Full steam ahead

What are your predictions for the captive insurance industry in 2018?

Travis Wegkamp
Captive director
Utah Insurance Department

Though the soft insurance market persists, I feel the current optimistic outlook on the US economy, as evidenced by strong gross domestic product growth and record stock market gains, will result in increased interest in captives for companies seeking an alternative risk financing approach.

Additionally, now that the industry has weathered through the first year of implemented the Protecting Americans from Tax Hikes Act changes, with those issues sorted out and adjusted too, we’ll begin to see more robust growth in the smaller captive market, perhaps not like in years past, but positive growth nonetheless.

Debbie Walker
Senior deputy commissioner
North Carolina Department of Insurance

The 2018 outlook for the captive insurance industry in North Carolina is bright. We anticipate that businesses of all sizes will continue to utilise captive insurers to manage risks. Federal tax reform measures and the activities of the Internal Revenue Service, such as the Avrahami case and the Notice 2016-66 disclosure requirements, have resulted in some companies making the decision to discontinue their captive insurer or not to pursue the formation of a new captive insurer. However, as more companies learn about the benefits of captive insurance, it is expected many will decide that captive insurance is a useful risk management tool to address their needs. Finally, we predict businesses and their advisors will seek new ways to use captive insurance. For instance, continued growth in captive insurers formed by employers to address employee health benefit costs is anticipated.

John Talley
Captive programme manager
Missouri Department of Insurance

This year, we expect to see a steady growth in captive formations and redomestications. In the heartland of the nation, Missouri’s two largest cities, St. Louis and Kansas City, are the hubs for some of the largest businesses in the US.

Additionally, Missouri is one of the states that enjoys a large agribusiness economy. We are expecting new and continuing growth from these areas.

Carl Culmer
Deputy manager
Policies and Practices Unit
Insurance Commission of The Bahamas

The Bahamas’ legislative and regulatory environment remains robust in facilitating the needs of new captive insurance companies. At year-end 2017, the captive industry experienced a year-on-year increase in both licensed and registered captive entities operating from within The Bahamas. During 2018, we anticipate sustained growth in the number of segregated accounts, or ‘cell captives’, as the cost structure for these entities are more favorable than operating a standalone captive. Additionally, we envisage modest growth in the international small- and medium-sized enterprises (SMEs) establishing standalone captives in the jurisdiction.

The captive environment in The Bahamas continues to be supported by a public/private partnership between The Bahamas Financial Services Board (BFSB) and the Insurance Commission of The Bahamas. BFSB’s role is instrumental in promoting the jurisdiction as a competent and competitive captive jurisdiction. The commission supports the captive industry by streamlining the application process and maintaining a robust regulatory and supervisory framework which meets international standards.

It is envisaged that this relationship will continue into 2018 with special emphasis on attracting international captive insurance managers that effectively bridge the risk and reward gaps under-utilised by SMEs. As a result, we envision an increase in the number of captive insurance managers domiciled within The Bahamas to facilitate the growth in both standalone captives and segregated accounts.

Ian Davis
Director of financial services Vermont Department of
Economic Development

Cyber continues to be a very topical issue at the moment, with 2017 seeing an abundance of high profile data breaches and cyber attacks.

As companies’ reliance on technology continues to grow, the scale and impact of these events will inevitably increase as well. In Vermont, we have convened working groups, are conducting market research and are working towards positioning the state to be at the forefront of regulating these new and emerging risks.

For example, last year the staff of the Captive Insurance Division and other members of the Department of Financial regulation included cybersecurity training sessions as part of their annual continuing professional education requirements and cybersecurity considerations are now emphasised in our examination programmes.

In 2018 I expect that we will continue to see companies expand the use of their captive programs to account for these exposures, and Vermont’s captive industry remains well positioned to support those efforts.

Do you have anything exciting in the pipeline?

Missouri: We have been in discussions with several captive managers, corporations and insurance brokers that have expressed interest in formation of new captives in the state and redomestication of existing captives to Missouri. We are looking to these conversations to come to fruition in 2018.

The Bahamas: In December 2017, The Bahamas Government passed the Commercial Enterprises Act, which is designed to encourage international persons to establish a domestic presence as a specified commercial enterprise. The captive insurance and reinsurance industry, amongst other industries, were specifically named in the legislation as areas of economic interest. The legislation is intended to provide economic incentives for investment in approved business undertakings. This legislation, demonstrates the government’s commitment to expand areas of industry and trade within The Bahamas generally, and specifically, to further evolve The Bahamas’ footprint within the captive insurance space.

The legislation also seeks to liberalise the granting of work permits to international investors desirous of establishing a specified commercial enterprise within The Bahamas. From this initiative, it is envisioned that The Bahamas will see a resurgence of material interest within the captive industry over the next few years. Furthermore, it will allow SMEs to yield the benefits of the synergies that exist between the insurance market and other financial services providers that aid in the development of innovative products and services. More information on captive insurance in The Bahamas can be found at www.icb.gov.bs.

Utah: We will continue to make improvements to our online forms and applications, as well as provide additional online resources accessible on our website at insurance.utah.gov/captive, but otherwise nothing big planned for the captive industry in Utah at this moment.

Vermont: Vermont’s captive insurance industry is off to a great start in 2018. In terms of new licensing activity, we have already licensed three captives in the first two weeks of this year and expect that momentum to continue. We are also extremely excited to welcome home University of Vermont Health Network’s captive insurance company from Bermuda, a move that underscores Vermont’s position as a global leader in the industry. Vermont’s reputation of offering a predictable and stable regulatory environment for captive insurance continues to make the state an attractive alternative to offshore jurisdictions.

This year Vermont Captive Insurance will also be unveiling a new marketing and communications plan, refreshed brand and new website. The goal is to revitalise our messaging, look and feel which will in turn help support all aspects of our marketing approach. These enhancements will reflect not only who we are, but where we want to go. Stay tuned!

North Carolina: Commissioner Mike Causey obtained funding for three new analyst positions during the 2017 legislative session. As a result, we hired three experienced insurance accounting professionals to fill those positions. With the additional staff, we are able to continue our appropriate regulation of North Carolina captive insurers and responsive, timely customer service to the North Carolina captive insurance industry. During the first weeks of 2018, we are diligently working to complete our evaluation of pending captive insurer applications filed at the end of last year. As we have in the past, staff will be attending and exhibiting at the World Captive Forum, the CICA 2018 International Conference in March, and RIMS 2018 Annual Conference and Exhibition in April 2018. In addition, we will be participating in other national, regional, state, and local state captive events, including the North Carolina Captive Insurance Association 2018 Annual Conference, 20 to 22 August, 2018 in Charlotte, North Carolina. Last year was a successful year for the North Carolina captive insurance industry, and we anticipate continued growth in large and small captive insurers as well as growth in the development of the captive insurance service provider industry.

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