Two Sides of the Same Coin

coinspin
Talk to most business people anywhere and the thought of “regulation” can make them bristle. And with good reason. Often times overzealous regulators help create overzealous regulations that are intended to protect citizens or the environment or fair markets but can instead create sweeping mandates that do more harm than good. To wit, the Trump administration’s proposal reducing regulations for American businesses by requiring that for every new rule proposed, two should be repealed.

This has reminded me of my old friend and former CICA President Dennis Harwick’s dictum he called the ‘regulatory imperative’: First and foremost, regulators live in terror of being accused of failing to protect consumers in whatever industry they are regulating. Second, they want everything and everybody they regulate to fit into a single template.

Captives—by nature and definition—tend not to fit within that regulatory dynamic. As Vermont’s chief captive regulator, Dave Provost, is fond of saying, ‘When you’ve seen one captive, you’ve seen one captive.’ Captives don’t usually fit into a template, due to the uniqueness of the risks and plans of their specific owners. Also, the consumer protection element is vastly reduced by the fact that the ‘consumers’ actually build and own the captive.

I think the anti-regulatory wave could be a double-edged sword for captives. On the one hand, rolling back regulations does open the door for more opportunity for American businesses.  And certainly for captives there have been numerous instances where regulations have had a deleterious impact on our industry, primarily at the federal level, but also in states with little or no understanding of captive insurance concepts.

But deregulation could introduce some uncertainty for underwriters as regulations often are created to reduce risk for businesses. In an article in Risk & Insurance by Katie Siegel this past April, she writes that if regulation goes away, some risk comes back. Maybe not right away, but with a lack of oversight in some key areas of safety and loss prevention, those risks may start to creep up again and result in unintended losses. And underwriters also rely on federal regulations to provide a reliable risk management framework by creating a reliable compliance framework for all companies to follow.

Good, strong regulation is consistent with the mission of the parent organizations that license their captives in Vermont. The best risk managers understand that adhering to high standards is as much about good business as it is about compliance.  After all, it’s their money at risk!

I look forward to hearing from you.

Rich Smith
VCIA President

Sometimes it Works!

compromise

There are too many horror stories about dealing with government bureaucracies, but here is a “shout out” to the State of Virginia as well as an important lesson to always keep trying.

VCIA and NRRA wrote letters regarding the proposed changes to the Virginia Fair Claims Act. The Act threatened to effectively eliminate any ability to write coverage on a “claims-made and reported” policy form and would have negatively impacted RRGs doing business in the state. Our letters addressed the fact that the language of the proposal could have been interpreted to include a requirement that all insurers must demonstrate prejudice in order to deny coverage based on the insured’s failure to comply with time-limited policy notice provisions.

Somewhat surprisingly, the letters generated a personal call to me from the Virginia State Corporation Commission the following day, and we were invited to work with them to fix the issue.  Drawing on the expertise of VCIA members Joe Holahan, Jon Harkavy, Kathy Davis and Skip Myers, we suggested a slight change to the proposal that satisfied the state’s needs while protecting RRGs. It’s heartening to me when a state responds quickly and openly to comments, and it’s a good reminder on just how vigilant we need to be!

I look forward to hearing from you.

Rich Smith
VCIA President

City of Brotherly Love… at booth #1817

RIMS-2017

Just a quick blog too say I am heading down to Philadelphia this weekend for the annual RIMS conference.  Although RIMS is “yuge” (over 10,000 attendees they say), Vermont still is able to attract a good crowd to the Vermont booth every year.

We get a number of folks from Vermont’s captive community who go down to RIMS and represent the Vermont captive industry at the booth. This year Ian Davis is taking the reins with DFR staff, Dave Provost, Sandy Bigglestone, Dan Petterson, Jonathan Spencer, Stacy Alden, Lance Tourville and Christine Brown. Also there will be KeyBankers, Jordan Mosher and Mat Robitaille, Steve Killoran from Maple Capital, Bill Riley from Paul Frank + Collins, and Mitch Cantor from ICCIE. Oh, yeah, and I will be there as well!

So if you are going to be at RIMS this year, come by booth #1817 and say hi!
Thank you all very much, and I look forward to hearing from you.

Rich Smith
VCIA President

Welcome, Ian

IanDavis_VTCaptive_Headshot_300

Ian Davis, Director of Financial Services, State of Vermont

I hope you will all join me in welcoming Ian Davis as the next Director of Financial Services for the State of Vermont! The position is responsible for the marketing and business development for the State’s Captive Insurance Industry.  Ian has replaced Dan Towle, who moved on to become the new President of CICA recently.

Our staff and I have already been working with Ian over the past few weeks, and I can tell you he will be terrific! He’s bright, energetic, and a quick learner – already tackling a number of projects for the benefit of Vermont’s captive industry. We are all looking forward to working with Ian for many years to come – and all of us will be down in Philadelphia the week after next for the monster that is known as RIMS. For those of you that are going to be there come on by the Vermont booth and say “hi” and welcome Ian to the family!

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

One Part James Bond, One Part Sherlock Holmes, and One Part Bono

richbono
I was reading an article on the globalization of risk just the other day, and it made me realize just how “glamorous” a risk manager is these days. Many new economic challenges are a result of the rise in societal issues around the world, and these instabilities will spill out and influence other risks, such as cyber-attacks motivated by the social unrest.  This was highlighted by John Drzik, New York-based president of global risk and specialties at Marsh, earlier this year.  With political and social unrest in many countries higher than seen in decades, captive owners need to look at how to be more resilient and mitigate risk where possible within their operations, he said. I couldn’t agree with him more.

Mr. Drzik recommends running scenarios to find changes that could be made to company resiliency plans. Vendors in your supply chain should be diversified, portfolio investments should be examined for risk in particular countries that could be affected by a food or water shortage or social unrest which could cause business disruption damaging a business or investments.

Captive uses are evolving in response to these new risks.  This is why, as a captive risk manager, you need to be a little bit James Bond to deal with international threats, a little bit Sherlock Holmes to dig deep through data to provide “elementary” analysis of whether the risk can be something captives can cover, and a little bit Bono because, well everyone should have a little bit of Bono in them!

VCIA will be in the Great White North of Minneapolis tomorrow, November 2nd, for one of our famous Road Shows, so if you are in the hood,  drop on by! Thank you all very much, and I look forward to hearing from you!

Rich Smith,
VCIA President

Brexit?? Verm-enter!

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

richcolbert
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