The Great Wall and Beyond

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As I mentioned in my last blog, I traveled to China right before the Thanksgiving holiday to speak before the 2018 Jing-Jin-Ji International Insurance Forum in Tianjin. My presentation focused on the introduction of Vermont’s captive market, development and supervision. I also participated on a panel that discussed the captive rules in Asia, U.S. and Europe, best practice and the latest innovation, with insurance supervisors from Hong Kong, Singapore and Guernsey as well.  I focused on how Vermont regulators create a “partnership” with the captive insurance companies while keeping a strong regulatory hand on the tiller. I emphasized the support from Vermont’s political leadership as well. This message was well received by my Chinese captive insurance colleagues.

IMG_1613It was a great trip, especially to see and hear how the China captive market is emerging. As I mentioned last time, there is a relatively small number of captives in China right now – and mostly held by state-owned enterprises (SOEs) like COSCO shipping, Sinopec and China Railway. However, there is a growing interest in captive insurance for private enterprises and other SOEs looking to better manage their risk.

The Chinese captive industry is very limited in scope right now. Like most regulators when presented with a new-fangled way of doing business, the China Banking and Insurance Regulatory Commission is taking a go-slow approach to captive insurance. The industry in China is looking to pick up steam and get interested parties from privately owned businesses to consider captives. They are also interested in helping move Chinese regulators to broaden the limits on captives currently in place.  And while it may be a long-shot to get a Chinese captive to domicile in Vermont, the fact that they are looking at VCIA as a place to learn illustrates the continued leadership of Vermont in the growing worldwide industry.  I look forward to continuing this dialogue and seeing how the Chinese captive industry evolves.

IMG_1614I want to thank in particular my colleague Geoffrey Cao, President of the Chinese Captive Insurance Association, who invited me over and played gracious host while I was in China. And a HUGE thank you to Christina Kindstedt, Senior Vice President of Advantage Insurance Management (USA), who provided a go-between with me and my Chinese counterparts, as well as helping with my trip every step of the way.  Thank you both so much!

I look forward to hearing from you!

Rich Smith
VCIA President

Rocky Mountain High

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First, shame on you for thinking I was going to milk our VCIA Road Show to Denver next week with some type of cannabis-related pun or joke. John Denver television specials were a big part of my memories growing up, of course.

Second, yes we will be in downtown Denver on Wednesday, November 7th with our Road Show, at the IMA Corporate Office. Starting at 1:00 local time we will spread the good word about captive insurance to folks in the Mountain Time Zone.  The Original Captive Insurance Road Shows are structured for the maximum education and networking that four hours will allow. The afternoon includes two educational seminars featuring captive owners and captive professional panelists including the Vermont Deputy Commissioner of Captives, who document their companies’ experiences in forming and operating a Vermont captive. Our two owners are a couple of old hats at this game (I could get in trouble for calling them old hats).

Jan Klodowski is the vice president of Agri-Services Agency Inc. a wholly owned subsidiary of Dairy Farmers of America. She is the administrator for Agrisurance Inc., a Vermont domiciled Sponsored Captive that provides Workers’ Comp and Health coverages for the farming and agricultural industry in the United States. Part of Jan’s responsibilities includes the development and management of successful Captive/Alternative Risk Financing programs for their members. Jan is a licensed Insurance Broker and holds the designations of Associate in Captive Insurance and the Associate in Risk Management.

And Heather McClure is an executive director of operations at OU Physicians. She is a licensed attorney in Oklahoma and Texas with an LL.M. in Health Care Law. Heather has worked exclusively for hospitals and physicians for over 20 years. She is responsible for risk management, professional liability, and patient safety for the multi-specialty academic medical practice, which includes partnerships with multiple hospitals across Oklahoma and encompasses nearly every adult and pediatric specialty as well as 72 ambulatory clinics. Heather 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.

The afternoon wraps up with a networking reception for all attendees. CPE / CLE credit available for seminar participation. VCIA members and nonmembers alike who have captives, serve captives or are exploring the formation of captives are invited to attend!  Go to www.vcia.com to get more information and register.

I can’t wait to feel the sunshine on my shoulders!  Ah, the grass is always greener…

Rich Smith
VCIA President

Time’s a Tickin’

 

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Hey, you! Yes, you! If you haven’t registered for the World’s Best Captive Conference™ yet, it’s time to get to it!  The Early Bird Rates for VCIA’s Annual Captive Conference expire this Saturday, June 30 and we don’t want you to miss out on the savings.

Top 10 Reasons to Come to VCIA!   Register Now!

  1. The VCIA conference is a great source forcaptive career development and networking; earn CPE / CLE / ICCIE credit
  2. We offer sessions with focus areas for those new to captive insurance, those in accounting / finance, operations, and risk management. Professional development sessions are offered as well. Sessions are interactive and fun.
  3. Nearly 100 companies exhibit at the conference, featuring the newest industry product and service developments.
  4. The event will have two excellent keynote speakersJack Uldrich is a renowned Global Futurist and award winning author; he will speak on trends transforming tomorrow. Joel Cohen is an Emmy award winning writer and producer for “The Simpsons.”  He is a hilarious speaker and will discuss the Simpsons, creative process, group dynamics & innovation.
  5. Risk management tour for captive owners. Captive owners are welcome on a special outing to tour Green Mountain Power, Vermont’s largest utility, and hear from their Risk Managers.
  6. Panelists who are captive owners from some of the most prestigious organizations in the world teach at VCIA. All the industry’s key players will be at the VCIA Conference!
  7. For attendees guests or spouse, there is a fun Vermont outing available.
  8. Global collaborationmake connections with professionals in all areas of captive insurance!
  9. VCIA is great for those new to the industry, or long-time participants. Educational offerings for all levels.
  10. VCIA is a great opportunity to relax, learn and have fun with industry peers!

So get on it! We look forward to seeing you in Vermont in August.
Thank you all very much!

Rich Smith
VCIA President

Actuaries and Hang-gliding!

Senior businessman laughing at office meeting

Two of my favorite jokes about actuaries are:

  1. An actuary, an underwriter, and an insurance salesperson are riding in a car. The salesperson has his foot on the gas, the underwriter has his foot on the brake, and the actuary is looking out the back window telling them where to go; and
  2. Two actuaries are duck hunting. They see a duck in the air and they both shoot. The first actuary’s shot is 20 feet wide to the left. The second actuary’s shot is 20 feet wide to the right. The actuaries give each other high fives, because on average they shot it.

Funny? Well, a little bit any way. Actuaries kind of get a raw deal as being so geeky and numbers orientated that they have trouble fitting into polite company. But I don’t find that true, for the most part.  I did have an actuary friend of mine tell me in all seriousness that he dreams in numbers – really!

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Here’s where the hang-gliding comes in: we have a number of the best actuaries in the captive business speaking at our upcoming annual conference with the RRG risk management officer for the US Hang Gliding and Paragliding Association. It’s shaping up to be one of our most popular conference sessions and is sure to be fascinating.

Recreation Risk Retention Group (RRRG) was created in 2016 to insure the unique risks faced by the hang gliding and paragliding industry. Tim Herr has over 30 years experience as a transactional and trial attorney in both state and federal courts and has represented the United States Hang Gliding and Paragliding Association for almost 30 years.

Joining Tim at our session entitled Innovative Spotlight: Financing Unique Risk will be Bob Gagliardi, head of AIG’s captive management and US Fronting operations, and Rob Walling, Principal and Consulting Actuary with Pinnacle Actuarial Resources, Inc. Behind the scene we have Mike Meehan from Milliman and Aaron Hildebrandt from Pinnacle providing their guidance and actuarial expertise.

This session explores the process RRRG went through to add unique risks to their program and will include details of the expected and unexpected obstacles encountered in adding the unique coverage, and how the obstacles were overcome.   And here is the kicker that should grab your attention: actuarial considerations will be covered! So come and join us, learn something, and laugh a little…

OK, last joke: How much is two plus two? A marketing VP will say “22”. An accountant will say “4.00”. A mathematician will say “I can demonstrate it equals 4 with the following proof … ” An actuary will ask “What do you want it to equal?”

Thank you and I look forward to seeing you August 7 – 9!

Rich Smith
VCIA President

Vermont has built an ARC (Affiliated Reinsurance Company)

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At a cyber security roundtable hosted by Vermont’s Department of Financial Regulation on May 17, Vermont’s Gov. Phil Scott signed a bill creating a new reinsurance option for U.S. companies affected by a key provision of the U.S. tax overhaul.

The half-day roundtable provided a discussion of emerging cybersecurity regulatory regimes of the banking, insurance and securities industries.  VCIA board member, Anne Marie Towle, Executive Vice President for JLT Insurance Management and the Captive Practice Leader, served on a panel that explored Innovation and Developments in the Cybersecurity Insurance Market and Risk Management Alternatives with a number of other experts, including Fred Eslami, Associate Director with the alternative risk transfer group at A.M. Best. It was an excellent presentation in the inaugural DFR series seeking to provide the insurance and financial services industry in Vermont with education and resources.

The bill the Governor signed (H.719) offers an onshore affiliated reinsurance alternative to insurance companies affected by the Base Erosion Anti-Abuse Tax on reinsurance ceded to offshore affiliates.  The BEAT provision included in the tax reform package adopted in December aims to circumvent profit movement overseas by imposing a minimum tax on certain deductible payments made to a foreign affiliate, including payments such as management fees and royalties, but excluding costs of goods sold, beginning in tax years after Dec. 31, 2017. It applies a minimum tax of 10% of taxable income.

It started when Ed Koral, Specialist Leader at Deloitte Consulting (and recent VCIA board member – see, we are all over the place…) approached the State of Vermont with a need for an onshore alternative for those reinsurers offshore that will be impacted by BEAT.  The concept is very similar to the Special Purpose Financial Captive, without the requirement for a securitization transaction. One of the key provisions of the law is the investment flexibility it provides companies. Unlike more prescriptive investment rules, these new affiliated reinsurance companies will develop an investment policy that addresses diversity and liquidity concerns, and the Department of Financial Regulation will work with the company to approve it.

This new law once again represents Vermont’s ability to adapt quickly to regulatory changes in support of the financial services industry.

At the upcoming VCIA Annual Conference August 7-9 there will be terrific education for captive professionals, including Hot Topics with Dave Provost, who will undoubtedly talk about this new legislation. Other sessions include Innovative Spotlight: Financing Unique Risk, Economic Headwinds and Tailwinds Impacting Captives, Owner Lessons Learned in Establishing a Captive, and The Cognitive Captive: Artificial Intelligence for Smarter Insurance. Register soon at http://www.vcia.com to get the best rates! Early rates expire June 30th.

We look forward to seeing you in Vermont in August. Thank you all very much!

Rich Smith
VCIA President

You Bet Your CPA!

Today, it’s a given that captive insurance professionals are some of the top people in their fields of expertise. However, it wasn’t that long ago that VCIA and the Vermont captive industry had to fight to prove that experience in captive management should count toward earning the Certified Public Accountancy (CPA) designation.

Back in 2005, the Vermont Board of Public Accountancy questioned the value of work experience in a captive management firm towards achieving a CPA designation.  Through hard work and smart advocacy, VCIA and its members were able to turn the tide and get that recognition.

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Christopher Plumpton, SRS

Today, two of the most important CPA organizations in Vermont are chaired by  captive professionals.  Christopher Plumpton, Senior Account Manager at SRS, is the Chair of the Vermont Society of CPAs, whose mission is to promote, protect, and represent the interests of their members and the profession while fostering the highest ethical standards.

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Josh Partlow, Johnson Lambert

And Josh Partlow, Partner at Johnson Lambert, who recently stepped down as Chair of the Vermont Board of Public Accountancy and is a member of AICPA, where he served on their national Auditing Standards Board.  The Board was created by the legislature whose members are appointed by the governor to administer the laws for this profession in the state of Vermont.

 

 

At the VCIA Annual Conference in August there will be terrific education for accountants, including Update on Federal & State Tax Issues Involving Captives, Financial Statements 101, and looking to the future Blockchain & Distributed Ledgers. Make sure to register soon at www.vcia.com to get our early bird rates that expire June 1st.

We look forward to seeing you in Vermont in August. Thank you all very much!

Rich Smith
VCIA President

VCIA Spring Fling – Thank you Johnson Lambert!

 

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It was a beautiful evening in Burlington, Vermont for the VCIA Spring Mixer! From left to right: Christine Brown and Sandy Bigglestone from the Vermont Department of Financial Regulation, VCIA Board Chair Jan Klodowski and Dawne Ware from Marcum LLP

One of my favorite VCIA events of the year is our annual Spring Mixer in Burlington, where 100 or so of our members join us for a little education, a little networking and a lot of fun! This year’s event on May 16 was no exception.

At the VCIA Board of Directors open meeting, an overview of the upcoming VCIA Annual Conference was presented to members. The conference, taking place August 7 – 9, is our 33rd annual conference and the theme is “VCIA: Where the Captive World Comes to Meet!” This is an apt description of our annual event, which highlights the power of collaboration among people from all sectors of the captive industry.  This year, special focus has been placed on professional development as well, with sessions such as Presenting to Board/Management, Building Better Relationships and a new young professionals forum.

Ian Davis, Director of Financial Services for the State of Vermont, then gave an update on the State’s captive insurance activities, including the fact that Vermont has already licensed 11 new captives in 2018 with more in the pipeline. Dave Provost, Sandy Bigglestone and Christine Brown from Vermont’s Department of Financial Regulation (DFR) gave a report on their ever attentive zeal on making the regulatory process for captives in Vermont efficient and cost effective.  Dave also announced the Governor signing the DFR bill this week, which includes a change to the captive statute that will offer an onshore affiliated reinsurance alternative to insurance companies affected by the recent imposition of the Base Erosion Anti-Abuse Tax on reinsurance ceded to offshore affiliates. An affiliated reinsurance company is an insurance or reinsurance company that reinsures risks only from its parent or affiliates, and is subject to a financial solvency regulatory system separate from that generally applicable to traditional insurers and/or reinsurers in the ceding entity’s domestic jurisdiction.

And finally, the part of the day we all wait for (and deserve!): the cocktail mixer under beautiful blue skies on the patio of the Hotel Vermont/Marriott Courtyard. Our thanks to our great friends at Johnson Lambert for sponsoring this wonderful event!  Not only do our Vermont members show up en masse, but friends from New York, Connecticut and even South Carolina joined us for a great evening of friendship and comraderie.

We look forward to seeing you in Vermont in August. Thank you all very much!

Rich Smith
VCIA President