is broad consensus around the priorities, such as the debt ceiling or infrastructure support, are being held hostage by more acrimonious politics than ever before. I spent three years on Capitol Hill and loved my time there. Not that it wasn’t political and sometimes rancorous, but there was a general feeling that we were all there for the greater good.

Enough gloom on the situation – the question remains is this dysfunction in any way good for the captive industry? Since insurance policy is primarily state driven, it might seem not to matter. However, as we have seen in the not too distant past, actions in Washington can have an effect on our industry, usually as collateral damage. The passage of the Nonadmitted and Reinsurance Reform Act (NRRA) is one good example. NRRA was not intended to pertain to captives, but because it was poorly drafted and tacked onto a bill barreling through Congress (Dodd-Frank) it is now interpreted that way.

The positive effect of Congressional dysfunction is that almost nothing will pass in the near term. That’s not to say that there aren’t bills of interest to our industry, such as PRIA (a government-backed pandemic reinsurance program similar to TRIA), updates to the LRRA, or the cannabis bill that creates a safe harbor for financial services to provide products where pot is legal.

My take on it is that Washington gridlock is not good for captive insurance. Risk management is increasingly important, and taking more of a center stage in broader policy discussions at the national level. So it would benefit everyone (captive owners, the industry and the country) if Congress were a place where one could work with both sides of the aisle to move a good piece of legislation forward. Presently, nothing is likely to pass – unless it is tacked on to a bill that finally gets dislodged. And that is not the best way for good policy to take place.

Two bits of news regarding captive people: First, VCIA board member Lawrence Cook has joined Somers Risk Services as director of client services, where he will be responsible for enhancing client relations and services as well as special project work, marketing support, and partner company relations. Prior to joining Somers Risk, Lawrence was the director, program management, for Sedgwick. Congratulations, Lawrence!

Second, Jay Branum resigned from his position as the director of captives in the South Carolina Department of Insurance (SCDOI). Jay joined the SCDOI in late 2013 as captive director, a newly created position, and in his time there South Carolina experienced tremendous captive insurance growth. Even though Vermont and South Carolina are competitors in the captive insurance arena, Jay has always been helpful and willing to share his many years of wisdom with me. He is truly a class act, and VCIA wishes him all the best in his new endeavors.

I look forward to seeing many of you at our Member Mixer next Wednesday, October 20th at the Hilton Burlington Lake Champlain! Register here.

Stay well, and see you soon!
Rich Smith,
VCIA President

The Long Goodbye… or If Daniel Can Do It, So Can I

As some of you have heard by now, I am stepping down as President of VCIA at the end of January 2022. Now, as many of us hear when a politician or business exec. gets in trouble and must step down, they often mention it is to “spend more time with their family” or to “pursue new opportunities and challenges” and we roll our eyes knowing they were getting booted out. It’s just with me it happens to be the truth – really!

It has been an amazing twelve years at the helm of this wonderful association and in this terrific industry. And to meet and work with such a great group of people who have become my friends beats all. But it seems right for me and the association for a refresh. There is never a perfect time to step aside, but I think this is as good as it can be. I will be here until the end of January providing a smooth transition to the next President. And by that time, you will probably be sick of me saying goodbye (my wife is already tired of hearing about it!).  Like Daniel Craig (who many compare me to) you realize it’s time to leave a terrific franchise and let a new 007 takeover.

I will be seeing many of you and talking to many of you over the course of the next few months so will have a chance to say a proper goodbye. But in the meantime, thank you for the wonderful opportunity to work with you and, more importantly, get to know you.

I look forward to seeing many of you at our in-person VCIA Mixer later this month.  Until then, stay well!

Rich Smith
VCIA President

Thank You!

A HUGE thank you to all of you that joined us for our 36th annual captive insurance conference this past August 10th – 12th. With 500 captive professionals in attendance from across the globe, the event received high marks for its substantive opportunities to conduct business, learn and make meaningful connections.

The conference featured fresh ways for service providers to present their newest innovations and connect with potential clients, both during “Ignite Talks” and while hosting their “Solution Labs”. These features were crafted by VCIA to offer alternatives to the typical online exhibit hall and create an energetic approach for all parties to learn and connect.

The Association presented two significant awards this year, for two well-deserving captive professionals. The 2021 Industry Service Award was presented to Mike Meehan of Milliman, a true friend of everyone in the captive insurance industry. Mike was on the VCIA board of directors when I came on almost 12 years ago and provided me with his friendship and guidance as I worked my way thought those first years.  The Captive Crusader Award was presented this year to Sandi Prescott of Performa. Sandi is head of Performa’s client service, with primary responsibility for the firm’s global client relationships.  The moment she came into the captive insurance industry, Sandi has been involved with the success of VCIA on many fronts. She really showed her chops by chairing VCIA’s Conference Task Force a few years ago – something that Mike accomplished (are you seeing a pattern here?).

A big thanks to all our volunteers, speakers, and sponsors for which we would not have had a successful event. A special thank you to Keynote Speakers Michael Pieciak, Commissioner of the Vermont Department of Financial Regulation and Hank Watkins, Regional Director & President, Americas for Lloyd’s of London, who discussed the implications of systemic risk. Altogether the event had an energetic synergy which was a breath of fresh air for attendees, panelists, and sponsors.

I look forward to seeing many of you at our in-person VCIA Mixers and other events beginning this October.  Until then, stay well!

Rich Smith
VCIA President

It’s a Wrap – Thank You!

Just a quick thank you to all of you who supported VCIA this past week helping and attending our annual captive conference. By all accounts it was a terrific success, and we could have not done it without the brains, sweat, and time of our volunteer members who made it all happen.

Tina Bukow from KBRA was our indefatigable 2021 Conference Chair, and she kept upbeat and enthusiastic no matter what was thrown her way. She led the wonderful VCIA Conference Task Force starting way back last September to last week’s triumph –  thank you, Tina!

VCIA’s Board of Directors rolled up their sleeves and jumped right into the fray as well. Thank you to Andrew Baillie from AES Global Insurance Company, Jason Palmer of Willis, Donna Blair, Dennis Silvia from Davies Captive Management, Lawrence Cook, Anne Marie Towle from Hylant, Tracy Hassett from EdHealth, Derick White from SRS, Jan Klodowski from Agrisurance Inc., and Board Chair Stephanie Mapes from Paul Frank + Collins.

And finally, to VCIA’s terrific staff! Diane Leach, Elizabeth Halpern, Peggy Companion, Janice Valgoi, Dave Rapuano, Meg Precourt, and our super intern Morgan McCuin. I can’t tell you how proud I am to be associated with such good people!  As Mike Meehan from Milliman and VCIA’s 2021 Industry Service Awardee said in his acceptance speech: it’s amazing that such a small staff can do so much.

Thank you and I look forward to seeing you in a couple of weeks at the October 20th Member Mixer!

Rich Smith,
VCIA President  

Three…Two…One…Ignition

Last week I spoke about the increased interest of parametric insurance in the captive space as evidenced by the number of Ignite Talks coming up at our virtual conference focused on this emerging specialty. However, that is only one of the many topic areas being covered with Ignite Talks by the captive industry at VCIA’s 2021 Annual Conference coming up in three weeks.

We informally polled some of our captive owners to ask them what some of the challenges are that their captives have recently faced. We then asked our members to respond to those challenges (or those they have focused on) and present them in our Solution Labs at the conference. Ignite Talks are short, “TED-Talk” style presentations on these solutions.

Some of the challenge areas besides parametric insurance that will be covered include cyber regulation, captive strategic planning, third party risk, tax strategies, employee benefits, premium payment options, use of InsurTech, cell structures, legacy solutions, mentorship, managing volatility, risk distribution, predictive modelling for workers comp, finance and investment strategies, actuarial impact of the pandemic and situational awareness. Quite an incredible line-up!

The VCIA Annual Conference will be held online August 10 – 12th, which is just 3 weeks away so check it out here and Register Now!

Thank you and I look forward to seeing you soon. 

Rich Smith
VCIA President

It’s Hot!

Captivated – July 9, 2021

The record-breaking heat in western North America is just another example of the climate change challenge we all face in the years to come. The insurance industry, not surprisingly, will play a lead role in helping their clients –  and society overall – manage this risk in innovative ways.

One such innovation that is beginning to take off in the captive insurance arena is the use of parametric insurance. Parametric insurance is a non-traditional insurance product that offers pre-specified payouts based upon a trigger event. Trigger events depend on the nature of the parametric policy, which can include weather-related events as well as earthquakes, travel cancellations, and much more.

I know parametric solutions are getting more traction in the captive space because we have not one, but four organizations that are providing Ignite Talks at VCIA’s 2021 Annual Conference on the topic. Ignite Talks are short, TED-Talk style presentations on solutions to challenges facing captive insurers.

Not in any order, we have Aon presenting Parametric Insurance – An Alternative Solution, which will explain how captives supporting Parametric Insurance placements are helping organizations address a hardening market for Natural Catastrophe coverage, contingent and non-damage business interruption risks and other ‘difficult to insure’ areas.

Another session by AXA XL is entitled Parametric Solutions for Captive Owners where you can learn more about how parametric programs enhance risk management for captive owners, and the practical solutions offered through effective captive utilization.

X350 – Magnify Your Reinsurance Capacity to the World´s Largest Capital Market(s) With One Page presented by RYSKEX will explain how the future of buying reinsurance capacity as part of a blockchain-based Digital Risk Exchange (DREx) ecosystem will allow you to start selling your risks to the capital market with parametric risk trading.

And finally, Arbol presents Streamlined “Captive+Parametric” Solutions for Climate Change Risk Management which will explore how captives can play an active role in corporations’ responses to the climate change risk management mandate using climate data, online tools to structure and price parametric protections, and settle claims automatically via smart contracts.

Quite an incredible line up! The VCIA Annual Conference will be held online August 10 – 12th, which is fast approaching, so check it out here and Register Now!

Thank you and I look forward to seeing you soon.  

Rich Smith
VCIA President

Trust

Vermont’s Governor, Phil Scott, declared that all remaining COVID-19 restrictions in the state are lifted following a massive 80 percent vaccination rate among its eligible constituents.  Vermont is the first state to reach this important milestone and it has a lot to do with the competence of the Governor, his team, and the many folks involved with getting Vermont through this crisis.

As I mentioned in an earlier post, Commissioner Mike Pieciak and his team at the Department of Financial Regulations were heavily involved with this critical mission.  The Governor relied on Mike and his team to assist with the modelling of the COVID numbers and analysis using actuarial science. The work and reports generated by Mike’s team were used to inform the Governor, Health Commissioner, and all Vermont citizens.

The success also has to do with Vermont and its citizens. We are a small state and there is a genuine feel for community that permeates the state regardless of which town you live in or what your economic status may be. This “we are all in together” with the trust of government leaders and workers – who are our neighbors – made reaching the 80% goal achievable. It was not easy, and there are still miles to go (to quote another famous northern new Englander), but having trust in one’s neighbors, one’s community, and one’s government is key. Its that same trust Vermont captive insurance owners feel when they domicile in the Green Mountain State.

And although VCIA will be holding our annual conference virtually this year – registration is now open –  I feel confident that we will see each other again by early fall if not sooner.

Thank you and I REALLY look forward to seeing you soon.  

Rich Smith
VCIA President

Remembrance

With Memorial Day coming up this weekend I wanted to give pause for time to do something I do not do as often as I should: remembrance.

Usually, I am busy planning a BBQ or a bike ride or a trip to Lake Champlain this weekend, as Vermont explodes with spring blossoms, sunshine, and greenery. Like many of us, I treat Memorial Day as time off with friends and family. However, I do believe remembering those who have left us, and honoring those who put their lives on the line for the benefit of our country, our communities, and each one of us individually is important.

My father was one of those from the Greatest Generation – a vet from World War II who never really spoke of his time in the service, and if asked just said serving was what one had to do. Luckily for him, he was one of those who joined the war effort just as the hostilities were subsiding and was shipped out to the South Pacific after most of the Japanese forces had been pushed out. I remember him saying he was fresh out of high school and there was a sense of commitment – of doing the right thing – that permeated Americans back then, no matter their place in socie ty.

I do believe we owe a debt of gratitude to those who have served or are currently serving in the  armed forces. Their sacrifices, courage and commitment must never be overlooked. This year we also owe our respect and gratitude to those  who have been on the front lines saving lives during  the pandemic this past year plus. They have given so much for all of us, many times putting their own safety and security on the line to help others. Perhaps if there could be a silver lining from the COVID pandemic, it would be a renewed sense of the concept of the greater good, service to others, and recognition of true selflessness when the chips are down.

So, please have a safe and happy Memorial Day weekend with all your loved ones but also take extra time to  remember and appreciate.  Thank you and I look forward to seeing you soon.  

Rich Smith
VCIA President

Captive Review Recognition

Captive Review hosted its annual Power 50 awards yesterday and I wanted to highlight some of the winners with strong connections to VCIA and Vermont.

First, they gave a shoutout to leaders in the captive owner category, two of VCIA’s board members were recognized: Andrew Baillie of AES and Tracy Hassett of EdHealth. Also recognized in this category were VCIA members Deyna Feng from Cummins and Julie Bordo of PCH Mutual Insurance Company (RRG).

New entrants to Captive Review’s Hall of Fame were former VCIA board member Steve McElhiney with Artex, former VCIA finance committee chair Michael Corbett with Pinnacle Financial Partners, and recent VCIA Industry Service awardee Mike Zuckerman of Temple University.  Also recognized were Captive Professionals to Watch including Alicia Miller of Crowe and Molly Hengtes of Gallagher Bassett.

Finally, congratulations to our colleagues who were named in the Power 50, including Greg Agnone of Midwest Employers Casualty (50), Mike Raybshteyn of EY (45), Rob Walling of Pinnacle Actuarial Services (39), John Prescott of Johnson Lambert (38), Nick Frost of Davies Captive Management (36), Paul Corver of R&Q (32), Renea Louie of Pro Group (31), Amy O’Brien of Gallagher Bassett (30), Phil Giles of MSL Captive Solutions (29), Mike Serricchio of Marsh Captive Solutions (25), Steve Bauman of AXA XL (24), Anj Fowler of Madison Scottsdale (23), Bob Gagliardi of AIG (21), Dan Kusaila of Crowe (19), Karin Landry of Spring Consulting (17), Mike Meehan of Milliman (13), Pete Kranz of Beecher Carlson (11), Anne Marie Towle of Hylant Global Captive Solutions (8), Sandy Bigglestone of Vermont’s Department of Financial Regulation (7), Nancy Gray of Aon (3), and Brady Young of SRS (1).

Congratulations to you all… and even to you Dan Towle of CICA (9)!

Thank you and I look forward to seeing you soon.  

Rich Smith
VCIA

Signed, Sealed and Delivered

Vermont Governor Phil Scott signed a bill this past Wednesday that makes some tweaks to Vermont’s captive statutes.

Every year, without fail, VCIA works with our members and Vermont’s Department of Financial Regulation (DFR) to bring a consensus bill to the Vermont legislature that makes rational, sensible changes that allows our industry to thrive in this State.

Sure, some years there are some sexy items in the annual captive legislation, like the creation of dormant captives (slow down my heart!).  However, the changes usually look at streamlining and clarifying the law to make it both easier to navigate the rules to the game and do the business of captives.  This year was one of those years.

When starting a captive, there is a certain practical order to things, i.e., the captive needs to be incorporated before a license can be granted or needs a tax ID number before bank accounts can be opened.  The new law will bring the statute in line with modern practices and procedures. 

The act also reorders language regarding protected cells to make it easier to follow. Similarly, captive statute references the traditional insurance statutes when it comes to mergers and redomestications. With enough difference in the captive insurance merger and redomestication language, the new act creates a separate section within the captive statute.

Finally, the changes in Vermont law will make it easier for captives to merge, provided there is unanimous consent of the parties (shareholders, members, or policyholders).

There are a couple of tweaks, but like I said, there was nothing earth shattering in the new act. Just another piece of legislation advancing Vermont’s captive insurance industry.

Thank you and I look forward to seeing you soon.  

Rich Smith
VCIA President