More Affirmation

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

Come Collaborate!

Alex Petrovich will facilitate the Captive Owners Only Forum at the VCIA Annual Conference in August.

One important aspect of the VCIA Annual Conference is the time that captive professionals connect and collaborate together outside of the educational sessions.  This is especially true for captive owners. It is such a niche career, and yet so important for those in it to have broad understanding.

Captive managers and other outside team members are invaluable  in advising and helping owners  address challenges and support growth, but the opportunity to discuss issues and ideas candidly with captive owner peers is hard to come by and can be immeasurably helpful. During the VCIA Annual Conference (less than 3 weeks away!) we’ve designed an  ‘off-the-record’ session (no press is allowed, and the session is for owners only), for captive owners to seize the opportunity to ask colleagues how they’ve addressed issues, and lend wisdom, stories of success, and knowledge to other captive owners.  

The forum will be curated by Alex Petrovich, an executive tasked with operating Circle Star Insurance Company, a Risk Retention Group and a segregated cell facility, STCICI. Alex spent almost a decade on the insurance company side, most notably at a Berkshire Hathaway subsidiary in the areas of underwriting, business development, finance, and operations.  He went on to work at Gallagher, leading cross functional teams and consulting with large companies on alternative risk management solutions, including captives.  Prior to his current role, Alex was a partner at Lockton Companies, the world’s largest privately owned insurance brokerage.

Collaborative interaction is the core of what makes VCIA so important to the broader captive  industry.  Not only does it shore up your captive knowledge and expand your captive horizons, but it strengthens the association through shared experience.  It’s the perfect example of a symbiotic relationship: your participation is the key to the continued success of VCIA as it strengthens our mission – which  allows VCIA to create these spaces to strengthen your captive IQ.  Quite a win-win!

The VCIA Annual Conference will be held online August 10 – 12th, which is fast approaching, so check out all the details here and Register Now!

Thank you and I look forward to seeing you soon.

Rich Smith, VCIA President  

Three…Two…One…Ignition

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

Happy Fourth

Last week I talked about our meeting with the British Consulate and discussing opportunities regarding captive insurance. This week we head into the Fourth of July holiday where we red-blooded Americans rant against the British monarchy… er, no – we usually have a cookout, hang out with friends and family, and go watch fireworks. As a matter of fact, Americans may even love the Queen more than our Brit friends!

Keeping with the British connection, one of the keynote speakers for this year’s VCIA conference in August will be Hank Watkins, Regional Director & President, Americas, Lloyd’s of London – the venerable British insurance market.  Hank will be  joined by Vermont Commissioner of Financial Regulation, Mike Pieciak, to discuss the perils and opportunities associated with ESG (Environmental, Social and Governance) issues and their practical application on the captive insurance industry. Be sure to register for the VCIA Annual Conference to check out this interesting keynote and connect with hundreds of other captive professionals!

I hope you all take  time this weekend to relax and enjoy this brief summer break. With the conference fast approaching, it will be good to rest and regroup  before digging back into captive insurance.  And invite one your favorite ex-pats along to your  BBQ!

Thank you and I look forward to seeing you soon.  

Rich Smith,
VCIA President

Time to Gear Up!

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

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

Not in all my days

I don’t usually think it’s appropriate to comment on events in Washington, but I feel compelled to address the events at the Capitol on Wednesday. I like to consider myself a rational and measured thinker, but Wednesday’s attack in Washington horrified me. I truly believe January 6th will go down as a dark day in America’s history no matter where one might stand politically.

This is no longer an issue about which party’s policies are right or wrong – including the very emotional issues of things like racism or abortion. This is an existential issue for our country when the very foundation of what makes us who we are is under attack.

I commend the statements from many leaders in the insurance industry condemning the events of this week.  A number of these executives said in a letter that attempts to delay the certification of the electoral vote, which finally took place early Thursday after the Capitol was cleared of protestors, were “counter to the essential tenets of our democracy.” Among those signing the letter were: Brian Duperreault, CEO of American International Group Inc.; Dan Glaser, president and CEO of Marsh & McLennan Cos. Inc.; Philip Ryan, chairman of Swiss Re Americas; and Alan Schnitzer of Travelers.

The statement continued, “Our duly elected leaders deserve the respect and bipartisan support of all Americans at a moment when we are dealing with the worst health and economic crises in modern history. There should be no further delay in the orderly transfer of power.”  The fact that we are even worried about the orderly transfer of power should boil the blood of every American.

I worked on Capitol Hill for three years and was awed and inspired every day I would walk into that building – a symbol of freedom and democracy that Americans and other nations looked up to.  To say I am angry is an understatement. I support and commend Vice President Mike Pence’s remarks after Wednesday’s riot: “To those who wreaked havoc in our Capitol today, you did not win,” he said. “Violence never wins. Freedom wins. And this is still the people’s house.”

Thank you and I look forward to hearing from you.

Rich Smith,
VCIA President

The F.B.I.

fbi FThose of us of a certain age can remember with absolute clarity the start of the popular show in the late 60’s and early 70’s. The announcer, in a strong, determined voice would introduce, “The F.B.I… starring Efrem Zimbalist, Jr.” and then we would have an hour-long drama whereby the eponymous organization would hunt down one bad guy after the other.

Well, at this year’s VCIA 2020 Virtual we may not have such a dramatic opening, and the bad guys now hide in the dark web, but the thrill is still there. Joining us on August 12th will be FBI Special Agent Matthew Wabby, currently assigned to the white-collar squad in Albany, NY, investigating corruption, fraud, money laundering and related crimes.  With his panel, he will explore how companies should respond to an increasingly complex and changing set of rules as our business environment and society move ever more quickly into the digital sphere.

Special Agent Wabby will be joined by a group of highly placed cyber and captive insurance experts:

  • Chris Giovino, who leads a practice for Aon when clients have suffered a loss due to crime, employee malfeasance or fidelity related matters;
  • Heather McClure, JD, LLM, Chief Risk Officer, OU Medicine and Executive Director of Operations, OU Physicians, who leads their Vermont-based captive insurance company; and
  • Shiraz Saeed of Starr Insurance Companies, the national practice leader for Cyber Risk responsible for the strategic direction and expansion of the Cyber Risk products and services.

Cyber-attacks are becoming more sophisticated. Organized crime now uses former intelligence members for more sophisticated attacks, broadening the nature of their attacks, and increasing their frequency. An ever-changing set of regulations from governments around the global compounds the difficulty of managing against cyber risks.

Join us to learn some positive ways to shield against cyber-attacks and respond to breaches if they do occur.  I look forward to seeing you all in August at VCIA Virtual! Register by June 30th for the lowest rates! View all the details here.

Captives and Debtors

Interesting news about OxyContin maker Purdue Pharma seeking product liability insurance and general liability coverage by creating a captive insurer.  Purdue asked for permission to set up the captive insurer in federal court on Monday as part of the firm’s filing for bankruptcy protection, as it has been challenging for them to find a commercial solution with a third-party insurer, not surprisingly.  Purdue faces more than 2,600 lawsuits alleging that it helped fuel the U.S. opioid epidemic.

As VCIA Member (and recipient of VCIA’s 2019 Industry Service Award!), Chaz Lavelle of Bingham Greenebaum Doll LLP stated recently in a September 17 article in Business Insurance,  “We’ve had situations in the past where an operating company has gone bankrupt but the captive insurer which it has previously set up was fully solvent, continued to operate and pay claims notwithstanding the bankruptcy and the disposition of the company.”

It reminded me of the Vermont captive for the bankrupt firm Enron back in the 90s. Even though the firm was mired in bankruptcy proceedings due to the fraudulent leadership at the top, under the supervision of Vermont’s Department of Financial Regulation its captive remained solvent and paid out every one of its claims under its policies in full. Having the captive kept the policy claims separate from the bankruptcy proceedings. Even debtors require various liability, casualty, property and other insurance programs in the ordinary course of their businesses.

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

Rich Smith
VCIA President

Vermont Gets an A+… so come see us next week for Legislative Day!

statehouse1

VCIA Members: Join us January 24th at the historic Statehouse in Montpelier, VT for Legislative Day!

According to a new report by the R Street Institute’s 2017 Insurance Regulation Report Card published recently, Vermont again has the best insurance regulatory environment.

Vermont has been named as having the best regulatory environment for the fourth straight year and the fifth time in six years and the report cites developments such as Gov. Phil Scott signing H. 85 to expand the state’s captive insurance regulatory regime to cover agency captives last May.  Vermont earned the only A+ in this year’s report card! Congratulations to DFR Commissioner Mike Pieciak, Deputy Commissioner Dave Provost and their team.

What greater impetus is needed, then to join VCIA on January 24th for our annual Legislative Day in Montpelier, Vermont, the coolest state capital in the country? 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.

This special event, for VCIA Members only, includes the VCIA Quarterly Board Meeting, lunch with Vermont Lt. Governor David Zuckerman, Commerce Secretary Michael Schirling and  special guest speaker Jeff Carr, Vermont’s State Economist.

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 2018.

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!