We in the captive insurance realm have fond relations with our British friends in the industry – I mean let’s face it, you can’t go to a captive event anywhere without bumping into an ex-pat.
But this past week, it was nice to meet Peter Abbott, Her Majesty’s Consul General at the British Consulate General Boston and members of his team to talk things captive insurance. The meeting was facilitated through Brittany Nevins, Director of Captive insurance for Vermont’s Department of Economic Development and included Christine Brown, Deputy Director of Captive Insurance for Vermont’s Department of Financial Regulation.
Consul Abbott was making several virtual visits throughout the New England states to meet with leaders from key industries in each of the states – and naturally, captive insurance interested them the most out of all of Vermont’s industries.
We gave them the fascinating history of captive insurance in Vermont as well as discussed possible trade cooperation between the UK market and Vermont captives. And although there is already much collaboration between the U.S. captive industry and the London insurance world, it is always good to strengthen these ties.
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.
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.
A couple recent reports confirm what we already know in the captive world: we are in a hot captive insurance market for the foreseeable future.
A new report by the Swiss Re Institute confirms that the disruption and uncertainty in global commercial insurance markets is prompting companies to explore captive insurance. “Exacerbated by uncertainty created by the pandemic, the current rate hardening is the strongest in 20 years and this is expected to continue into 2022.” This coincides with a Marsh survey in September 2020 that found 59% of respondents expected to expand their captive use by adding more lines of coverage, increasing retentions in the captive.
Interestingly, the report also highlights the fact that there are now more captive insurance companies than traditional insurers globally, estimated at more than 7000 captives domiciled in more than 70 jurisdictions. The US remains the world’s leading market for captive insurance, used by up to 70% of Fortune 500 companies. But with high saturation among large corporations in North America and Europe, the use of captives is spreading geographically to Asia and Latin America.
Another report confirming the continued growth in the captive space was recently released by the Insurance Information Institute (Triple-I) called A Comprehensive Evaluation of the Member-Owned Group Captive Option. It’s key finding has been a touchstone of the captive insurance industry since the beginning: Interest in captives flourishes when commercial insurance becomes more expensive and less available.
As I said, neither of these reports are a surprise to the captive insurance community. But it does confirm that the more traditional insurance world is taking notice!
Normally at this time, I would be looking forward to travelling to one of the great cities in the U.S. to take part in the mega-insurance event known as RIMS. Even though we will not be luxuriating in a convention center while pining for a breath of the outdoors this year, the State of Vermont, VCIA and our members will be staffing the virtual Vermont booth starting next Monday.
Brittany Nevins is captaining our ship, that includes Dave Provost, Sandy Bigglestone, Dan Petterson, Christine Brown, and others from Vermont’s DFR; Janice Valgoi and myself from VCIA HQ; and a smattering of captive professionals from Vermont. Normally, over 10,000 attendees stalk the cities hosting this behemoth, but with RIMS going virtual, there is still an opportunity to meet with Dave, his team and the rest of us.
We will be hanging out in our virtual booth so come on by if you are attending. Sure, there won’t be the dinners and receptions, but we are still a lot of fun!
I just received my first shot of the COVID vaccine yesterday, and it provided a real boost of optimism that we are heading out of this weird nightmare. I would never have guessed how excited I’d be about getting a jab in the arm with a sharp needle!
Governor Scott of Vermont, who has been incredibly disciplined about taking necessary precautions, has said he expects the state to be more or less open by July 4th. As we start to head into nicer weather up here in the Great North, that is good news. Still a lot to be worried about when I scan the news from around the world: huge spikes in Brazil, slow rollout of vaccines in Europe, the fact that many in the developing world won’t see vaccinations until next year.
COVID is indeed an international issue – not only is there a truly humanitarian issue at stake, but the pace of vaccinations around the world will impact us all. That’s why it was interesting to hear about the new Global Health Risk Facility (GHRF). The GHRF is a highly collaborative undertaking that insures the transportation and storage of COVID-19 vaccines, and other critical health commodities, for the benefit of low, middle, and upper-middle-income countries. The GHRF has been developed by Parsyl, a Lloyd’s Lab alumni, in close partnership with AXA XL, Ascot and McGill and Partners. AXA XL will lead the risk management and local policy implementation.
What’s also interesting (though maybe not a big surprise) is that many of the pharmaceutical companies involved with the development and manufacturing of the vaccines chose to base their captives here in Vermont. How cool is that?! Pfizer, Johnson & Johnson, and AstraZeneca all domicile their captive insurance companies here, for good reason.
I look forward to learning more about how captives were utilized in these extraordinary times. Which is exactly what will happening as part of the VCIA Signature Series, this coming Tuesday, April 13th! One of our sessions is on disaster (and unforeseen event) preparedness and recovery. We will learn from captive owners whose programs have navigated the treacherousness of the pandemic, sure to be fascinating. Also in the line-up for that day is a great session about cyber-risk and it’s ever-expanding nature of threat. The day ends with a private forum for captive owners to get together, see each other (via camera), share ideas and collaborate. Should be a great day and it’s not too late for you to register! More info at http://www.vcia.com.
Just as we here in Vermont are starting to pack up our skis (not the hardcore, of course), the captive insurance industry is facing a new slippery slope.
Legislation approved March 9 by the Washington State Senate would set new requirements for captive insurance companies licensed in other domiciles but doing business in Washington State. Under the legislation, S.B. 5315, captives licensed elsewhere and operating in Washington would be required to pay an initial registration fee of $2,500 and be assessed an annual two percent premium tax on insurance provided to their parents or affiliates for Washington risks. Captives affiliated with public institutions of higher education would be exempt from the premium tax.
Besides being poorly drafted, the bill sets a terrible precedent whereby acquiescing some regulatory oversight by the Washington State insurance commissioner on captives domiciled in other states. This is the culmination of a battle over the past few years between Washington’s Office of Insurance (OIC) and reality. For whatever reason, the OIC has not liked that companies in Washington can set up captives to better manage the risks of their organizations. The OIC seems to have turned a blind eye on the benefits of captives to these organizations, and in turn to the State of Washington, and instead sniffly says “we don’t approve”.
For the companies and organizations headquartered in Washington, it has been frustrating I know. Finding a solution that gives some clarity to their operations as well as boundaries around taxes and potential fines forced a deal that neither helps the State of Washington, the companies doing business there, nor the broader captive community. At some point, this law if passed could discourage the use of captives by Washington State businesses and nonprofits. All it will do is limit control and add costs. Washington could have instituted a self-procurement tax like several other states – instead, the OIC chose pride over prudence.
I attended the virtual World Captive Forum this week and it was great to see many friends over the two days. I was working the Vermont booth (remember those days…) so was not able to see all of it, but there was some good stuff on several sessions I was able to join.
The regulators panel with Vermont’s own Dave Provost, Deputy Commissioner – Captive Insurance, Vermont Department of Financial Regulation; Carl Culmer Jr., Manager – Policies and Practices, Insurance Commission of The Bahamas; and Travis Wegkamp, Director of Captive Insurance, Utah Insurance Department was ably moderated by Joe Holahan of Morris Manning & Martin LLP (and member of VCIA’s Legislative Committee). It was good to hear that each domicile was more or less in synch with each other as they discussed legislative and policy updates, new and emerging risks, and the outlook for the captive industry post-pandemic.
Dennis Silvia, Davies Captive Management and VCIA board member, did a super job with his panel, The Art of the Cell (very clever!), outlining the dramatic increase in the popularity of the use of cells and how they are currently being utilized in risk financing programs.
The topic of the hard market and evolving global risk landscape was of course a prominent area of focus throughout the conference. Another terrific panel highlighted the importance of captives in long-term risk financing and risk management planning. Deyna Feng, Director, Captive Programs at Cummins Inc.; Mike Maglaras, President of Michael Maglaras & Company; and Anne Marie Towle, Global Captives Insurance Leader of Hylant (another VCIA board member) discussed how companies are re-defining their risk appetite to take control of their own destiny by using captives to complement traditional insurance placements and fill coverage gaps. Anyone who has not yet had an opportunity to meet Christine Brown, Assistant Director of the Captive Division in Vermont’s Department of Financial Regulation, moderator of the session, should check out this rising star!
And speaking of the captive insurance firmament, the all-star panel of Sandy Bigglestone, Director of Captive Insurance at Vermont’s Department of Financial Regulation (Women to Watch winner 2018); Ellen Charnley, President of Marsh Captive Solutions (Women to Watch winner 2018); Karen Hsi, Program Manager- Captive Programs, University of California Office (Break Out winner 2020); and AmyEvans, Executive Vice President, Intercare (Women to Watch winner 2020) did an amazing job explaining why captives are well suited for crises such as a pandemic, hardening market and social unrest.
Great job all around!
An update from my blog on February 5th challenging you to identify the people in the 80’s era photo. Maria Young of Alcoa, who was present at the party, won the box of chocolates for identifying most of the group. She was an insider, but there was nothing in the rules that said the people there could not answer! Here is who was in the photo:
Diane Leach; Mary Wrenn (now Woodward); Gary O’Hare ; Maria Young; Cynthia Reer (now O’Connor); Sue Urie; Jeff Kenneson; Scott Whittemore; Kate Westover; Nikki Kuhn.
A true giant of the captive insurance industry has recently passed away. George Chaffee, Jr., founding director of VCIA, (shown above at the VCIA Annual Conference) died on February 6, 2021 in Vermont. Though he was a Harvard graduate with a degree in Engineering & Applied Physics, George worked in the insurance field all of his life, starting as an adjuster with Kemper Insurance in Boston in 1961. I remember him as being kind and welcoming to me as a newbie in the industry over 10 years ago.
George became Deputy Commissioner of the State of Vermont Banking & Insurance Department in 1977 and was appointed by VT Governor Richard Snelling as Commissioner of the department on March 21, 1980. This being the 40th anniversary of Vermont as a captive domicile, it is especially poignant to note that George introduced landmark legislation in 1981 creating the Vermont Captive Insurance industry, eventually ensuring that the State of Vermont would become a domicile for the captive industry. VT Governor Jim Douglas cited George for his significant contributions to the State of Vermont, and recognized that he was one of the world’s leaders in the captive industry, in addition to contributing in a major way to Vermont’s economic development. George was also the founding Director of the Vermont Captive Insurance Association and was instrumental in the growth and success of VCIA.
Throughout his life, George touched many people in Vermont and the captive industry. So many of the industry’s leaders today have strong connections to him. He will be deeply missed. George was also known for owning various motorcycles and enjoyed many trips with friends throughout Vermont and beyond. He was a licensed pilot and even built two of his own planes, both of which he flew avidly. There is at least one story of him landing one of his planes in a tree – unscathed of course!
All of us at VCIA send our heartfelt condolences to his wife, LouAnn, and his many loving family members, children, grandchildren, great-grandchildren and friends. Farewell, George.
Great kickoff event for the 40th Anniversary of captive insurance in the State of Vermont this week. Each year in January, VCIA Members visit the Vermont State House for our annual Legislative Day. This special event highlights the successful working relationship between our Association and the State’s elected and appointed leaders.
This year, we switched to a virtual Legislative Day due to the pandemic and it was one of the most popular we have hosted! We started the day with a Q&A session from the leadership team at the Vermont Department of Financial Regulation’s Captive Division. They reviewed recent events and changes at DFR, as well as answered questions on what they saw on the regulatory horizon.
Midafternoon, DFR Commissioner Mike Pieciak hosted an hour-long captive industry review, highlighting 40 years of innovation and superlative regulation in Vermont. Mike also talked about how members of the Captive Division and others in DFR had taken on important roles in tackling the COVID-19 emergency in the State – the Governor drew on the expertise and competence of Mike and his department in modeling the pandemic as well as assisting in the distribution of COVID resources to Vermonters.
DFR’s Dave Provost and Sandy Bigglestone provided an overview of the captive industry in Vermont to legislators, members and guests attending, followed by Brittany Nevins, Captive Insurance Economic Development Director at Vermont’s Agency of Commerce, who gave the economic and market report. Yours truly did a quick summary of VCIA, before passing the baton to Julie Bordo, President & CEO, PCH Mutual Insurance Co. Inc. (RRG), who hit it out of the park with a presentation of her captive program and the important role Vermont has played in its success.
The final event was a zoom meeting with VCIA members and the new leaders under the gold dome. Lt. Gov. Molly Brown, Speaker of the House Jill Krowinski, and Senate President Pro Tem Becca Balint shared their valuable time with us talking about the issues and priorities they see ahead for the State of Vermont. The enthusiasm they all brought to our meeting with our members contributed enormously to the success of the day. Sen. Balint recounted the time as a new member of the Senate Finance Committee she reported out the captive bill on the Senate floor with a song! (Something she had to apologize to her colleagues for later 😊).
The cherry on top (literally) is that the State of Vermont provided a Lake Champlain Chocolate Thank You Gift Basket to a randomly chosen attendee of Legislative Day. The winner was our good friend Adam Dubuque of Johnson Lambert who has been in the industry for 18 years – almost half of the 40 years captives have been in business in Vermont! Yikes 😉
Thank you again to all of you who joined us this week. I look forward to hearing from you.