Zurich Insurance Company Ltd
An early start with Fred Reiss gave Steve Bauman the captive bug.
He tells CIT about his beginnings in the industry
You’ve been at Zurich for five years now—how have you seen the company’s captive strategy develop?
When I came to Zurich five years ago, I came in to an organisation that had been working with captives for more than 20 years already, both in the single parent side and the group side, so there was already a strong history of servicing captives. My role was to further develop our services and commitment to our global corporate clients and their single parent captives, help them use their captives even better, and generally to make Zurich more captive friendly. Now we’re providing captive services to more lines of business, including life and disability and pensions—and we’re working with our clients on new and innovative captive products, as well to advance the coverage and services that Zurich provides to our clients. It has been an exciting five years, and I’m really pleased with my time spent here.
What sort of captive team do you have at Zurich?
On the single parent side, we’ve got a group, including myself, and my team out of Schaumberg, Illinois, and also Zurich regional shared services around the country that we use, but the shared services are not exclusively single parent captives servicing. We also have a larger group situated in Schaumberg that does group and agency captive business, and then we have other groups in the US that do programme business, as well as European and Asian counterparts that do captive servicing around the world. It’s an extensive group, a great infrastructure of people working on captive programmes around the world, and I think that’s one of the things that makes it really exciting within the organisation.
Do you have a typical customer?
We really don’t. Zurich is fortunate in that we have the ability to work with any type of customer, anywhere in the world, providing nearly any type of coverage, within captive utilisation. I personally work extensively with single parent captive clients, our largest kind of corporate clients, but as I mentioned, we have another group doing group captives, people working with agency captives, and cell captive structures as well, so we’re truly global with all our captive capabilities. We work with captives in all of the major domiciles around the world, and are truly domicile neutral.
To what extent do customers understand captives and has this improved in recent years?
I think that there’s so much more knowledge around captives in the marketplace now and so many more companies are getting into using captives. Growth has been encouraging and I’m really encouraged by the continual development of captive domiciles around the world. I’m encouraged by the fact that captive utilisation is definitely trickling down to small companies. Whereas 30 years ago it used to be just the biggest corporations in the world that had captives, now it’s trickling down into smaller companies, which are middle market-type businesses and large family businesses. I think that it’s a great development in the marketplace that there is so much growth and knowledge and expertise out there.
Are there any domiciles that you would tout as future competitors?
I think that the competition among domiciles is actually healthy. There has been tremendous growth in the US, with more than 30 states or territories now having captive laws—a big difference from 30 years ago, when there were only three or five. It’s been a pro-growth promotion of captive utilisation: innovative and entrepreneurial, so I think that the growth in domiciles has really enhanced the industry.
What are some of customers’ recurring concerns around their captives?
A main concern for our clients and their captives are the growing regulatory issues that they are facing around the world. Issuing policies globally has become a more complex and complicated process, with constantly evolving regulations, and that’s where we’re able to help our clients and our captives. Zurich has a global infrastructure that helps captives, where we issue local policies to captives and provide funding services, and that has evolved over the years to become more complex.
Another major concern has been security and stability in the marketplace. Zurich is very strong financially and we’re able to help and provide that support to our clients and their captives. Leading on from that, collateral is always a major issue around captive programmes and Zurich has been able to provide some really good flexibility around collateral requirements.
We have the flexibility to do all sorts of collateral provisions. We work with LOCs (Letters of Credit), which have been an old standard for captive programmes, but more recently, trust programmes that have been put into place are proving popular. We work just as comfortably with LOCs as we do with trusts, with flexibilities around setting up different step-up provisions as the programme may warrant, and we can also share collateral among programmes, as in integrated programmes, which can be an important flexibility for clients.
What sort of captive services does Zurich provide?
The main services that Zurich provides are fronting services, with the ability to provide local policies and services around the world, in more than 180 countries. Additionally, we provide expert claims handling around the world, and reinsurance and risk transfer support for all types of captive programmes. We also have great engineering services that we provide to our clients, as well as some newer products, for example, a captive operating dashboard that we’ve been working on with a few of our clients, which has some nice potential.
QRA takes into account Solvency II requirements—what are your own and your customers’ feelings on the directive?
We were providing our QRA (Quantative Risk Analysis) process before Solvency II came about, but it does lend itself to issues surrounding Solvency II and the additional regulatory issues that Solvency II provides on captives. Customers need to be ready to adhere to the new directives, and those that aren’t prepared aren’t going to be in a very good spot. But it’s an opportunity for those that are prepared. Our customers that are working on it will likely be prepared, and Zurich as a company is prepared, and we think that’s the best way to tackle this.
What do you think about domiciles such as Guernsey refusing to seek Solvency II equivalence?
I think that all captive domiciles have the right to govern captives as they see fit. The competition between captive domiciles has made this a better industry and companies have great choices now when it comes to captive domiciles, whether around the world or within the US. Guernsey is a good choice as a captive domicile, we do a lot of business with Guernsey captives, but there are a lot of other good choices. Domiciles should do as they see fit.
How was your time at Aon?
I enjoyed my time at Aon. I also worked at Marsh for some time and liked my time there too. I especially enjoyed it when I started in this industry, and was working for the Fred Reiss Organisation. Fred Reiss was known as one of the founders in the captive industry, and he was one of the real early purveyors of captive insurance, and that’s where I got the captive bug.
The Fred Reiss Organisation actually became part of Aon; in 2001 Aon had bought the remainder of the organisation. But no matter where I work, I love working with captives. I’m always encouraged by the continued sense of innovation and entrepreneurial spirit in the sector, and even though Zurich is a large company, we’ve retained that flavour. We’ve been working with captives for more than 20 years, but we still work with our clients and our captives in a true partnership format, and in a very tactical and inventive way. It makes it fun and profitable for all of us.
