Captive Insurance Times

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04 March 2020 - Issue 193

Insurtech Insight Emerging Talent Reserve Mechanical

What changes need to be made in order Dale McCann Reserve Mechanical Corporation files for the captive sector to keep up with Vice president of captive insurance opening brief with tenth circuit court technological advances? Comerica Bank of appeals Captive Insurance Times

Issue 193

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Editorial

Editor Becky Bellamy [email protected] Tel: +44 (0)208 075 0927

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stored in a retrieval system or transmitted, in any form or by What changes need to be made in order Dale McCann Reserve Mechanical Corporation files for the captive sector to keep up with Vice president of captive insurance opening brief with tenth circuit court any means, electronic, mechanical, photocopying, recording or technological advances? Comerica Bank of appeals

otherwise, without permission in writing from the publisher.

B++ Good captiveinsurancetimes.com 3 Contents In this issue

News Focus

page 6 Market Update Davies Group employees discuss the

C current view of the captive insurance

M sector along with the firm’s plans for 2020

Y page 22 CM

CY Emerging Talent Dale McCann, vice president of captive CMY insurance of Comerica Bank K Insurtech Insight page 26 As technology advances, the pressure is on to keep up the pace, but with the ‘technology generation’ lacking in the captive sector - what Industry Appointments changes need to be made? page 16 Comings and goings in the captive insurance industry page 32

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captiveinsurancetimes.com 5 News Focus WE KNOW CAPTIVE INSURANCE.

Reserve files opening brief with tenth circuit court of appeals

Feldman Law Firm and Foley Gardere test by receiving more than 30 percent Additionally, the Coalition to Advance have filed the opening brief with the of its gross premiums from reinsuring Captive Insurance filed an amicus curiae tenth circuit court of appeals on behalf pooled and blended risks of more brief with the US Court of Appeals for of Reserve Mechanical Corp, a client of than 150 insureds under more than the Tenth Circuit in support of Reserve. Capstone. 500 direct-written policies, issued by PoolRe Insurance Corporation. The 11 organisations supporting the The appeals brief challenges the US tax recent appeal by Reserve, include court’s rulings in the Reserve captive The brief stated: “Reserve’s direct- the Alabama Captive Insurance insurance case, identifying the specific written policies provided real insurance: Association, Arizona Captive Insurance ways in which the tax court erred in its when Peak suffered a covered loss and Association, Delaware Captive adverse opinion issued in June 2018, made a claim, Reserve paid. Reserve’s Insurance Association, Georgia Captive according to Capstone. risk distributing arrangements imposed Insurance Association, Hawaii Captives real contractual rights and obligations.” Insurance Council, Kentucky Captive In its opinion, the tax court concluded Association, Missouri Captive Insurance that Reserve’s transactions did not “If Peak suffered a large covered loss, Association, Montana Captive Insurance For more than 70 years, no firm has had a more constitute insurance for federal income a substantial portion of the loss over a Association, North Carolina Captive complete understanding of the captive and self- tax purposes. predetermined amount would be borne Insurance Association, Utah Captive insured market than Milliman. With our global by the fifty-plus insurers participating Insurance Association, and the Self- The tax court suggested that Reserve’s in the risk pool. By the same token, if Insurance Institute of America. reach, we routinely advise multinationals on insurance arrangements did not meet one of those insurers responded to a cross-border transactions and how to meet each two of the four necessary insurance large loss, Reserve would also be called The amicus brief addresses and informs domicile’s unique requirements—key in today’s criteria, concluding that Reserve failed upon to pay its proportionate share of on three issues of concern in the original captive environment. to satisfy adequate risk distribution the loss.” Reserve decision: prior loss history, and that Reserve’s arrangement with manuscript policies, and risk pooling. milliman.com/captives its affiliated company, Peak Mechanical Capstone explained that the tax court and Components was not “insurance in employed legal reasoning that was Capstone said that the tenth circuit’s [email protected] the commonly accepted sense”. contradictory to decades of existing decision in the Reserve appeal case law. The tax court also went outside is “expected to carry enormous Reserve’s opening brief explained that the record in making findings that were implications” for the captive insurance Reserve satisfied the risk distribution not supported by the evidence at trial. industry.

6 Captive Insurance Times - Issue 193

1349PCP_Captive Review_20200211.indd 1 2/12/20 12:09 PM News Focus News Focus

Alabama to update captive A.M. Best affirms Lincoln Benefit ratings insurance legislation Tennessee licenses A.M. Best has removed from under review The Alabama Captive Association’s statute, that follows the existing 200th captive with negative implications and affirmed the EU removes BVI from ‘grey list’ sponsored bill to update the state’s Alabama Department of Insurance financial strength rating of A- (Excellent) captive insurance legislation passed practice, to allow captives to cease The Tennessee Department of Commerce and the long term issuer credit rating of unanimously in the House Insurance writing business for up to five years and and Insurance (TDCI) has licensed Mattoon “a-” of Lincoln Benefit Life Company The government of the Virgin Islands good governance principles. This is as a Committee on 19 February. remain in existence. Insurance Company, marking the state’s (Lincoln Benefit). The outlook assigned to has welcomed the EU’s decision to result of close cooperation and positive 200th licensed captive insurance company. these credit ratings (ratings) is negative. name the British Virgin Islands (BVI) dialogue with the EU and demonstrates The updates allow for greater economic Finally, the bill will allow for technical as a fully compliant jurisdiction for the BVI’s commitment to meeting and growth and development within the corrections to language pertaining to Tennessee has licensed four captive According to A.M. Best, Lincoln tax purposes. surpassing international standards.” captive industry in the State of Alabama. coastal captive insurance companies to companies already in 2020 with six more Benefit’s balance sheet strength has promote consistent language between captives currently in the approval process, been categorised as strong, as well as BVI was placed on the EU’s Annexe Fahie added: “I, along with my The bill was presented by state Chapter 31(B) and 31(C) of the code. TDCI’s captive insurance section director its adequate operating performance, ll ‘grey list’ while the EU monitored government, remain completely focused representative David Faulkner, who also Jennifer Stalvey revealed. neutral business profile and appropriate compliance in matters related to on ensuring the continued success of presented the previous amendment The change will also remove the enterprise risk management. economic substance. our international business and finance to the Alabama Captive Insurers Act requirement for coastal captive Stalvey said: “2020 looks to be another centre and its role in the global economy. in 2016 sponsored by the Alabama coverages to be fronted through an impressive growth year for Tennessee’s The negative outlooks reflect the In order for the BVI to comply, the We believe there will be significant Captive Association. admitted traditional carrier. captive sector.” continued decline in capital and surplus Economic Substance (companies and opportunities for our territory and our at Lincoln Benefit, as well as its captive limited partnerships) Act was passed on people as we enhance our economic Under this bill, the significant changes Executive director of the Alabama TDCI commissioner Hodgen Mainda, reinsurer, Lancaster Re Captive Insurance the island in December 2018. substance yet further.” to the Alabama captive insurers act will Captive Association, Norman Chandler added: “The licensing of Tennessee’s Company, coupled with lower capital and include rethinking the use of branch said: “We are excited to present an 200th captive is a significant landmark surplus to liability ratio that is below its The BVI was also required to undertake Elise Donovan, CEO of BVI Finance, captives to allow multi-state and multi- industry-leading update to the Alabama because it is proof of how far Tennessee similarly rated peers. further work to define appropriate said: “We warmly welcome the statement national organisations to better manage captive insurers act that establishes has come in the relatively short time since substance requirements for collective of the premier of the Virgin Islands that their Alabama risks in Alabama. industry-first initiatives in branch our captive insurance regulations were Due to underperformance in its run-off investment vehicles. the EU has recognised us as a fully captives and will allow domestic, revised to make Tennessee more attractive operations beyond initial projections, the compliant jurisdiction for tax purposes.” The bill will also make capital standards foreign and alien businesses to insure to captive insurance companies.” company’s capital deteriorated. Following a thorough process of more reasonable and in alignment with their Alabama risks in an Alabama assessment, monitoring and dialogue, the “There has been a lot of work across other pure captives under the Alabama branch captive.” Since Tennessee’s captive insurance A.M. Best suggested that mitigating factors EU has removed BVI from its ‘grey list’. the public and private sector to get to law and expand the use of branch laws were revamped in 2011, the state include a new team with a strategic vision this important outcome and I wanted captives to other lines of business. He added: “The proposed changes has experienced significant growth in the for the company, with a plan that includes Commenting on the outcome, premier to thank all those involved for your will advance the State of Alabama in captive insurance sector and is now the supporting the liabilities and a suspension and minister of finance, Andrew Fahie engagement with this process.” Additionally, it will include the the captive industry and in economic seventh-largest captive domicile in the US, of dividends from the organisation to said: “I welcome the EU’s recognition codification of a formal dormancy development.” according to TDCI. improve its capital position that the BVI fully complies with its tax

8 Captive Insurance Times - Issue 193 captiveinsurancetimes.com 9 News Focus News Focus

Hippo forms captive as part of expansion plans

Hippo has revealed plans to form its own captive to participate in the risk and underwriting profit.

The new reinsurance structure enables the Hippo programme to broaden the footprint of the business and attract more customers.

The plans were announced as part of the introduction of a new panel of reinsurers to support Hippo’s plans for continued expansion this year.

The panel includes Arch, Markel, RenaissanceRe, TransRe and others, Bermuda returns to the EU’s ‘white list’ who reinsure the carrier behind Hippo’s largest programme. Singapore extends captive Bermuda has returned to the European Action Task Force assessment, Bermuda’s global industry associations, According to Hippo Insurance, the firm’s tax benefits Union’s (EU) ‘white list’ of fully together with Bermuda’s EU Solvency representing sectors ranging from re/ technology, dynamic underwriting and cooperative tax jurisdiction for the first II equivalence and status as an NAIC insurance, captive insurance, trusts and dedicated claims handling were “key time since 2017. reciprocal jurisdiction in the US.” family offices to asset management, all factors” in attracting the attention of The Singapore government has revealed year period until 2025. With the current echoed those comments and welcomed reinsurers to this panel. the Insurance Business Development scheme set to lapse on 31 March 2020, According to the Bermuda Business “Bermuda’s blue-chip transparency and the EU decision. (IBD) umbrella scheme and the IBD all new and renewal IBD scheme awards Development Agency (BDA), the private outstanding offering to global business Ken Brandt, TransRe’s president of captive insurance scheme has been approved on or after 01 April 2020 will be sector worked collaboratively with are second to none.” John Huff, president and CEO, global underwriting operations, said: extended until 31 December 2025. granted for five years. the government, along with the active Association of Bermuda Insurers and “Hippo believes that homeowners’ involvement of the Bermuda Monetary He added: “I thank Bermuda’s Reinsurers (ABIR), said: “The Bermuda insurance and protection can be As part of its 2020 budget, the The Monetary Authority of Singapore Authority, to implement reforms specifically government, regulator and all our Monetary Authority, Bermuda Finance improved through technology.” government said the extension has been said it will provide further details of the relating to collective investment vehicles. industry stakeholders for continuing to Minister, Bermuda government and put in place to support Singapore’s value change by May 2020. ensure Bermuda maintains its world- Bermuda business community once Brandt added: “By combining home proposition as an Asian insurance and The decision to move Bermuda onto class regime.” again demonstrate internationally- checkups with smart monitors, they reinsurance centre. According to a Deloitte report, insurers the ‘white list’ was made by EU finance recognised regulatory enforcement.” expect to reduce the number of serious will “welcome the extension of the ministers at the meeting of the Economic The EU blacklist was first introduced on events. We share that vision, and we are Under the current IBD-captive scheme”. and Financial Affairs Council (ECOFIN). 5 December 2017 as part of its efforts “From EU Solvency II equivalence, US pleased to support Hippo’s technology- insurance umbrella scheme, approved to clamp down on tax avoidance and Reciprocal Jurisdiction status, Financial enabled products and services.” insurers are granted a concessionary However, in a report, it suggested Roland Andy Burrows, CEO of the harmful tax practices. Action Task Force compliant anti-money tax rate of 10 percent for five years that some may have preferred that the Bermuda BDA, said: “This outcome is laundering regime and now EU Economic Assaf Wand, CEO and co-founder at on qualifying income derived from the duration of the award for the IBD scheme testament to Bermuda’s commitment to Out of the 92 jurisdictions initially Finance ‘white list’ designation Hippo Insurance, said: “As we expand to carrying on of onshore and offshore life has remained at 10 years rather than meet and exceed the highest international chosen, 17 including Bermuda, were recognising Bermuda’s solid work on EU even more homes across the country, a reinsurance, onshore. being reduced to five years. standards of regulatory compliance and added to the list. tax good governance and our economic diversified reinsurance panel ensures that economic substance.” substance framework, Bermuda’s our customers are protected in the most The extension will continue to allow Bermuda also featured in the EU’s robust regulatory environment is world- effective and cost-efficient way.” a 10 percent tax rate for a further five He added: “Combined with our world- ‘blacklist’ in March last year but was class.” leading achievements in the Financial later moved onto the ‘grey list’ in May. 10 Captive Insurance Times - Issue 193 captiveinsurancetimes.com 11 News Focus

Cayman Islands added to the EU’s ‘blacklist’

The Cayman Islands has been added to the of investment funds. Scott explained funds, which the government recently European Council’s revised conclusions that this was in response to an evolution introduced new legislation to address. of the EU list of non-cooperative in global regulations, primarily driven jurisdictions for tax purposes. by the EU and other global standard- Cayman Finance said it is confident setting bodies. that the country’s government will According to the European Commission, take all necessary actions to address the Cayman Islands does not have Scott said: “Just as approximately 30 any remaining EU concerns in a timely appropriate measures in place relating other jurisdictions were removed after manner to ensure removal from the list to economic substance in the area of taking the necessary actions, we look at the earliest possible opportunity. collective investment vehicles. forward to the same happening with regard to the Cayman Islands. In the Cayman International Insurance, In response to the European meantime, clients can continue to expect formerly IMAC, also indicated support Commission’s decision, Cayman the usual high professional standards for the Cayman Islands Government in Finance CEO Jude Scott said: “The from their Cayman service providers taking the necessary steps. Cayman Islands has had a track record that they have always received.” of meeting evolving global standards It said: “This technical listing does not and that is expected to continue.” Within the last year, a review impact or hinder Cayman Islands-based undertaken by the Organisation international insurers and reinsurers Scott added: “As an organisation, for Economic Cooperation and from supporting our clients and meeting we stand ready to work with the Development (OECD) of the Cayman their insurance needs.” government, as it sees fit, as it Islands’ domestic legal framework that cooperates with the EU to be removed includes economic substance, found “Internationally recognised standards from the list. We anticipate this that the Cayman Islands tax neutral for regulation will continue to be met decision will happen in the not too regime is not harmful and meets all and we are confident that recent distant future.” economic substance requirements. legislation passed by the Cayman Islands Government will be affirmed as The Cayman Islands Government The EU also came to the same meeting the required standards and will recently introduced modernised conclusion, with the exception of lead to our removal from the listing at legislation that enhanced the oversight the EU’s requirement for investment the next possible opportunity.”

12 Captive Insurance Times - Issue 193 News Focus VERMONT CAPTIVE INSURANCE OVER 1,100 CAPTIVES LICENSED

Risk management isn’t about

SIIA claims IRS settlement choosing better figures were ‘misleading’

The Self-Insurance Institute of taxpayers have agreed to participate thousands of captives remain in place next time. America (SIIA) has suggested that the and consider a settlement, but did not that are assisting America’s small and settlement figures released by the actually settle. medium-sized businesses to mitigate Internal Revenue Service (IRS) earlier important and real risk factors. this month are “misleading”. According to SIIA, those taxpayers can indeed settle, but also have the option As part of its ongoing work on behalf In September last year, the IRS mailed a to go to court. of the captive industry, SIIA has When you choose to domicile your captive in Vermont, you can be confident time-limited settlement offer for certain established the Captive Manager Code you chose correctly. With nearly 40 years of regulatory experience coupled with taxpayers under audit who participated SIIA said it understands that, to date, of Conduct, which provides a set of in ‘abusive’ micro captive insurance not a single captive has engaged in a ethical business conduct guidance to an unparalleled service provider network and legislative partnership, Vermont transactions. In early February, the final settlement agreement, and making captive managers. offers companies the sensible, secure and supported domicile they need. IRS issued IR 2020-26, revealing that such an announcement is “premature”. 80 percent of taxpayers who received In a statement, SIIA said: “While the IRS offer letters elected to accept the In addition, SIIA suggested the audit may remain focused on certain micro Connect with us and see why Vermont sets THE GOLD STANDARD. settlement terms. teams will most likely be looking at captive structures, it must do so in a other issues unrelated to the captive responsible and fair manner.” The IRS also announced the industry, not simply focusing on establishment of 12 audit teams to look captives themselves. “As the industry continues to grow, at certain captive structures. captive insurance companies remain SIIA revealed that while approximately dedicated to providing a needed risk However, SIIA stressed that the figure is 160 captive structures have agreed management structure for America’s misleading in that the 80 percent of the to consider settlements with the IRS, small businesses to grow and thrive.”

14 Captive Insurance Times - Issue 193

VTC001-20_Captive_Insurance_Times_Full_Page.indd 1 1/13/20 7:30 PM Insurtech Insight - By Maria Ward-Brennan Insurtech Insight

The rise of insurtech, a combination of But the latest technology is generally two words ‘insurance’ and ‘technology’, linked with the younger generation A window was recognised in 2010 following and with the captive insurance sector an initiative from the banking sector; currently suffering from a talent crisis, is ‘finance’ and ‘technology’ for ‘fintech’. the captive insurance sector missing out on what could help them prepare for the It mostly refers to the use of apps, present as well as the future? of opportunity big data, machine learning, and other transformative technologies to automate Footing the bill and improve processes across the insurance market – from marketing and Like any new initiative within a company, policy origination through underwriting, it needs a financial aspect to help support services, and claims. the idea. This is certainly the case for any sort of technological plans, as they As technology becomes more powerful, need to be trialled and tested while also so does the pressure for businesses to keeping security as a priority. keep on top of the trends and create technological programmes and products Discussing technological innovations that can be cost-efficient or advance their within the captive insurance sector, business lines. According to Willis Towers Rocco Mancini, vice president of Marsh Watson’s Q4 2019 insurtech report, what Captive Solutions, suggests the sector has been “clear for all to see is the uptick is rapidly evolving. He states: “Captive As technology advances, the pressure in investment over the past year”. service providers and a growing number of captive owners are investing in is on to keep up the pace, but with the The report suggested that global technological innovations.” ‘technology generation’ lacking in the captive sector - investment into insurtech had started to stabilise at approximately the $1.4 Also weighing in, Helga Viegas, director what changes need to be made? billion mark looking at Q4 2018 to Q3 of digital and innovation at MAXIS 2019, however, it showed that Q4 2019 Global Benefits Network (GBN), explains: “bucked the trend” as it reached an all- “We’re seeing a growing interest and time investment high of almost $2 billion. investment in technology innovations by the captive industry. Risk management is It found that 2019 also saw a 90 percent all about data, and technology provides jump in investment rounds that exceeded increasingly sophisticated tools to collect, $40 million when compared with 2018. combine, model and analyse data.”

16 Captive Insurance Times - Issue 193 captiveinsurancetimes.com 17 UNI_CB-67921-05 Captive_Ad.pdf 1 6/20/18 11:18 AM

Insurtech Insight

Viegas says that technology will also allow for further development as insurtech and She emphasises: “The best firms and captives to automate tasks like claims technology in general expands.” industries will find ways to continually management, accounting and administration. adapt to new technology while protecting What ﬁnancial challenges She argues: “New industries will bring their data. Cybersecurity is an industry unto She suggests that investing in technology new needs. Captives will be willing itself and what’s exciting is that insurtech innovation “is a no-brainer” for the and able to utilise data that comes can leverage the best security practices does your captive have? captive industry. from outside the traditional avenues. without having to recreate the wheel and That’s one of their strengths. I hope can instead focus on driving innovation and On the benefits, Peter Carter, head that the struggle to gain applicability solving challenges in the industry.” LIMITED COLLATERAL OPTIONS of captive practice at Willis Towers acceptance isn’t too prohibitive. That’s Watson, explains that the automation an industry challenge.” Meanwhile, Carter disagrees, of manual tasks will improve accuracy suggesting that technology solutions and efficiency. Mancini agrees with Soloman on the allow a firm to identify threats and OFFSHORE AND ONSHORE SOLUTIONS sector not being behind in terms of vulnerabilities more effectively than He says: “Installing the latest technology innovation as he believes that the captive traditional approaches and so develop will allow firms to run analytical algorithms industry is one of the nimblest segments appropriate mitigation strategies. and data science projects to optimise the of the insurance industry. TREASURY MANAGEMENT OPTIONS use of the captive and manage risk more He says: “Technology is part of the solution C efficiently/effectively.” He adds: “The nimbleness of the captive to cyber threats, not the problem.” M insurance industry creates an ideal and SOLUTIONS IN ALL MAJOR DOMICILES Supporting Carter’s comments, Laurie innovative environment for not only Time for school Y

Solomon, strategic advisor at LineSlip piloting captive specific technology CM Solutions, explains that new technology innovations but also technology It is normal for a business to change and MY adoption will “drive speed, accuracy, data innovations that have implications for the adapt to keep up with the latest trends CY quality, data roll-up, decision-support, insurance industry as a whole.” of the world, however, technology has improved collaboration and security” for changed so rapidly over the last 15 years, CMY a company. The dark web it can be hard for companies to keep the K same pace. However, Viegas maintains that it’s not As advantages of technology about stating the benefits but more a become greater so does the risks One reason for the falling behind of If you don’t think a bank can help your captive insurance company navigate case of survival. of cybercrime. Mancini says that some firms is the lack of education through captive solutions, maybe it’s time to bank differently. cybersecurity will always be a leading around new technologies. Viegas She highlights that “technology has reason that companies stray away from outlines that first, captive managers Want a At Comerica, we’ve become the Leading Bank for Business by providing the great potential of reducing the cost implementing the latest technology. need to be invited to look at what’s little advice? more than just banking basics, because we’re not just business bankers. of providing a product or service and However, he suggests that these happening beyond their organisation. We’re business advisors, here to help plan, guide and consult. also improving it. Combined with great concerns “should not stop people Ask the As one of the few banks with a dedicated captive insurance banking team, people who can implement and use the from at least discussing and exploring Viegas suggests that attending Leading Bank our advisors are here to help businesses lower their costs by owning their technology to its maximum potential, it’s these technologies”. conferences and events to hear * own insurance company. a winning formula”. directly from the innovators as well as for Business. Exploring innovative technologies collaborating with others in the industry To protect your bottom line, move beyond basic banking. She stresses that “businesses need can create opportunities to perform a is important to keep up to speed. Learn how, with the Leading Bank for Business at comerica.com/captive. to implement technology and invest in full review of the firm’s cybersecurity up-skilling their people to survive in a practices and standards, which Mancini She continues: “By speaking to trusted competitive environment”. believes “can only help to improve suppliers and consultants, asking them cybersecurity and to reduce the risk of about the latest developments, the most Keeping on trend cyber breaches”. interesting projects and the innovations they’re seeing in the market.” Although insurance industry experts Soloman thinks “it’s an important believe the captive industry is up to speed consideration”, but points out that Collaborating with innovation labs ® with the latest technology, Soloman technology and innovation are not going and venture capital arms, speaking to suggests that there’s “a huge opportunity to stop due to a fear of ‘what-ifs’. scouts, seeing how new ideas are being RAISE YOUR EXPECTATIONS. MEMBER FDIC. EQUAL OPPORTUNITY LENDER. * Comerica ranks ﬁrst nationally among the top 25 U.S. ﬁnancial holding companies, based on commercial and industrial 18 Captive Insurance Times - Issue 193 loans outstanding as a percentage of assets, as of March 31, 2018. Data provided by S&P Global Market Intelligence. CB-67921-05 05/18 Insurtech Insight

incubated outside and brought into larger talent crisis among the captive insurance insurtech, consultants and suppliers, the organisations is also important, she adds. sector, a view of having a younger awareness around tech innovation is now generation working in firms would help higher than ever in the industry.” Additionally, Viegas notes that reading advance technological innovations. about technology innovations, new Viegas argues that captives are in a better products, services and case studies, Mancini anticipates that the pace of position to innovate than large insurance not only within the captive industry innovation will increase significantly by companies, “as they are smaller and itself but also in other data-heavy having young people enter the sector. generally have been around for less time”. sectors like healthcare, broader financial services, transportation, technology and He says: “Young emerging talent from She adds: “As long as they invest now communications is important. a digitally native generation will bring a in up-skilling people and recruiting new new perspective, however bringing a new talent and commit to exploring promising Soloman maintains that companies perspective will not do anything unless technologies, they are well set for need to be open to change as well as that perspective can be shared throughout adapting to future tech trends.” being curious about new ways to tackle the industry.” industry challenges. According to Carter, data and technology The captive insurance industry can both “will mean the discipline is more attract and retain new talent by actively seamlessly integrated with broader risk communicating with young emerging management solutions”. “The PCC is also talent and by working to understand their appealing to some perspective, he notes. He explains that the “skillset within the industry will shift from being predominated business owners Actively asking young emerging talent by skilled technicians and CPAs to for their perspective on innovation, technologists and data scientists”. that may want to get according to Mancini, “can add autonomy their feet wet in the to their role while also aligning them with Mancini foresees one of the most interesting the company’s mission, which is two changes in five years’ time will be the rise captive insurance critical aspects in attracting and retaining of captive programmes that were simply industry by first these individuals”. infeasible before technological innovations were implemented. participating in a cell Soloman adds: “There is such a window of opportunity right now for those who He explains: “In the past five years, of a sponsor’s PCC” can bridge the gap between ‘how it was’ technological innovations played a role and ‘how it could be’. Young talent is in enabling new commercial captive used to digital-first solutions and using programmes, where the captive writes data to drive decisions. These folks will third party risks, and this trend will She suggests that they should engage demand innovation when they see today’s continue with new, unique captive with insurtech vendors in order to learn insurance processes.” programmes emerging over the next five what’s out there. years as more technological innovations Swiping right on the future become mainstream.” She adds: “There’s no risk to seeing a demo or asking for more information. In the next five years in terms of Soloman adds that there’s no doubt When it comes to technology adoption, innovation within the captive insurance that the use of AI and data analytics will they shouldn’t be afraid to take calculated sector, Viegas believes that the industry absolutely become commonplace. risks as this is the only way that we will will be seeing more innovations. be able to learn and advance innovation.” “These technologies will make risk- She notes that “a large driver for that is taking decisions faster, more accurate Millennials are known to be very good at the current surge in publicity and media and more efficient. I definitely believe using technology along with Generation coverage for hot concepts like artificial that captives will be doing amazing Z, who grew up with new and advanced intelligence (AI) and blockchain. Combined things with data that seems like technology at their fingertips. With a with the interactions we’re seeing with fantasy today.”

20 Captive Insurance Times - Issue 193 Market Update - Maria Ward-Brennan reports Market Update

What are the current hot topics in the Crabb: There’s an increased interest in the broaden our capability for UK, European lines. A number of Lloyd’s markets have captive industry? South American market, such as Columbia and International customers. cut back on lines and products that and Argentina and how we can help them historically used to reinsure people from Steven Crabb: At Davies, we are already with captive creations. As we enter or already entered a Canada, Latin America. Even if you have tapped into the cannabis risk opportunity; hardening market, how do you a captive you still have to have reinsurers Nick Frost has been to Canada a few times Frost: All geographical locations, are expect captives to perform? to reinsure you. They are more likely to to talk to potential clients there. The price seeing their premiums increase even to reinsure you if you take risks yourself. If of regular insurance for those businesses is companies with excellent loss experience. Frost: Very well, this is the best market for a you are taking risk, they know you are expensive so we are seeing this as a strong Losses don’t substantiate the rate captive. With hardening prices captives will going to manage it properly; reinsurers opportunity for our captive management increases and consequently, they are inevitably be used to a much greater extent. It would rather offer you their capacity if you solutions business. looking for captives, which is where has been a long time waiting, and we expect have a captive and participate in the risk. we specialise and are able to offer our it to grow with the hardening of the market. Nick Frost: Captives and cannabis risk is expertise and experience. Crabb: There are people offering these an important item in Canada and the US at What advice would you give to captive reinsurance products now which are specific the moment. What themes are you currently owners during a hard market? lines of business, however, there are less of seeing in the captive them and it is becoming more expensive. Turning to captives, both reinsurance and insurance market? Crabb: Captive owners are buying fronting are huge topics - more businesses regular insurance and they are buying So do firm’s domicile in Bermuda all over the world are turning to captives to Crabb: The theme we are thinking of as some insurance from their own captive because of its large insurance market? help manage their insurance risks and in a group at Davies is how we increase due to regular insurance becoming more most cases they need fronts and in all cases, our service offering to become more expensive. If in four years’ time, as regular Frost: Yes. Bermuda has excellent depth they need reinsurance to limit their maximum valuable to our clients. We are domiciled insurance becomes cheaper, people will as a reinsurance sector, along with London exposure. There are a limited number of fronts for captives in Bermuda and the US and use captives less and will start to buy and New York – no other jurisdiction has and reinsurers of captives in the marketplace are assessing where else we should have normal insurance again. I don’t think that’s reinsurance capacity to the same scale. so the ones that get in first with a good a platform to continue to respond to going to happen in the near future. business plan will get the best deals. our customers better. So that could be And they know captives, so it’s very easy Guernsey, Gibraltar or it could be Malta. What do you think are the biggest for us to set up a captive and reinsure in Most fronts and reinsurers specialise in challenges the market is facing? the Bermuda market different lines so if a business needs a captive We are quite interested in those three Movin’ on up it is a good idea to speak to someone like areas because there are three different Frost: I think the biggest challenge is Sam O’Shaughnessy: Bermuda is seen Davies to help navigate and introduce them to nuances of regulations, which would finding insurance/reinsurance for particular as a one-stop-shop, you have your the appropriate people to help them achieve Steven Crabb, Nick Frost their goals.

and Sam O’Shaughnessy of There was a record attendance at The Davies Group discuss the World Captive Forum this year because the insurance rates are firming for the first time current view of the captive since the 80s and there is a lack of capacity. insurance sector along with Many people in the industry do not remember those times. When the market price gets hard, If in four years’ time, as regular the firm’s plans for 2020 businesses look to captives – Latin American insurance becomes cheaper, people will use countries, in particular, are increasingly looking towards captive options and US and captives less and will start to buy normal Canada are finding that capacity for certain insurance again. I don’t think that’s going to lines of business has shrunk and they need a captive to fill in the gaps in coverage. happen in the near future

I have heard horror stories in Canada and the US where companies on renewal are getting Steven Crabb 50 to 200 percent rate increases even if their CEO losses are good. These are ideal for a captive. Davies Insurance Services

22 Captive Insurance Times - Issue 193 captiveinsurancetimes.com 23 Market Update

From a captive perspective, we will be doing more business in the US and Canada and spending more time building out our Latin America client base

Nick Frost President Davies Captive Management

reinsurance available together with captive in the supply chain, they find it really Frost: From a captive perspective, we will legislation and expertise. tough to find insurance, so we’re hoping be doing more business in the US and to respond and to get them some good Canada and spending more time building What would you say are the biggest insurance products. out our Latin America client base. opportunities for the market this year? What plans does your firm have in Crabb: It is a huge focus for us this place for 2020? And what are you year, the acquisitions we made last year Crabb: Non-standard risks, like cannabis, hearing from clients? boosted our presence in the US. We’re are an opportunity for risk managers to looking to build on that this year and respond properly with the captive idea. Crabb: Our overall group is very focused on get all the services going in the adjacent This is a big issue for businesses who the US – we are looking to expand in the US. spaces to captives. are involved in the cannabis industry. We want to try and get a situation where we Not necessarily the people selling it in have a full-service group. So anyone involved There are other services in risk and the shop but the people who transport it, in the insurance industry, we should be able consulting that we think we could respond people who finance it, people who work to provide a full set of services to them. to and help our customers better.

Bermuda is seen as a one-stop-shop, you have your reinsurance available together with captive legislation and expertise Sam O’Shaughnessy Vice president Davies Captive Management

24 Captive Insurance Times - Issue 193 Emerging Talent Emerging Talent

Dale McCann Vice president of captive insurance Comerica Bank

Personal Bio: I currently reside in Southeast Michigan. My days outside of Comerica are spent with my wonderful wife and two children. I spend the Michigan autumn and winter coaching my son’s hockey team, while still also playing competitively. Spring and summers are spent on the golf course or travelling up to the beautiful inland lakes of Northern Michigan – a hidden gem of America.

Professional Profile: I attended Western Michigan University and received my Bachelor’s in business administration with an emphasis on finance. Directly after college, I started within Comerica trust operations where I worked the first eight years of my career. After reaching my personal goals within operations, I was eager to move to the client-side within the institutional trust (employee benefits) department of Comerica. There, I was captivated by the growth and energy coming from our captive insurance team. I set my sights on moving into a relationship manager role within our captive insurance team.

How did you end up in the captive What has been your highlight in What/who have been your influences “The insurance industry as a whole industry? the captive industry so far? in the captive industry?

After learning the securities operations First and foremost, the people within Comerica Bank is a well known full- has always been fascinating to me – so side of trust and then moving to client the captive industry are unbelievable. service bank integrated within the captive side, I was fortunate enough to partner They are welcoming, knowledgable and industry. Being a full-service bank with a wonderful mentor at the bank, understand the importance of what a provides me with the opportunity to work what better way to start than providing Randy Browning. He taught me the bank brings to the bigger picture within with internal departments within Comerica right way in how to be a successful the captive industry. Who can’t forget, on a regular basis, one specifically being relationship manager. Combined with many of us have the opportunity to travel our captive lending team. Every individual that, the insurance industry as a whole to beautiful places onshore and offshore. within that team has positively influenced banking solutions to the captive has always been fascinating to me – so me in one way or another over the past what better way to start than providing few years. It has been an absolute banking solutions to the captive insurance pleasure working with them and I look insurance industry” industry with the products and services forward to how we can collectively impact Comerica trust has to offer. the captive industry moving forward.

26 Captive Insurance Times - Issue 193 captiveinsurancetimes.com 27 Emerging Talent

“Dale has been a tremendous value add to the captive insurance team within our trust department. His operations knowledge mixed with his dedication to client service has been instrumental in the growth of our captive business. We will continue to count on him to build his knowledge and become an expert in the captive industry.”

What is your impression of the industry?

Through my first few years within the captive industry, I can clearly see that the landscape is constantly changing. 2 0 2 0 V I S I O N : There always seems to be a new focus within the industry, whether that is Focusing on Your Captive an emphasis on Foreign Account Tax Compliance Act, tax reform, economic substance – you name it.

What are your aspirations for your career in the captive industry? May 18 - 20, 2020

Having worked in Comerica trust for a number of years, the transition to the Salt Lake City, UT captive team gave my career a resurgence and a new meaning. I feel Comerica is an elite full-service bank within the captive industry and we are able to provide banking solutions to all. That said, I would like to be a large contributor in the continued pursuit of Comerica Bank being the top banking service provider Martin Ellis within the captive industry. Senior vice president, Learn more at global and captive What advice do you have for someone considering a role in insurance group the industry? Comerica Bank w e s t e r n c a p t i v e c o n f e r e n c e . o r g You must be agile in this ever-changing marketplace, as there will always be a new challenge!

28 Captive Insurance Times - Issue 193 Industry Events

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30 Captive Insurance Times - Issue 193 Industry Appointments

The latest moves in the captive industry

AXA XL has appointed Scott Gunter as the new CEO after Greg Hendrick steps down from the role to take on other opportunities outside the company.

Gunter will also join AXA’s management committee and report to Thomas Buberl, CEO of AXA. Michael Corbett is set to leave the the State of Tennessee in establishing Previously, Gunter worked at Chubb Group Tennessee Department of Commerce the captive insurance market and making as senior vice president and president and Insurance (TDCI) and will join Tennessee a top tier domicile for the of Chubb’s North America commercial Pinnacle Bank as senior vice president, industry. I am now returning to the private insurance division. effective 16 March. sector to continue the work of promoting Tennessee as a gold standard domicile.” Commenting on his new role, Gunter Michael Corbett is set to leave the said: “I am very happy to join the AXA Tennessee Department of Commerce He added: “I wish all my colleagues Group and look forward to working and Insurance (TDCI) and will join good luck and good fortune at the TDCI with AXA XL’s teams to accelerate its Pinnacle Bank as senior vice president, and I look forward to seeing many of development. Together, we will leverage effective 16 March. Corbett, who them at industry events throughout the our unique position in the market and our worked as the director of TDCI’s captive year. I leave the captive section with a recognised expertise to make AXA XL the insurance section since 2011, was deep and broad bench of very talented best global commercial lines insurance recently named to the newly created captive insurance company analysts partner for its clients.” director of business development of and examiners led by two very talented TDCI’s insurance division. captive regulatory and examination Buberl added: “I would like to warmly directors: Jennifer Stalvey, director and thank Greg Hendrick for his leadership in Prior to joining TDCI, Corbett developed Cathy Gray, assistant director.” managing the integration of XL over the an institutional financial consulting past two years and building the new AXA practice at a brokerage house that Kevin Doherty, president of the Tennessee XL division, which is today a solid and well- focused on captive insurance companies. Captive Insurance Association (TCIA), positioned franchise.” said: “On behalf of the TCIA, we wish to Corbett was also a member of the congratulate Corbett on his many years “I am very happy that Scott Gunter is Vermont Captive Insurance Association’s of service within the TDCI and wish him joining AXA. Gunter brings over 30 years (VCIA) finance committee and served as much success in his new role. Tennessee of experience, a strong track record in its chairman. captives would certainly not be where commercial insurance and underwriting they are today without his hard work. We and profound knowledge of the North Commenting on his departure, Corbett welcome his continued expertise as he American market.” said: “It has been my honour to serve transitions into the private sector.”

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