A Fresh Start

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Happy New Year, captive community! Here’s hoping 2015 will be a great year for captive insurance. We are already off to a good start with the House passing a TRIA reauthorization bill as one of their first acts. The bill is the same language as the compromise bill that was worked out with Senate and House leaders last year but was held up due to one lone Senator, who has since retired.

The measure that passed Wednesday — H.R. 26, the Terrorism Risk Insurance Program Reauthorization Act of 2015 — calls for extending the program for six years, gradually increasing the trigger for activating the backstop to $200 million from the current $100 million and gradually increasing the industrywide retention to $37.5 billion. The bill also would establish a new National Association of Registered Agents and Brokers (NARAB) that would streamline interstate agent licensing.  The prevailing wisdom is that the bill should pass without too much difficulty in the Senate, but nobody is really sure of the timing. My hope, is with both Congressional bodies under the same party leadership a lot of the partisanship that stopped any movement on legislation will dissipate somewhat.

And speaking of examples of strong bipartisan support, I hope all of you who can will join us next week, on Thursday, January 15, in Montpelier for VCIA’s annual Legislative Day. This is our best opportunity to meet with state officials and legislators to thank them for all their support over the years as well as engage them on the issues that face our industry today. If you are able to join us for the day (or part of the day) it sends a terrific message to Vermont’s leaders. And please encourage your colleagues to register as well – I can’t emphasize enough how important it is to have our members mobilize for this day!

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

~Rich

End of the Year (not the World)

2014 clockOne thing about living in Vermont is that you know when it gets toward the end of the year – it’s dark, cold and often snowy. Just keeps us in a rhythm with nature, I guess. But it also signals the start of lighter days ahead. With that introspective hackneyed opening, it’s time to ponder the end and look ahead.

It was another good, albeit challenging year in the captive industry. We continue to see growth industry-wide as more organizations (big and small) take control of aspects of their own risk which in the past they would have pushed off to the commercial insurance market.  There are now over 5,000 captive insurance companies worldwide, and growing interest from smaller to middle sized entities seeking ways to mitigate new and emerging risks.  Emerging risks, such as cyber risk and supply chain risk, present opportunities to the captive insurance world, which can respond more quickly and precisely than traditional insurance. We see the risk starkly with the very recent cyber-attack on Sony by shadowy assailants who are causing major disruptions to Sony’s operations. Owning the risk early on may have helped Sony protect itself from these types of attacks.

Even as captive insurance has emerged solidly as a mainstream risk financing tool, there is still work to be done.  We continue to see  challenges to the industry, including  threats of excessive regulation; the weakening of sound regulatory structures based on a desire to attract business; and efforts to impose new or increased taxes.  As Congress left Washington this week without passing a TRIA reauthorization, we are reminded that we have our work cut out for us next year.

All in all, however, I wouldn’t want to be anywhere else. We have so many opportunities for growth, and will work hard to see captives continue to prosper!

Have a safe and happy holiday season and terrific New Year! Thank you all very much, and I look forward to hearing from you soon!

~Rich

Oh, the weather outside was frightful…

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Yes, VCIA did host our annual holiday mixer Wednesday night in Burlington as a Nor’easter was raging outside. But it did not stop the many intrepid members from the captive insurance industry from joining us for great food, libations and conversations. Special thanks to Saslow Lufkin & Buggy, LLP for sponsoring the mixer. It was great to catch up with so many friends who too often I only see in passing at other captive events and meetings around the country… and to have nothing on the agenda other than to have a good time.

Of course having just said that, it is also an excellent opportunity for me to check in with our members and get a take on the industry as we near year-end, highly unscientific as it may be. And although the year was not without its challenges to the industry as a whole, our members are happy with where things stand.

On the emerging TRIA reauthorization front, the House of Representatives passed a bill on Wednesday to reauthorize the program but the bill may still face opposition in the Senate. Besides the changes negotiated by House and Senate leaders we reported on earlier, the bill originally contained provisions to modify the Dodd-Frank Act by incorporating a rule which will relieve insurers of capital standards regulations that originally targeted banks (the Collins Amendment). The White House had said that while it supported TRIA, it was opposed to the changes to Dodd-Frank being sought by Republicans.  Ultimately, the Collins Amendment was not included in the TRIA reauthorization bill approved by the House, however, in a separate action it passed through unanimous consent S. 2270, a bill that was passed by the Senate in June.  However, Sen. Tom Coburn (R-OK) says he’ll delay the bill unless the Senate would agree to his state opt-out amendment to NARAB II. The House has apparently gone home so don’t know if any amendments to House passed bill can be accepted. We will keep you posted as TRIA continues down the tortuous path to reauthorization (I hope)!

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

~Rich

Post-Election (and Post-Turkey) Haze

Captive insurance turkeyWith the mid-term elections behind us we can look into the captive insurance crystal ball and divine how our industry will fare on Capitol Hill in the year ahead… well, not really. I think one thing all the pundits can agree on is that not a lot will happen in the lame-duck session of Congress to the end of the year as the newly energized Republican leadership in the Senate will prefer to postpone any major actions that are not absolutely necessary for running the state until they control both the House and the Senate in January (and even those issues are not guaranteed to move before the end). So I suspect we will see some sort of TRIA extension, as well as little to no action on updating the Liability and Risk Retention Act (LRRA) and the technical correction to the Non-admitted and Reinsurance Reform Act (NRRA) passed in Dodd-Frank a few years ago.

It sounds like there may be some agreement between the two parties to make necessary adjustments to Dodd-Frank early next year. Both sides agree that there need to be some tweaks to fix issues that always arise when implementing policies at that magnitude. But it will still require that the Republican and Democratic leadership can keep the politics to a low boil.

In regards to TRIA reauthorization, House and Senate negotiators remained at an impasse this week, and not necessarily because of the partisanship we have seen over the past few years. As you know, initially enacted after the Sept. 11, 2001, terror attacks, the federal cost-sharing program that provides a backstop in the event of another catastrophic attack is set to expire at the end of 2014.  The Senate version to reauthorize the program for seven years—approved 93-4 in July with nearly unanimous Senate Republican support—would be a better bill for the captive insurance industry.  However, there is an ideological split within the GOP, with House Financial Services Committee Chair Jeb Hensarling (R-TX) opposing the Senate approach, and saying bigger changes are needed to protect taxpayers, and other Republicans, like Rep. Peter King (R-NY), urging the House to act—and openly questioning the continued opposition by some GOP colleagues.  The business community has, for the most part, opposed Hensarling’s approach. And Republican leaders haven’t yet brought his bill to the floor for a vote—a sign of uncertainty that it would have even enough Republican support to pass.  So like the way one sometimes feels from overdoing it on Thanksgiving, my crystal ball is equally hazy.

In other news, our good friends at the audit firm of Johnson Lambert elected John Prescott as the firm’s next Managing Partner. John will serve as Co-Managing Partner with Debbie Lambert beginning January 1, 2015 and will begin a five-year term as Managing Partner on January 1, 2016.  Debbie will remain with the firm after stepping down as Managing Partner and will be returning primarily to a client service role.

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

THIS JUST IN!

Just before sending this blog post, we heard from Jim McIntyre, VCIA’s DC legislative counsel. Here is what he said about TRIA reauthorization:

Sen. Schumer and Rep. Hensarling have agreed on the outline of a reauthorization bill.  They have tentatively agreed to the following outline, which could change:

  • 6 year reauthorization;
  • $200 million trigger, phased-in;
  • 80-20 co-share;
  • Study on bifurcation; and
  • NARAB II (broker licensing)

They continue to discuss other issues such as certification and recoupment, a study on up front premiums, TRIA insurance data collection and the creation of a risk retention council.  A final bill could be included in a larger government funding bill next week (currently looking at Wednesday) or voted on separately.  With time running out, including it in the omnibus bill is the most probable.  They are hoping to conclude the negotiations shortly.