VCIA Legislative Day – Cyber-up!

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As we all know, cybersecurity is one of the main issues facing society today. From data breaches that expose personal information to malware that can infect computer systems, in our growing IOT (internet of everything) world it’s the problem of the day. The insurance industry, including captives, have focused on cybersecurity for some time now. Both to provide their clients with the proper mitigation policies and to protect their own data systems, our industry continues to be in the forefront.

Who would have figured that in our small state, Vermont hosts one of the top cybersecurity institutions in the nation! Located in Northfield, Vermont (just south of our State’s capital, Montpelier) Norwich University hosts the NU Applied Research Institutes (NUARI).  NUARI was federally chartered in 2002 to address cyber incident management challenges through research, training programs and technology development and has been a global leader for more than a decade in developing cyber war gaming, distributed learning technology, distributed simulation technology, critical infrastructure exercises, and cybersecurity curriculum.  Norwich provides a truly unique program utilizing state-of-the-art forensic tools unheard of at other institutions of this size.

We are honored to have the President of NUARI, Phil Susmann, address our members at next week’s VCIA Legislative Day in Montpelier. Phil will speak at lunch in the Capital Plaza Hotel on January 23rd along with DFR Commissioner Mike Pieciak and a welcome from Lt. Governor David Zuckerman.

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.

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 2019.

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!

Rich Smith
VCIA President

Let the Games Begin (and Congrats Vermont – Again)!

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The Vermont General Assembly began the first half of the legislative biennium this month. Both houses of the Vermont legislature now have a supermajority of Democrats, so Governor Scott (R) will have less room to push back on any legislation he doesn’t support. That being said, the House Commerce Committee’s new chair is Mike Marcotte, a Republican and former vice chair of the committee. Senate Finance remains in the hands of veteran Ann Cummings; both these committees oversee captive insurance in Vermont and both are strong captive insurance supporters.

As we do every year, VCIA initiated a process to build an agenda for suggested changes to the captive statutes for the 2019 legislative session.   With the results from our membership survey in hand, we meet with  Vermont’s captive management firms and law firms to hear their suggested changes. Then comes an iterative process with Dave Provost’s team at Vermont’s Department of Financial Regulation resulting in a consensus bill to present to the legislature. This year’s captive bill will be mostly tweaks and technical corrections, but even those are important in staying current in our ever-changing industry.

On another note, congratulations again to DFR and the State of Vermont! For the fifth straight year, Vermont was ranked the BEST  insurance regulatory environment in the United States, according to the R Street Institute’s  Insurance Regulation Report Card, an annual examination of which states best regulate the business of insurance.

Don’t forget that January 23rd  is VCIA’s annual Legislative Day in Montpelier, Vermont’s capital. It’s a full day of meeting and hearing from Vermont’s political leaders on the captive industry and issues facing the State broadly. Go to www.vcia.com and register today!

Thank you and I look forward to hearing from you.

Rich Smith
VCIA President

Fred Hackett 1933 – 2018

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An early photo of Fred Hackett, in the 1980’s, second from left. Fred was instrumental in the foundation of the captive industry in Vermont.  (From left to right: VCIA Members and captive industry participants Julie Boucher, Fred, Mark Boll, Kathy Davis and Dan Labrie.) 

Former Vermont captive insurance founder and director of VCIA, Luther “Fred” Hackett, died of Alzheimer’s disease on October 8, 2018 at the Wake Robin Continuing Care Retirement Community in South Burlington, Vermont.

After graduating from the University of Vermont in 1955, he served in the Air Force before returning to Vermont to join his father in a new insurance business. He was Chairman of Hackett, Valine and MacDonald Inc., Champlain Captive Management, Inc. and Benefit Investment Advisors, Inc. He was an advisor to the Vermont Captive Insurance Association Board in the early era of the captive industry in Vermont.

In 1965 Fred was elected to the Vermont House of Representatives from South Burlington. He served on the Appropriations Committee, and as Chairman from 1969-1970 and served as republican majority leader from 1967-1968. He was Chairman of the Joint Fiscal Committee of the Vermont House and Senate in 1969. In 1972 he won the Republican Primary for Governor. He lost the Governor’s race to Thomas Salmon in the general election.

Fred was an environmentalist. He proudly assisted with the legislation in 1969 for preservation of certain land abutting the Camel’s Hump State Park, creating a state-owned Forest Reserve that formed Camel’s Hump State Park. He was instrumental in the creation of ACT 250 and heavily involved with the Clean & Clear Task Force for Lake Champlain.

Fred was a sixth generation Vermonter and spent most of his life building a business and aiding ventures he felt would make a positive difference to the future of his beloved State of Vermont. Over the many years Fred received numerous awards and recognition for all he did for our state, but I remember him as a man willing to give excellent advice to an upstart in Vermont (that would be me) with no trace of condescension, and being treated as an equal. I believe that graciousness and community spirit has been successfully imprinted on Vermont’s captive insurance community.

If VCIA had a flag, it would be lowered to half mast today. Thank you for all you did, Fred.

Rich Smith,
VCIA President

It was a sizzling conference!

2018collagefinalThanks to all who joined us in Burlington, Vermont, earlier this month for another great VCIA captive insurance conference.  More than 85% of conference survey responses rated our conference the best or better than most. With over 1000 attendees from 44 States and 9 countries, where more than 25% were captive owners, 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 conference is “the best congregation of the captive industry in the U.S.” while another stated it was “the perfect environment for meeting the alternative risk and captive community”.  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. We have a bunch of webinars being planned for the rest of the year, including Regulatory Compliance on September 20th, Captive Benchmarking on October 17th, State of the Union for Captives on November 15th with Dave Provost, Jim McIntyre and me summarizing all things legislatively current, and our annual Captive Taxation Update webinar on December 13th so keep your eyes on our website!

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

Rich Smith
VCIA President

South Pacific…A Captive Story (Not the Musical)

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I read a news story back a few months which I thought was pretty cool. The government of the Pacific Island country Tonga had received a $3.5 million pay-out from a captive, the Pacific Catastrophe Risk Insurance Company (PCRIC), following Cyclone Gita that struck the islands on February 12, 2018.

The PCRIC offers member countries parametric insurance which is designed to payout within 10 days after a triggering event, providing those in need with valuable funds very soon after an event occurs. Something this vital for vulnerable regions when addressing the impacts of natural disasters and climate-related events.  The PCRIC purchased reinsurance from four international reinsurers, with additional capital contributions from the Multi-Donor Trust Fund, which includes contributions from Germany, Japan, the U.S., and the UK, and is managed by the World Bank. Sure enough, funds from the program were transferred after seven days of the cyclone event, providing the Tongan government with appropriate financing to support disaster-relief efforts and effective service delivery to the affected areas.

Gita reached its peak intensity as a Category 4 cyclone before making landfall on Tonga on February 12, where its destructive wind strength caused wide spread damage.  PCRIC chief executive David Traill said, “It is clear that the increased level of coverage provided to Pacific Island countries through the establishment and capitalization of PCRIC by our donor partners has made a positive impact on the support we are able to deliver to the Pacific Island region.”

To me, this story reinforces the growing recognition of climate change and related severe weather events to the insurance world. I believe captives can and will play a more important role as the world confronts this problem.  At the upcoming VCIA Annual Conference August 7-9 there will be a terrific session called Natural Catastrophes and their Impact on Risk Management, which will feature the following experts sharing information on the potential impact of natural catastrophes on risk management:

  • Gillian Galford, an Earth Systems Scientist at the University of Vermont and lead author of the Vermont Climate Assessment
  • Howard Kunst, Senior Modeler and Chief Actuary, at CoreLogic
  • Jason Shafer, Professor of Atmospheric Sciences at Lyndon State Colleges, who focuses on the valuation of weather information within the private sector
  • John Ferrara, FCAS, MAAA, senior manager at Ernst & Young

Register soon at 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

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

We are Open for the Season – the VCIA Conference Season!

reg-openIt’s hard to believe, but May is here and that means only one thing: VCIA has opened registration for our captive insurance conference taking place this August in Burlington, Vermont.  The VCIA staff have been working furiously the past number of weeks to ready for our first day of registration for VCIA’s 33rd Annual Conference, and it is shaping up to be a good one.

Thirty-three years ago this August, VCIA held its 1st Annual Conference in a small hotel meeting room in downtown Burlington with only a dozen or so attendees. After a morning of meetings, it was off to the golf course and later a small reception. Today the VCIA conference covers three full days and is the premier captive insurance gathering for education and networking for over 1100 attendees and 100 exhibitors.  Make sure to join us August 7th through the 9th for this valuable program.

The conference,  aptly named “VCIA: Where the Captive World Comes to Meet!” will bring together over 1100 industry participants to learn about the many aspects, trends and innovations of captive insurance while connecting with industry participants from all over the world.  Leading industry experts will teach over 20 educational sessions, many of them using interactive technology to engage the audience. This year we have placed focus on professional development sessions as well, with sessions such as Presenting to Board/Management, Building Better Relationships and a new young professionals forum.

Two renowned keynote speakers will be joining us as well. Jack Uldrich, a Global Futurist and award winning author, will speak on trends transforming the insurance sector tomorrow; and Joel Cohen, an Emmy award winning writer and producer for “The Simpsons”, will discuss the Simpsons, creative process, group dynamics and innovation.  Register today at www.vcia.com.

gadbois siri photoOn a very sad note, we learned this week of the passing of former VCIA board member, Siri Gadbois. Siri’s time on our board will be remembered by her thoughtfulness, leadership, and an infectious laugh that could lighten a whole room. Siri served as president and CEO of Educational & Institutional Insurance Administrators (EIIA) from 2002 to her retirement in 2017, where her duties included president and board chair of College Insurance Company and board chair of College Risk Retention Group.  We will miss Siri, and our hearts go out to her family and her amazing colleagues at EIIA who were like family to her.

We look forward to seeing you in Vermont in August. Thank you all very much, and I look forward to hearing from you soon.

Rich Smith
VCIA President