More Headwinds Than Tailwinds

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Swiss Re’s 2018 SONAR report was just released which annually examines the emerging risks that the re/insurance industry and society are facing today. There have been shifts since last year and some things are not too surprising, but some that came to the forefront are more so.  Many of these emerging risks will be addressed at VCIA’s Annual Conference this August 7th–9th.

Of the top five Swiss Re highlighted, emerging geopolitical risk is a growing concern. Risk managers must be ready to adapt to the possible turmoil in financial markets as power drifts to Asia, democratic influences decline and the relevance of global governance institutions erodes. Additionally, the possible erosion of legal rules could threaten the ability to run global businesses.  Combined with the loss of risk diversification and the free flow of capital key to running a global re/insurance business, awareness and flexibility in our industry is paramount. Growing national protectionism and regulatory fragmentation jeopardize the benefits of the international diversification that our industry, and economy, has been built on over the past 50 years.

In the education session at our conference called Economic Headwinds and Tailwinds Impacting Captives, participants will learn about the health of the economy, macroeconomic themes, global monetary policy, the path of central bank policy and the overall direction of interest rates. Special panelist Jeff Carr, President & Senior Economist at Economic & Policy Resources, will lead the discussion. Jeff has more than 35 years of experience in economic analysis, economic and fiscal impact assessment analysis, and economic forecasting. He has served as the consulting State Economist and Principal Tax Revenues Analyst-Forecaster for the past six Governors of Vermont including the current Governor Philip B. Scott.

Also in the Swiss Re report, was the emerging threat of an increasing number of business processes driven by algorithms. Algorithmic applications are not infallible since they base their actions on human judgement as well. Discriminatory bias may also translate into defective modelling and prediction, bringing a two-fold risk to insurance and other industries.

A panel of consultants who work in this space will discuss the growing role of machine learning and analytics in all aspects of insurance business: underwriting, claims, and importantly, displacement and relocation of the risks themselves at our session entitled The Cognitive Captive: Artificial Intelligence for Smarter Insurance.  Questions discussed include: How does this affect insurable risks? How have insurance products changed to cope with these emerging technologies? How are insurance companies using artificial intelligence and predictive analytics to improve underwriting results or create a safer workplace? What coverage gaps are being created by the dislocation of risks, or a growing ambiguity about liability for losses caused by software? And how might your captive serve as a problem solver for these market failures? It will be a mind-bendingly fun hour of discussion on topics ranging from self-driving cars to bankruptcy predictions and more.

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

Rich Smith
VCIA President

Next Gen

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So Millennials, welcome to the “name-that-generation” world. Starting with Baby Boomers, the X, Y and Z Generations, we humans can’t help ourselves when it comes to putting every generation in a neat, new box. And then the fun stuff comes: we older and “wiser” generations bemoan something about the work ethic or their shaving habits. Millennials have been described as everything from more self-centered to more worldly and charitable, and we in captive insurance need to understand this new “thing” if we want to fill our aging industry with new blood.

Well, I don’t buy it. Yes, every generation has its quirks and trends and signature “look” to some degree, but the young people I talk to who are looking at careers in the captive industry remind me why I have hope in darker moments. They are inquisitive, hardworking and want to help others. Yes, they want a better work-life balance, but who the hell doesn’t! In short, they remind me of every generation of young people looking to enter the workplace, make a mark and do good.  While every business and organization should strive to create a welcoming environment for newcomers, and look at crafting a new and better environment that works for all of us, let’s be careful about pigeonholing our younger colleagues and new entrants to our world. I would even suggest dropping the label Millennials and just treat them as the humans they are. After all, it will be their world tomorrow!

In the meantime, we do have a number of sessions at VCIA’s conference  August 7-9 focused on helping the next generation move into the world of captives, including Bridging the Next Generation of Leaders with Current Leaders, Presenting to Board/Management, and a Young Professionals Forum.

Registration opens May 1, so put it on your calendars!  Thank you and I look forward to hearing from you.

Vermont Gets an A+… so come see us next week for Legislative Day!

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VCIA Members: Join us January 24th at the historic Statehouse in Montpelier, VT for Legislative Day!

According to a new report by the R Street Institute’s 2017 Insurance Regulation Report Card published recently, Vermont again has the best insurance regulatory environment.

Vermont has been named as having the best regulatory environment for the fourth straight year and the fifth time in six years and the report cites developments such as Gov. Phil Scott signing H. 85 to expand the state’s captive insurance regulatory regime to cover agency captives last May.  Vermont earned the only A+ in this year’s report card! Congratulations to DFR Commissioner Mike Pieciak, Deputy Commissioner Dave Provost and their team.

What greater impetus is needed, then to join VCIA on January 24th for our annual Legislative Day in Montpelier, Vermont, the coolest state capital in the country? Legislative Day is a chance for our members to meet the State’s top political leaders and hear about the issues that are facing Vermont in the upcoming year. It’s also a great chance for the captive industry to say “thank you” for the over 30 years of support from politicians and policy leaders from all stripes: Democrats, Republicans, Progressives and Independents.

This special event, for VCIA Members only, includes the VCIA Quarterly Board Meeting, lunch with Vermont Lt. Governor David Zuckerman, Commerce Secretary Michael Schirling and  special guest speaker Jeff Carr, Vermont’s State Economist.

There will be meetings with legislative leaders and presentations to House and Senate committees. And don’t miss the Q&A opportunity with Dave Provost and the DFR Team after lunch! The event concludes with a fabulous evening reception where legislators, elected and appointed officials and VCIA Members mingle and exchange information about Vermont’s captive insurance industry and make plans for its continued success in 2018.

So, if you haven’t done so already, register here for a great day!

Thank you all very much, and I look forward to hearing from you!

2017 is on track to be a record-setting year for huge natural disasters in the U.S.

natural-disastersNot a surprise for anyone remotely following the news these days to understand the year we have had regarding natural disasters. For the first nine months of 2017, the United States has endured 15 disasters that each cost $1 billion or more and collectively claimed 323 lives, all linked to weather and climate, according to the latest data from National Oceanic and Atmospheric Administration.

2011 set the record for billion-dollar disasters with 16 by year’s end, the National Centers for Environmental Information reported. With 15 major natural disasters this year, 2017 is on par with that record-setting year and shows no sign of slowing down. Clean-up and recovery efforts after one of those major hurricanes continue in Puerto Rico three weeks after Hurricane Maria roiled over the entire island for more than 12 hours.  And maybe I should not have been, but I was surprised to hear that there are still clean-up efforts from when Hurricane Katrina struck Louisiana 12 years ago.

Nationwide, one of the biggest gaps in preparation and recovery is whether or not states have long-term recovery plans. Most states don’t, according to a PBS report. After first responders have saved all they can save, few states have a plan in place to rebuild. And despite years of predictions from climate change experts who warn that rising sea levels will produce higher storm surges creating more devastating floods and damage, few U.S. homebuyers take disaster risk into account when they want to settle down. According to a February 2017 survey from the National Association of Insurance Commissioners, only 22 percent of Americans thought about natural disasters when they thought about where to buy a home.

As an industry that focuses on risk mitigation and insurance financing, it is difficult to digest this unsettling statistic.

Thank you and I look forward to hearing from you.

Rich Smith
VCIA President

Thoughts and Prayers

Just wanted to add VCIA’s voice of concern to all those caught in hurricanes Harvey and Irma.  We often talk in abstractions about risk assessment and property damage and insurable risk in our business when natural disasters hit, but when you see the pictures of devastation and hear about the impact to people’s lives it puts into perspective the havoc these things bring.

A bunch of Vermonters were about to head to South Carolina next week for their captive conference and just got word that they had to cancel, which I am sure is the right decision. However, we understand what a difficult one it was and how disappointing to have to reschedule (to say the least) after so much planning and hard work. Our thoughts are with our friends Jay, Jeff and all others – stay safe, our Carolinian captive family!

Thank you all very much, and I look forward to hearing from you.

Rich Smith,
VCIA President

Back to work!

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Thank you to everyone who joined us in beautiful Burlington, Vermont, a couple of weeks ago for the VCIA Annual Conference! Without a doubt, it was a terrific 2 ½ days with great programs, networking and events. With over 1000 attendees from 44 States (plus the Virgin Islands) and 9 countries, where roughly 23% were captive owners and 18% first-timers, our annual gathering in August has grown to be THE captive insurance forum!

The conference had great energy – people liked the fresh format changes and extra touches, and, as one attendee stated “the enthusiasm for the captive industry shone throughout all aspects of the event.”  The learning formats and interactivity of the event were also held in high standing.  Many thanks to our sponsors and exhibitors without whom we could not put on such an event, as well as to the hundreds of volunteers who make it happen.

Now after a little break, we are back to work again looking out for the captive industry. In case you missed it, we hosted a webinar Wednesday on the recent Avrahami decision regarding the use of the 831(b) tax election for small captives. Chaz Lavelle, Partner at Bingham Greenebaum Doll LLP, and Dan Kusaila, Tax Partner at Crowe Horwath LLP, provided terrific analysis not only on what the opinion says, but also what it means. Avrahami is the first court case involving a captive taxed under section 831(b).   If you missed it, you can purchase a recording of the webinar through VCIA’s Captive EDU.

Other VCIA webinars on the docket include Short Duration Contracts coming up on September 14, State of the Union for Captives October 18 with Jim McIntyre and I summarizing all things legislatively current, Reinsurance Marketplace Trends in November and our annual Captive Taxation Update webinar December 14.  Notices will be sent by email once registration is open, or check our site.

Thank you all very much, and I look forward to hearing from you!

Rich Smith
VCIA President

Berlitz Phrasebook for Vermont

vermont-festivals4fun-imageI know most of you are busy preparing for next week’s VCIA conference – remember to pack comfortable shoes! – so I thought I would share a few tips on “Vermont-isms” that you may hear while you are here (and, yes, they sound a lot like “Maine-isms”, but don’t say that to a Vermonter):

Jeezum Crow – Commonly used in a state of anger or surprise, but it’s less offensive than yelling “Je$@$ Ch^!$&!”

Dooryard – This is the main entry way area into the house for people. Or rather, it hasn’t been taken over by the farm and used by animals.

Mounain – Not “mountain,” it’s “mounain” (pronounced without the “t”).

By the Jesus – Often said in a state of amazement, this is another way of saying “You betcha!”

Djeet? – A quick way of asking “Did you eat?”

Creemee – Forget Ben & Jerrys! When you are in Vermont this is ice cream (although it means a soft serve).

Upta – As in “Are you going upta the mountain?”

Yahd Aht – Or “Yard Art”. You’ll find all sorts of interesting things in yards in Vermont…

Flatlander – Someone (anyone) who wasn’t born in Vermont.

Woodchuck – A guy who lives and thrives in rural Vermont. Oh, and he can probably fix just about anything.

Keow – Those are the black and white animals that provide Ben & Jerry’s their cream.

I won’t be posting for a few weeks as I will be conferencing and then going on a nice, long holiday with the fam. I look forward to seeing many of you next week, by jeezum!

Rich Smith, VCIA President