The People of Washington Have Spoken!

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Captive Review reported that Washington State voters rejected a recent law that imposes premium taxes on captive insurance companies licensed in other states that are doing business in Washington State this past Tuesday! When asked to give their views on introducing the 2% premium tax, voters opposed it by a 19 point margin. It was just one of a number of new taxes rejected by voters under the advisory votes on tax increases that must be held under state law.

As you all have heard me say in an earlier post, the Washington State captive law passed earlier this year sets a terrible precedent whereby acquiescing some regulatory oversight by the Washington State insurance commissioner on captives domiciled in other states. 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.

The reality is that the non-binding vote is unlikely to have an impact – the law will remain in effect unless state legislators vote to repeal the measure, which is unlikely to happen. I don’t think Washington State citizens delved into the issue of the captive tax and, after weighing the strong evidence of its inappropriateness, decided to reject it. No, this was a broad anti-tax vote on several taxation measures in the state, and the captive tax was dumped into a bunch of other unpopular taxes.

That being said, the vote did give me a moment of hope!

Stay well and see you soon!

Rich Smith,
VCIA President

Member Mixer

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Thank you to all our members who joined us this past Wednesday evening for VCIA’s open board meeting, DFR Q & A, and Mixer. It was so nice to see people gathering once again, even if somewhat cautiously, for VCIA’s first in-person event since the beginning of COVID.

Besides hearing the litany on how many legislative items we are watching down in DC that will likely not move this Congress due to the continued gridlock, members got to hear Dave Provost and Dan Petterson from Vermont’s Department of Financial Regulation provide an update on their work and changes in the future that they will see.  Brittany Nevins , Vermont’s Director of Captive Marketing, screened a new video she produced extolling the virtues as Vermont as a captive domicile for members. It was a terrific piece that will be used in the State’s marketing efforts going forward. One of the “stars” of the video was VCIA new board member, Joe Carter, from United Educators, who did a super job outlining what makes Vermont so special for captive owners.

Dave provided an update on the number of captives being licensed this year and it sounds like its going to be a record breaker. Over 40 have been approved to date and we usually see a wave of applications toward the end of the year as organizations scramble to get their captives licensed. That said, we could easily hit 50 new captives this year. A good year for new captives licensed in Vermont is usually around 25. Another interesting note, DFR is seeing far fewer dissolutions and redomestications out of Vermont then normal, meaning that current captives are not only happy but thriving. Dan reported that DFR was fully staffed and ready to take on the workload that these new captives promise.

The reception was a terrific way to cap off the day with an opportunity to see and say “hi” to many of our old and new friends alike. A special shoutout to former board member, and good friend, Ed Koral who traveled all the way from New York City to joins us that evening. I think the prize for the greatest distance traveled for the event was by Andrew Zoller, the new Head of International & Captive Solutions – US Commercial Insurance for Zurich North America, who flew in from Dallas.  Welcome to the family, Andrew!

Rich Smith,
VCIA President

Stay well and see you soon!

Is Gridlock Good for Captives?

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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

John Primmer

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Sad to hear of the passing of another great name in Vermont’s captive insurance history last month. John Primmer was one of the legal minds behind the original captive insurance law passed in Vermont 40 years ago that almost every state that has adopted captive laws since has copied – for good reason!

John was a founding partner of the Vermont law firm of Primmer Piper Eggleston & Cramer, which not only being one of the largest and most prestigious law firms in Vermont, is still one of the powerhouses in the captive legal realm. Prominent captive lawyers such as Jeff Johnson, Randy Wachsmann, Jesse Crary, Ryan Gadapee, and Rusty Young are some of the most sought-after legal minds in the industry.  VCIA also has relied on the government affairs team at the firm lead by the estimable Jamie Feehan for many years.

Retiring a number of years ago, John lived in a part of Vermont known as the Northeast Kingdom – a place of great beauty even by Vermont standards.  He was a wonderful father and husband, great cook and great host, and a true friend of many in the captive insurance industry. Rest in peace, John.

Rich Smith
VCIA President

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

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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

More Affirmation

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Not a surprise to those of us in the captive insurance industry to see the 2021 Captive Benchmarking Survey from Aon highlighting that captive insurance growth is occurring at a level not seen in two decades.  Price increases in primary insurance markets over the past two years have led captive insurance company owners to retain more risk as they look to maintain appropriate levels of coverage while controlling costs.

You only need to talk to the many VCIA members providing services to captives to see how busy they all are. And talking to Dave Provost at Vermont’s Department of Financial Regulation confirms the report. Last year saw a big spike in captive formations and it looks like they are on track for a bigger year for 2021.

Aon’s report said that since 2018 they have seen a 73 percent increase in premium retention among the captives it manages. The types of risk covered have grown to include risks that are difficult to place or emerging perils, such as cyber and environmental.  According to the report, over the past 5 years Aon has seen a 650 percent increase in cyber-insurance premiums in captives, while environmental risks have seen a 400 percent premium increase since 2018.

In addition, AM Best released a report in August showing that the operating performance of rated U.S. captive insurance companies continued to surpass that of their commercial market peers in 2020. The captive insurance industry has shown its colors in these trying times over the past few years. It will only pay dividends for their owners in the years to come.

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, President, VCIA

Thank You!

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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!

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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  

The Closer

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Don’t miss the VCIA Conference Aug 10 – 12! Panelists for the ‘Hot Topics with Dave Provost’ session, from L to R: Tracy Hassett, Steve Legg, Sandy Bigglestone, Ellen Charnley and Dave Provost

OK, enough with the procrastination! The VCIA Annual Conference starts August 10th, and because it is virtual, folks tend to wait until the last minute to sign up. I understand! But online registration for the event closes Monday at noon – so NOW is the perfect time!  

Besides all the great educations and networking opportunities, the one event during the conference that everyone waits for is Hot Topics with Dave Provost. For those few of you who don’t know Dave, he is the preeminent captive insurance regulator in the world (don’t take my word for – ask anyone) and his knowledge, experience, and sense of humor, provides just the right closing to our much-anticipated captive conference.

The distinguished group joining Dave (see photo above) are Sandy Bigglestone, Vermont’s Director of Captive Insurance (and Dave’s right hand woman).  In 2018, Sandy was a recipient of the Women to Watch Award for her leadership, expertise, and accomplishments in the captive insurance industry by Business Insurance. Ellen Charnley, President of Marsh’s Captive Solutions Practice, is recognized as a global leader in the captive industry. And, Steve Legg, who has been with Starbucks since 1997, serving as director, risk management since 2006. Aptly moderated by VCIA board member, Tracy Hassett, President and CEO of edHEALTH, a first of its kind consortium of colleges and universities with the mission of reducing health care costs while enhancing consumer knowledge of options, plan design, disease management and wellness programs.

This epic group will get you totally up to speed on current developments in captive regulation, key issues facing the industry, future initiatives, increased interest in captives as a response to challenging markets, and much more. You can even ask them questions and provide comments of your own. Don’t miss it!  

So, take this moment to register for VCIA 2021!  Join these experts  and other audience members and share your experience and insight to make the conference even better. YOU are what makes this event incredible!  Check it out here and Register Now!

I look forward to seeing you next week!

Rich Smith, VCIA President

Can We Talk?

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As I mentioned last week, collaboration is at the core of what makes VCIA so important to the broader captive insurance industry.  Understanding that, we’ve scheduled several semi-structured, interactive Discussion Groups  during the upcoming VCIA Conference  open to all attendees to allow the captive community a chance to converse with one another around topics of interest.

One group, whose focus is Getting Comfortable with Change, asks questions like ‘how do we accept and learn to even embrace change, and how do we assist our colleagues and clients in embracing change?  What opportunities and risks are developing because of recent events in our world?’ They will also explore how  companies are utilizing  captive programs to mitigate risks and enhance corporate wellness programs.

US Regulatory Realm is a Discussion Group that will give insight into what the NAIC is working on and its impacts on captives.   Lead by Vermont’s Director of Captive Insurance, Sandy Bigglestone, and Zaw Win, a director in DRM’s Business Law and Captive Insurance groups (and chair of VCIA’s Legislative Committee), this is an opportunity to look at the industry from a state regulatory view, allowing the group to discuss and consider a more uniform approach to working through key items as a collective unit.

One group of experts will provide some background on a proposed federal backstop for business interruption and event cancellation claims that occur because of a pandemic or public health emergency. The Pandemic Risk Insurance Act (PRIA), mirrors many of the fundamental mechanics of the Terrorism Risk Insurance Act (TRIA) which was established in the wake of September 11, 2001, to help provide adequate terrorism coverage in the United States. Will PRIA be good for captives? Are there other options? Will it pass? Come  join in the discussion to find out.

The certainties of life: death, taxes, and collateral. That is what Ed Koral of BDO, and Jeff Packard of PMA will serve up through a lively exchange of war stories, cautionary tales, and common-sense tips on how to navigate your organization through difficulties with reinsurance or self-insurance collateral requirements. Collateral Without Damage highlights steps you can take to ensure that you are better prepared for contentious negotiations and equipped with more leverage.

Everyone in our industry knows we need to attract and foster the next generation of professionals who will take captive insurance to new heights. Finding a Mentor is perfect for those new to the industry and looking to make their mark, as well as those who are long-standing members of the industry, looking to share knowledge, help someone along, and find a renewed purpose. 

Totally Cellular, Dude! You guessed it, the growth of new cell and sponsored captive formations across all domiciles will cover a brief background on cell/sponsored captives and explore recent developments, innovative uses, reporting and general evolution.

Talk amongst yourselves! The VCIA Annual Conference will be held online August 10 – 12th, which is fast approaching. Take a moment now to check out all the details here and Register Today! Thank you and I look forward to seeing you soon!

Rich Smith
VCIA President