Tag Archives: Rich Smith

Hail to 40 Years!

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Vermont’s 40th anniversary year of the inception of its captive industry is drawing to a close. Since 1981, Vermont has worked hard to be the top U.S. domicile and continues to strive for excellence. Currently, VCIA is working with Dave Provost and Sandy Bigglestone and their team at DFR to build another captive bill to be introduced into Vermont’s General Assembly.

Over the past two years of COVID challenges, the Gold Standard has never been so apropos as Vermont lead the captive insurance industry in incredible growth and resiliency. I could not be prouder to be a part of this great work.

Brittany Nevins, in her role as Captive Insurance Economic Development Director, has put together a terrific short film highlighting relationships, accomplishments, future goals—and really what it means to be part of the Vermont captive family. I hope you will watch and encourage you to share.

Stay well and see you soon!

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

Three…Two…One…Ignition

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Last week I spoke about the increased interest of parametric insurance in the captive space as evidenced by the number of Ignite Talks coming up at our virtual conference focused on this emerging specialty. However, that is only one of the many topic areas being covered with Ignite Talks by the captive industry at VCIA’s 2021 Annual Conference coming up in three weeks.

We informally polled some of our captive owners to ask them what some of the challenges are that their captives have recently faced. We then asked our members to respond to those challenges (or those they have focused on) and present them in our Solution Labs at the conference. Ignite Talks are short, “TED-Talk” style presentations on these solutions.

Some of the challenge areas besides parametric insurance that will be covered include cyber regulation, captive strategic planning, third party risk, tax strategies, employee benefits, premium payment options, use of InsurTech, cell structures, legacy solutions, mentorship, managing volatility, risk distribution, predictive modelling for workers comp, finance and investment strategies, actuarial impact of the pandemic and situational awareness. Quite an incredible line-up!

The VCIA Annual Conference will be held online August 10 – 12th, which is just 3 weeks away so check it out here and Register Now!

Thank you and I look forward to seeing you soon. 

Rich Smith
VCIA President

Time to Gear Up!

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As we all have heard over the past year or more, the captive insurance market is booming. I can’t tell you how many of our members I have spoken with  in the past few months who’ve mentioned how busy they are  setting up new captives, or helping clients expand current captive programs.  Dave Provost from Vermont’s Department of Financial Regulation reported  that Vermont has already licensed over 20 new captives – a “normal” year for Vermont is about 24,  and we are not even halfway through the year!

So, that said, this is the perfect time to open registration for the VCIA Annual Conference! The event will be held virtually August 10th – 12th and registration officially opens June 15th. There will be plenty of top level education  for newbies to get a better handle on this new risk tool they have just established,  and plenty on how best to optimize captive programs that have been around for a while.

Sessions include setting up new captives, reinsurance programs that are available and appropriate for captives, and a discussion of whether risk retention groups are a mature industry.  In addition, this year’s VCIA conference will include education focused on  captive taxation issues and captive investment portfolios.  The conference will conclude with a session in which Dave Provost and his stellar team  will discuss captive “hot topics” with the top risk manager for Starbucks.  Educational sessions will continue to discuss up to the minute emerging and current risks, and how captive programs relate to those risks.

This August we will be offering more ways for small groups to connect in video chat rooms. The event will feature  Ignite Talks,  Solution Labs, Morning Coffee and great keynote speakers. CPE, VT CLE and CRE credits are available to those who participate in the virtual conference webcasts. 

So keep an eye out for conference details and  registration opening next week, and prepare yourself to gear up!

Thank you and I look forward to seeing you soon.   

40 Great Years… and Many More to Come

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Seems like just yesterday, but this is the 40th Anniversary of the captive insurance industry in Vermont! In 1981, the Vermont Legislature passed the Special Insurer Act, which was designed to provide a unique and attractive statutory framework for captive formation. As most of you know, this landmark law and subsequent amendments and regulations have become the model of captive regulation.

As a way to kick off the 40th Anniversary, VCIA and the State of Vermont will be hosting the Members-Only annual Legislative Day on January 27, 2021, but instead of our members traipsing down to Montpelier, we will be hosting the event online. 

The event will start off with Dave Provost, Sandy Bigglestone, and their team at the Department of Financial Regulation (DFR) hosting a Captive Division update that will review any new or upcoming regulations, other DFR news, and answer any questions members might have.

Then, DFR Commissioner Mike Pieciak will host a one-hour webinar with Vermont legislators and members to celebrate the 40th anniversary of captive insurance with an overview of captives by Dave Provost and his team, a report from Vermont’s Captive Insurance Economic Development Director Brittany Nevins, a quick update on VCIA by yours truly, and then a presentation by Julie Bordo, President & CEO, PCH Mutual Insurance Co. Inc. (RRG), a Vermont-domiciled captive owner.

Our final event will be a Zoom meeting with Vermont’s political leaders. Members will get a chance to hear from these leaders, many new to their positions, on what their priorities are for the upcoming year. They will also be able to ask them all those questions they have been saving up just for this occasion!

And if all that hasn’t got you interested; the State of Vermont is providing an exclusive Legislative Day giveaway: all registrants will be entered to win an awesome Lake Champlain Chocolates Gift Basket – so what are you waiting for!

Please RSVP to megan@vcia.com if you can join us. I hope to “see” you there! Thank you and I look forward to hearing from you.

Rich Smith,
VCIA President

IRS and 831(b)s… Here we go again!

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rich-groundhogThis past Tuesday, the Internal Revenue Service called for more information on microcaptives, as it seeks to determine whether the companies are used as tax shelters.  This has become a never-ending story in some respects. Even with the recent Congressional action to curtail the abuse of some captive insurance companies using the tax election, 831(b) captive insurers have, for the second year in a row, ended up on the IRS annual Dirty Dozen list of “tax scams” this year.

Through the end of this year, parents of 831(b) captives can make up to $1.2 million in tax-deductible premium contributions to the captives each year, and such captives’ underwriting income is exempt from federal taxes.  Legislation passed last year, raises, effective in 2017, the maximum tax-deductible annual premium contribution to $2.2 million but imposes new limits on how much in 831(b) written premiums can come from any one policyholder.

In its latest notice on 831(b) captives the IRS states 831(b) transactions have “a potential for tax avoidance or evasion” and that it lacks “sufficient information to identify which 831(b) arrangements should be identified specifically as a tax avoidance transaction…”  It goes on to describe various types of transactions involving 831(b) captives that it is looking into and asks for comments to be submitted by January 30, 2017 on “how the transaction might be addressed in published guidance.”

I agree with our good friends Chaz Lavelle at Bingham Greenebaum Doll and Mike Serricchio with Marsh Captive Solutions that the notice seems to suggest that the IRS isn’t condemning all captives that take the 831(b) election as fraudulent.  As we see the growth of captives for small-to mid-sized enterprises, it behooves us all to support better regulation of captives at all levels, and especially microcaptives. To me, the 831(b) concern points to state regulators who haven’t done enough to police this activity. Perhaps all this attention will help to correct that. And it is another example where we often see a backlash, either in the press or in public policy, that have consequences potentially harming our industry as a whole.

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

Rich Smith,
VCIA President

Brexit?? Verm-enter!

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autinpowersrichsmith
I just hosted a VCIA Members-only webinar yesterday called “Captive State of the Union” where we explored what VCIA is doing legislatively in Vermont, DC and internationally to keep the captive industry strong and thriving. I was joined by the redoubtable Dave Provost, Deputy Commissioner of Captive Insurance for the State of Vermont, and the sagacious Jim McIntyre, VCIA’s veteran DC counsel.

Toward the end of the webinar, we had a chance to discuss a few international events that may impact the captive industry, including my favorite term of the year: Brexit. Lately, much of the news has been dominated by Britain’s vote to leave the EU, and especially how it might affect the world of finance and insurance – including captives. The answer is, I have no idea.

Obviously, many UK captive domiciles, like Gibraltar and Guernsey will have to figure this out as this slow-motion train wreck unfolds. And of course, many captives and RRGs based in the US have reinsurance agreements with the likes of Lloyds. However, I like what Dave Provost suggested: Vermont would be glad to host a reinsurance marketplace here in our beautiful state. Instead of Lloyds of London it will be Lloyds of Lyndon (Lyndon, Vermont that is)!

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

Rich Smith
VCIA President

Captive Nation

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I hope you can all join me next Thursday for my version of the Colbert Report, when I’ll have a chance to tell VCIA Members what VCIA is doing legislatively in Vermont, DC and internationally to keep the captive industry strong and thriving. I’ll be joined by Deputy Commissioner Dave Provost and VCIA’S DC counsel, Jim McIntyre, to inform our members on what’s happening at the state, federal and international level  with legislation and regulations potentially impacting captives.

We are calling it “Captive State of the Union” and it’s not too late to register to attend! The webinar will be held  October 13, from 2-3 p.m. EST, and will address  VCIA’s activities on your behalf, and the status of important current issues like:

  • The Captive Insurers Clarification Act of 2015 (the bill to clarify The Nonadmitted and Reinsurance Reform Act (NRRA))
  • The Department of the Treasury’s proposed rules to implement changes to the Terrorism Risk Insurance Program (TRIP or TRIA) required by the Terrorism Risk Insurance Program Reauthorization Act of 2015
  • R. 3794, The Nonprofit Property Protection Act which will allow nonprofit RRGs to provide property insurance to their members who are 501(c)(3) nonprofits with over $50 million in premium, in addition to the liability insurance they already provide
  • FHFA’s rule to exclude captive insurers from the Federal Home Loan Bank
  • Activities and updates from the NAIC
  • Vermont’s captive insurance bill, H-538, which was signed into law last spring
  • New leadership at the Department of Financial Regulation, as well as an update on State leadership races

Go to this link  to register online, but remember, it is for VCIA Members only – membership has its privileges!  We will take questions during the webinar and I will do my best to be as snarky as possible and keep to a very high level of “truthiness.”  : )

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

Rich Smith
VCIA President

Keep Moving Forward

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A couple of quick updates from the President’s corner…

We are in the process of surveying our members and talking to captive leaders here in Vermont about potential changes to Vermont’s captive statute. After gathering ideas and vetting them internally, we meet with the leadership team at DFR and begin an iterative process that will ultimately produce a “captive bill” for introduction to the Vermont legislature in January. Coming in with a coordinated bill between the regulators and the industry gives us the clout to move a bill quickly to passage. If you have any good ideas (hey, even crazy ideas) send them my way – you never know!

Just a quick note to let folks know I will be attending the SIIA (Self-Insurance Institute of America) conference in Austin starting this Sunday and then heading directly to the NRRA (National Risk Retention Association) in Chicago on Tuesday night. SIIA is a member-based association dedicated to protecting and promoting the business interests of companies involved in the self-insurance and alternative risk transfer (ART) industry, including captive insurance. It’s a great opportunity to meet and talk to others in the self-insurance world. And NRRA’s conference brings together the leaders in the RRG industry annually to discuss the opportunities and challenges in the world of Risk Retention Groups. Vermont has more RRGs licensed than any other captive domicile.

And finally, I want to give a shout out to Bob Gagliardi from AIG (and VCIA Board Member) for his promotion. Bob was recently promoted to AIG’s Global Director of Captive Management and US Fronting. Our expectation is that AIG will need to build a new skyscraper in downtown Burlington to fit the whole operation.  Congrats, Bob!

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

Rich Smith, VCIA President

Back in the Saddle…

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Thanks to all who joined us in beautiful Burlington, Vermont, a couple of weeks ago for VCIA’s annual conference. Without a doubt, it was a terrific 2 ½ days with great programs, networking and events. With over 1000 attendees from 41 states and 14 countries, our annual gathering in August has grown to be THE captive insurance forum! To quote from one of our attendees “All the important captive market players from North America and parts of Europe were in attendance.” And 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 in the saddle again looking out for the captive industry. Currently we are working with U.S. Treasury on changes to the TRIA data call for captives, fighting to pass the NRRA clarification bill, and generally looking out for the captive insurance industry. You got to be a tough hombre to keep the posse moving!

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

Rich Smith
VCIA President