Is it time your captive had a checkup?

There has been some press lately about the IRS auditing enterprise risk captives. The IRS has definitely increased its scrutiny of captives over the last few months, and more than a few captives are currently experiencing audits.

For most enterprise risk captives, this shouldn’t be a problem. Certainly, it’s always stressful to have the auditors looking over your shoulder, but when they’re set up properly, enterprise risk captives operate like any other insurance business, under a series of well-defined laws and regulations that dictate exactly how they should operate. Uphold and maintain the spirit of captive, follow the letter of the laws, and you should pass an audit without any difficulty.

What happens in an audit?

One of the most critical aspects of the enterprise risk captive that the IRS is looking at involves the nature of the captive – is it a legitimate risk tool built for the purpose of insurance, or is it something else?

The IRS will also look at the kind of insurance coverage the captive provides to make sure the insurance is necessary to the business, and they’ll want to know about the integrity of the risk distribution that supports the captive. In short, they want to see a duck that looks like a duck, walks like a duck, and quacks like a duck. They’ll ask for all the paperwork, accounting support, and legal documents you’ve got, and they’ll probably give your accountants and lawyers a run for their money and yours for a few months.

Should you be worried?

At Intuitive, we spend a lot of time and energy in the discovery phase making sure that a business is right for a captive and that the captive is right for the business. Before we ever begin underwriting, we know that a captive is a good and viable option for the company we’re working with. We spend an equal amount of time and energy getting all of your ducks in a row when we’re setting up the captive. We’ll pull all the paperwork together, all the legal documents, and every bit of information a company might need if they were ever to be audited, and provide the company’s officers with all of this documentation (we keep a copy, too) and then we set about the task of keeping the documentation current quarter-over-quarter, year-over-year.

We also maintain a risk pool that is the best in its class. To get more information about it you can either give one of our partners a call, or read what they have to say about our management philosophy and our risk pool.

If you’re at all concerned about the status of your enterprise risk captives, please call us. We have professionals on staff who can evaluate your captive and provide you with feedback on how it’s been set up and maintained. We’ll do this free of charge and with no obligation. We want to help you avoid problems down the road, and start a conversation about best practices in the industry. A rising tide lifts all boats, we’re here if you need safe harbor.

Chicago skyline

Keeping an Eye on Tax Loopholes

John Stewart once quipped on his show, “Let’s say you’re the present governor of Illinois, and you’re in a room with a former governor of Illinois on your right, and a former governor of Illinois on your left…chances are, the room you’re in is jail.”

Recently, more than a few lawmakers and business owners in Illinois would have liked to put Gov. Pat Quinn in a holding cell after a minor change in the state’s laws that govern insurance taxation were slipped past the Illinois House and Senate.

The law in question, which was thought to be a small amendment to an existing law, creates a loophole that could apply state tax rates to payments to wholly owned captive insurance subsidiaries beginning in 2015 at a cost of almost $100 million a year to Illinois-based businesses like Boeing and United/Continental Holdings, according to Crain’s Chicago Business.

With all the best intentions

The original intention of the bill was to target the premium tax paid by brokers in Illinois who arrange surplus lines of insurance, but the language created the possibility that the state could look to captive holders for as much as 4.6 percent of tax on premiums. Here is a very good explanation of how the law is worded from InsideSalt.com.

A letter signed by all 47 of the republican members of the Illinois House demanded a resolution to the issue, but it’s not likely to happen before the tax could be imposed next year.

Should lawmakers have read the fine print prior to voting for the amendment? Possibly, but the administration should have been more forthcoming about the potential impact of the bill. Most agree that the impact to captive owners had never been raised in formal meetings about the bill, and it would have taken a keen-eyed staffer to identify the loophole.

Looking to 2015

Illinois lawmakers and businesses will continue to put pressure on Gov. Quinn to not sign the bill, but the case reminds us how important it is to keep current with laws that regulate the insurance industry.

We maintain a close watch on laws and regulations in each state that we serve, and keep up with federal regulations, too. This particular law in Illinois is a glaring example of what can happen when lawmakers are careless, but illustrates that even small alterations to existing rules and regulations can have a big impact on our clients.

We’re hopeful that the issue in Illinois will be cleared up, and that Gov. Quinn has better luck than some of his predecessor in the Governor’s seat in Illinois. In the meantime, contact us if we can help you with your enterprise risk captive.

 

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Business Travel Abroad

Is your company entering a new market? Are your employees going to a conference in an unusual destination? Making sure your employees are safe when they travel abroad can sometimes be as easy as making sure their passports are in order, but depending on where employees are going in the world, you may need to begin planning months in advance to get them there and back safely.

Resources for Americans Traveling Abroad

Before you purchase tickets, take a quick look at the State Department’s Bureau of Consular Affairs website to check your destination, read about passport restrictions (will your passport be valid from the time you leave through the time you return?) and find out about personal safety and health issues in the country or countries you’re visiting.

The site is a fantastic resource to anyone traveling, and it’s a very good idea for employees who aren’t used to international travel to really take a look at the site and understand some of the issues it brings up. For instance, you’ll need vaccinations if you are visiting certain countries, and some vaccinations require a full course of shots that can take a few weeks or even months, so be sure you understand these restrictions before booking a ticket. You will also want to check the political and safety situation in your destination country.

The state department site can help you locate help if you’re already abroad and something happens – you lose your passport, or get into trouble with local authorities. It’s a very good idea to know where the U.S. Embassy is when you’re traveling.

Employer responsibilities for traveling staff

When your staff or senior executives are traveling on behalf of your company, visit The Overseas Security Advisory Council (OSAC), an public-private venture that was created specifically as an extension of the U.S. Department of State to help U.S. private sector interests worldwide. The OSAC was launched in 1985 when CEOs from U.S. companies sought to promote a better relationship between the State Department and U.S. businesses abroad. Now, the agency has more than 4,700 companies and educational institutions as members. If you’re planning extensive travel, you can become a member, or you can use the site as a resource for news and events. If employees will be overseas for a while, particularly in countries where there could be unrest, it’s a good idea to be networked with other American institutions and government agencies.

Personal Security

Hiring a personal security guard or detail is sometimes recommended for staff travelling to countries where there is a great deal of political unrest and/or kidnapping.  It can be a difficult process to look for and find reliable companies, so it’s important to network with other companies with established businesses in the region, or get recommendations from reliable sources (Triple Canopy and Academi are two companies well known for protection services globally.)

Insurance

There are a number of insurance issues you’ll need to take care of, even for a short trip abroad. Health insurance and travel insurance are a good idea for all travelers. But you also want to make sure your corporate policies provide coverage for a wide array of possibilities, from kidnapping to arrest, extortion, and even death of an employee or executive abroad. So many factors can impact any one of these unfortunate events, and you’ll need a lot of resources at your side quickly, including crisis management, if an employee gets into trouble in a foreign country. Be prepared.

If you’ll be doing business overseas regularly, consider updating your insurance policies, or even establishing an enterprise risk captive to cover the wide range of risks you and your employees face when traveling. Contact us if we can provide some assistance with planning.

captives and business growth

Risk Management Isn’t just for the Big Guys

Growing a business is tough. You get so mired in the day-to-day that you forget to stop, pull in some oxygen, and take a really good look at how far you’ve come. We meet with a lot of business owners who, once they set aside their worries and frustrations for a little while and take the time to really look at what they’ve accomplished, are surprised to see how much progress they’ve made.

Sometimes, I think it is human nature to forget that you’re growing, and with growth comes change. We meet with a lot of business owners who either underestimate their real value, or think that they’re not yet big enough to worry about risk management. “Risk management?” a client said, looking at me quizzically when I started talking with him about it, “That’s for the big guys, not me.”

But the truth is, as your business begins to mature, you really have to take a look at the amount of risk you’re self-insuring and find ways to cover that risk so that you can move the business forward. In fact, the people who fund you – the banks and investors, the shareholders – will want to know that you are managing risks appropriately, that you’re insured properly, and that you are thinking strategically about your assets, the amount of risk you’re taking on, and the way you manage that risk.

Benefits of risk management

Risk management isn’t just about buying more insurance. Certainly, there are a number of situations you want to be prepared for – liability issues of all kinds, including employment issues, product liability, property damage, even bank deposits. Risk management, when done appropriately, helps to insure you against the worst case scenario, providing a buffer if the worst happens.

But it’s not enough, sometimes, just to buy insurance. Depending on what type of business you’re in, you may not be able to get reasonable deductibles, leaving your business exposed to a loss that’s bigger than you’re comfortable with. You might not be able to purchase insurance on certain types of liability at all. Consider flood insurance in lowlands areas, or kidnapping insurance for executives who are working to build your company’s profile globally.

Proper risk management will help your company absorb the costs of the worst happening. Your business will also have the benefits of lower overall insurance costs and a better financial structure during good times – and bad – to support long-term growth.

Risk management strategies

Reconsider the idea of risk for your business and reframe the idea with a series of buffers that are available to you – the smart people you’re hiring to move the company forward, the support you have from investors and board members, and the financial mechanisms that are in place to carry you over the rough patches.

Meet with your insurance broker regularly to go over updates and changes your company is going through and find out how your broker can help you reconsider your insurance in the same way that your bankers and brokers help you grow your investments. Updating policies, purchasing new policies, and restructuring payments are all ways to responsibly manage risk. When you reach a point where insurance is difficult to buy for a certain type of coverage, or where the deductibles are prohibitively high, your broker may suggest an enterprise risk captive. Once thought of as a tool for “the big guys”, captives are now much more accessible to – and right-sized for – mid-sized companies. With a captive, you can zone in on risk planning that you need to do for your company, and insure those risks that are difficult to find policies for on the open market. We work closely with your company to underwrite, manage, and meet all state and federal regulatory and tax guidelines associated with the captive, so that you can feel confident that the captive is working efficiently for your company.

If you’d like to consider a captive, talk with your broker, or contact us to find out more about how captives work. I promise, they’re not just for the big guys.

Thousands of Businesses Susceptible to the Backoff Virus

The Secret Service and the Department of Homeland Security recently warned more than 1,000 retailers that they were probably being hacked with the same malware that hit Target last year. The Chicago Tribune reports that the “Backoff” virus was more widespread than initially thought. The virus, which scrapes credit card data at the point-of-sale, is difficult for retailers to detect and many businesses aren’t yet able to monitor for it.

The DHS is urging retailers to get in touch with their anti-virus vendors in order to get the right systems into place as soon as possible, and recommends additional measures, such as implementing systems to ensure consumer and credit card data are always encrypted wherever the data lives on the network.

Industry-wide challenges

Cyber security will continue to be a serious issue for retailers large and small. Groups like the National Retail Federation (NRF) and the Retail Industry Leaders Association (RILA) have put together large consortiums, think tanks, and initiatives to pool information and resources to get effective solutions out to retailers as quickly as possible.

The NRF’s information sharing platform, and RILA’s Cybersecurity and Data Privacy Initiative are good resources for retailers who need more information on what they can do to protect their data and their customers’ data. RILA’s initiative seeks to strengthen overall cybersecurity, improve payment security, and address consumer privacy issues. Both programs are big and far-reaching, but fighting hackers requires quick and nimble action.

As the industry searches for and develops new methods for security, retailers will have to find new ways to ensure the safety of their transactions and data. Retailers might want to take some advice directly from Target – in his testimony before the Senate Committee on Commerce, Science & Transportation in March, 2014, John Mulligan, executive vice president and chief financial officer for Target, reviewed some of the actions Target was taking to ensure the safety of customer records. Target is currently:

  • Reviewing security across its network, segmenting and separating key portions of the network by using firewalls and limiting unauthorized traffic.
  • Strengthening anti-virus tools and whitelisting, or limiting the type of transactions that can run on a Target cash register.
  • Initiating stricter authentication on the networks that Target uses, upgrading to two-factor authentication for entry into the system.

Target was also the first retailer to join the Financial Services Information Sharing and Analysis Center, and is changing over to chip technology for its payment system.

Solutions for retailers of all sizes

Keeping your organization safe from hackers is a massive undertaking. From your servers down to every cash register in every store, it’s expensive, time-consuming, and ever-changing, requiring constant vigilance. And, as Mr. Mulligan pointed out, even if your company is certified as being compliant with the more than 300 independent items in a Payment Card Industry Data Security Standards assessment – as Target was – you are still susceptible to widespread hacking.

Consider the exposure you have if your cash registers are hacked, or your servers breached. Are you insured for these breaches. Does your policy even cover hacking and cyber crimes under their current definitions? Review your coverage with your agent, and understand what types of liabilities are covered – will your policy cover reimbursement for every customer who was affected by the breach? The lawsuits filed against you by customers? The lawyers you’ll have to hire, and the consultants you’ll need to on-board to fix the problems?

If you feel like your coverage isn’t enough, consider an enterprise risk captive – feel free to contact us if we can provide more information for you. A captive can help cover your company in the case of cyber crimes, or it can assist you with the high deductibles you may have with your current commercial policy.

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Lessons from Hurricane Katrina

Last week marked the 9th anniversary of Hurricane Katrina, a strom that was among the deadliest in U.S. history. More than 1,800 people died in the storm, while wind, water, and flood damage was widespread. In New Orleans, the damage was profound as the levee system failed in the wake of the hurricane, flooding the city.

The entire Gulf of Mexico region suffered immediate and long-term impact from the storm. It is estimated that more than 600,000 people left the region as a result of Katrina. Industries including oil, fishing, and forestry suffered greatly, and efforts to rebuild the region are arguably still underway today.

A national discussion about flood preparedness

The failure of the levee system in New Orleans has sparked a national discussion on flood protection, and storms since Katrina have shown how vulnerable American cities are when it comes to hurricane winds, rain, and storm surge. Hurricane Sandy hit the East Coast in 2012, stunning some residents and homeowners who are just now getting the go-ahead and funding to begin rebuilding their damaged homes and businesses.

It’s not just coastal cities that have to worry when a tropical storm hits. The amount of rain produced by huge storm events can trigger flooding and flash flooding inland, too. This map from the National Hurricane Center shows rainfall levels during Hurricane Frances in September, 2004, revealing vulnerability of regions as far inland as western North Carolina and Southeastern Ohio.

Being prepared

September is National Preparedness Month. Perhaps your kids are coming home with information on what to do in case of a tornado, flood, or hurricane in your town. It’s a good moment to take some time to think about your safety at home and work.

The National Weather Service sponsors a whole series of web pages on disaster preparedness with some very practical information on what to do in case of an emergency. Does your family have an emergency plan? Does your workplace have an emergency evacuation plan? Take some time to read on the topic, and take some action – get the family together and make a new plan or review your existing one.  At the office, volunteer for the safety council, and if your company doesn’t have one, start one. Your local emergency management service office (or fire department) should be able to help you get started.

Consider your vulnerabilities

September is also a good time to re-asses your property and investments to see if they’re in need of updating. Are there any new vulnerabilities in the region to consider? There are some coastal areas that are reassessing their risk of flood based on elevated ocean levels. Norfolk, Virginia, is a town that’s sinking as sea levels rise around it.

Also check any property you own against zoning or building codes to make sure your structure is up-to-date. As storms intensify and cause more damage, regulations that govern buildings are changing, too.

If you don’t have hurricane or wind coverage, you may find that you’re out of luck – it could be difficult or almost impossible to purchase hurricane and wind insurance where you live. If that’s the case, you may want to consider alternative methods for managing the risk you face. Contact us if you’d like to explore options in enterprise risk captives.

captive management

Enterprise Risk Captive Basics Part III – Ongoing Captive Management

Before you launch an enterprise risk captive, make sure you understand what your long-term relationship will be with the captive manager. Find out what is involved in the day-to-day management of a captive, from compliance basics, to planning, and long-term management and get a list of the critical questions you should ask potential captive managers to ensure your long-term investment will be professionally managed.

Due diligence

Before we consider launching an enterprise risk captive on behalf of a potential client, we work closely with them to vet their business and make sure that they are right for a captive. This process has many steps and involves a great deal of research and digging to get an accurate picture of a company’s financial situation. With this information, we’ll insure that a captive is not only a good investment for a company, but that the company meets all the legal, regulatory, and compliance standards required to launch a captive.

Once we agree that the client is appropriate for a captive, our team develops underwriting and creates coverages appropriate for the company. We write up and submit all the necessary applications, financial forms, legal and regulatory compliance data, and work with the client to make sure their board of directors and staff understand the nature of the captive so that we can work with them on ongoing management issues.

When we launch the captive, we hand over to the client copies of all of the licenses, documentation, and paperwork that we’ve created for their captive. We want any questions of integrity – of your captive or our management of it – to be managed with a policy of open door transparency policy of transparency.

And that’s just the beginning.

Managing enterprise risk captives

Once the captive is launched on behalf of the client, it’s our job to provide ongoing management and support to the client. As we’ve increased our level of expertise, we’ve been able to create processes that ensure proper execution on all levels. Our staff works closely with you on an ongoing basis to:

  • Maintain your compliance with all state and federal laws and regulations that impact captives
  • Keep your company up to date on tax codes that impact captives
  • Help your company file all the necessary reporting to state and federal regulatory agencies on quarterly and annual basis, and as needed
  • Provide support if your company is audited
  • Provide quick turnaround – generally within 24 hours – on any paperwork or documentation requested by your company or any requesting agency
  • Work with your company to make updates, additions, or changes to your captive over time
  • Constantly look after compliance issues in every state, on behalf of every client
  • Create, manage, and update the organization policies and procedures that help us manage vast amounts of information about our clients and our industry
  • Take care of details – like off-site backup systems of all your files in case we experience a fire or incident at our facility
  • Hire smart people to manage your captive, and provide them with ongoing training and learning opportunities

We are a partner in your captive for the long term, and our staff is there to make sure your company is compliant. Above all, we’re here to ensure the performance of your captive. We shoulder the responsibility of underwriting and pricing your risk appropriately so that, ultimately, your captive is operating efficiently for you.

As you consider captive managers, use the bullet-points above as a guide for questions you might ask them. What kind of initial documentation do they provide, and how closely will they work with you on an ongoing basis? Ask about their process for answering questions from state and federal regulating agencies quickly, and ask about IRS audits their clients may have experienced in the past – what kind of support did the captive manager provide, and what is their average response time?

Our goal is to create captives that manage risk appropriately for clients and that perform well over a long period of time. As partners in your business, we will be with you every stop of the way. If you’d like to find out more about our process and our service, give us a call.

Read our Enterprise Risk Captive Basics series – Part I is an overview of captive rate structures, and Part II addresses captive loss ratios.

 

captive loss ratio

Enterprise Risk Captive Basics Part II – Captive Loss Ratios

Enterprise risk captives insure risks that are highly volatile and severe – events that happen infrequently, but when they do happen, they are very big. Over the course of a few years, a captive can go from very low liability to a total limit loss. That’s why captives need to be structured correctly, so that they’re ready to absorb these losses when they do happen.

Captive loss ratio

There is a misconception that captive loss ratio pools are at 5 percent, and that underwriters are overwriting the risks a captive covers. It’s true that a captive can operate for 5 – 7 years on average with no loss at all, and then suddenly experience a 100 percent loss, accounting for a more realistic 50 percent loss ratio.

Comparing this loss ratio rate to the commercial market won’t work in this case. The loss ratio for a captive is going to be much lower in profitable years, and extremely high in a given year. A commercial policy might insure nuisance flooding and pay out on small claims throughout the year – a captive, on the other hand would cover a catastrophic flooding event and may pay only one huge claim in ten years. Additionally, captives cover catastrophic events that aren’t even priced on the commercial market.

An A.M. Best Special Report on captive performance outlines how any why captives differ from commercial rates and is well worth a read for additional information on the topic.

Underwriting risk

Pricing risk appropriately is a key function of any insurance company. A really big player in the insurance industry can be brought down quickly if they haven’t structured their pricing appropriately.

As captive managers, we’re looking at the severity and volatility of risks, along with the cost of the claims and the breadth of the coverage. These are the four key areas of captives that influence pricing. Because captives are “boutique” in what they offer as well as in how claims are paid, some of the pricing is higher. Captives don’t see the type of day-to-day volume in claims that commercial providers do, so captive managers don’t enjoy contract pricing with law firms or big accounting firms. These costs are perhaps less frequent, but more expensive to the captive manager when they arise.

Captives also specialize in deductive buydowns. As the nature of the commercial market changes, so do captives. Consider employment practices and liability coverages. Most companies that carry an HR policy typically have HR procedures well in place. The sophistication of HR in general has caused underwriters to raise deductibles so that only the most severe claims are covered. But when a problem does arise, the companies are now faced with paying out-of-pocket claims of up to $25,000 to almost $75,000 in some cases. Captives are there to alleviate those instances where the unexpected occurs.

Accuracy in pricing

In Part I of our enterprise risk captive series, we talked about how important it is that a captive works with a reputable actuarial firm. Accuracy in pricing is critical to captives. When you’re talking with a potential captive manager, ask these questions:

  • Can you break down your expense ratio for me?
  • Can you show me your past performance for loss ratios?
  • How do you calculate future loss ratios
  • Can you talk about the experience your underwriting team has and how their experience relates to my industry?

The relationship that you have with your captive manager will be a close one. Be sure the company you work with can speak with integrity about their approach to the business, their expenses and losses, and that they’ll patiently take the time to help you understand their business as well as you want them to understand yours.

If we can help you work through some of these questions, contact us.

Did you miss Part I of our Enterprise Risk Captive Basics series? Read it now. Or go directly to Part III to learn about ongoing captive management.

Insurance

Enterprise Risk Captive Basics Part I: Captive Rate Structure

As enterprise risk captives become more widely known in the U.S. market, they’re getting more attention from consumers, insurance agencies, and regulating bodies. Regulating agencies are looking at domestic captives to make sure they are following the rules laid out under the IRS’s guidelines for enterprise risk captives. Meanwhile insurers and companies interested in captives are studying costs and rates, sometimes comparing captives to traditional commercial rates.

Captive rates vs. commercial insurance rates

Captive insurance companies differ greatly from traditional commercial insurance companies, which makes comparing the two a bit like the classic apples and oranges analogy. As enterprise risk captive managers, our approach differs from a commercial insurance underwriters, particularly in the type of risk we manage on behalf of our clients. In fact, captives often exist to provide coverage for damages that commercial insurance companies don’t cover.

Pricing captives involves a number of factors. First and foremost, a captive is designed to cover the most catastrophic events (we’ll take a deep-dive into loss ratios in Part II), a primary consideration in pricing the cost of a captive. But there are additional issues that we need to consider. As captive managers, we are like an insurer in one key respect: We act as a highly specialized insurance company from the moment we begin the underwriting process until the captive is dissolved. That means we have to staff like an insurance company, work with underwriters, oversee compliance to all regulatory agencies, and assist our clients with ongoing management of their captive.

When you take a long view of a well-run captive, the pricing is generally on-par with the 10 – 15 percent profit margin that most healthy commercial insurers report.

Expense ratios

If you’re shopping for a captive or a captive management company, ask about expense ratios. A well-managed captive should be able to meet a 7 – 10 percent expense ratio relative to premium costs. This expense ratio will be well under a typical commercial insurance provider that has huge operating expenses (around 30 – 35 percent) they are writing commercial, claim-frequency-driven business. The very nature of a captive is to be a smaller and therefor more efficient risk management tool. Once a captive begins to get too big, it will start mirroring the commercial market.

Questions to ask your captive manager

A captive is a huge investment, and a large undertaking. Ask plenty of questions before you work with a captive company. Some of a captive’s biggest costs a captive has should relate directly to the service they provide. Here are some of the main questions you should ask a potential captive manager:

  • What kind of actuarial services do you use? Actuaries drive many of the decisions the captive makes when it comes to underwriting, and you want to be sure that the captive has excellent actuaries who work with the company.
  • How many accountants are on staff? Captives require year-round accounting services, so you want to be sure that there are enough good accountants on board to cover all the captive clients. Ask about turnover, too – working with an accountant long-term who knows you and your business is helpful.
  • Describe processes and documentation for me? Ask the captive manager very specific questions about the documentation they’ll provide to you when your captive is launched, and how they maintain and update all legal and regulatory documents monthly, quarterly, and annually.
  • How quickly can your firm react to specific questions from regulatory agencies? The answer should be “within 24 hours.”
  • What kind of involvement will you have with my company and board of directors? A good captive manager will have an ongoing relationship with your company, working with your financial and legal departments to ensure ongoing communication and good management of the captive. Your captive manager will also attend your board meetings to make sure your board is well informed about the captive (especially if you’re nominating any changes to the captive) and to make sure your company is meeting all of your legal and regulatory obligations on a corporate level.

Word-of-mouth

Don’t just ask the captive manager these questions, try to get recommendations from clients and other professionals in the industry that they might work with.

The real value of the captive is a lower expense ratio that allows you to allocate more dollars to risk. You’re getting specialized management on a focused group of coverages. A captive is a long-term commitment, so make sure you’re doing business with a company that’s operating efficiently with a focus on your business.

We’d be happy to answer your questions and talk with you about enterprise risk captive solutions. Contact us.

Read Part II of our Enterprise Risk Captive Basics series on captive loss ratios.

Image of Duke Niedringhaus

Captives – A Natural Progression for Entrepreneurial Companies

Based in St. Louis, Missouri, J.W. Terrill is a brokerage firm with just under 200 employees that offers a broad range of commercial insurance products, risk management consulting, surety bonds, and employee benefits. JW Terrill is ranked one of the 100 largest brokers of U.S. business, by Business Insurance magazine.

J.W. Terrill recently added enterprise risk captives to their offering. “We’ve been working with group captives for 15 years,” notes Duke Niedringhaus, Senior Vice President of J.W. Terrill’s captive practice. “We are looking to grow in the area of enterprise risk captives.”

Funding uninsured risk

JW Terrill logoEnterprise risk captives are ideal for the mid-market space that many of J.W. Terrill’s clients occupy. “An enterprise risk captive is a natural progression for an entrepreneur who owns a company, particularly if they already use a group captive to fund some of their uninsured business risk,” notes Niedringhaus.

J.W. Terrill works extensively with casualty group captives, employee benefits captives, and property captives, and finds that clients who launch one captive alternative are often ideal candidates for developing a combination of captive options, including enterprise risk captives.

Niedringhaus works with a wide variety of clients on captive strategies. “We work with businesses as diverse as convenience stores, security and manufacturing facilities on captives,” says Niedringhaus. “The common denominator for the companies that are optimal for captives is that they are usually the best in their class and really understand the value of protecting their uninsured risk.”

Keeping an eye on captive trends

As a board member of the Self Insurance Institute of America (SIIA), Niedringhaus maintains a keen interest in industry and market trends.  SIIA is the leading national association representing captives.  “Intuitive is a very professional firm and well respected within SIIA”, notes Niedringhaus. “The company leaders at Intuitive come from an insurance background, so they understand how to go about underwriting and pricing various coverages.” Niedringhaus also appreciates Intuitive’s high level of disclosure and transparency on the Colorado Reinsurance Exchange, or C-Rex, that it manages.

“Intuitive is a conservative company,” says Niedringhaus, “so they’re not out there pushing the envelope or trying to make captives fit for companies that aren’t right for them.”

Niedringhaus believes that the enterprise risk captive market will grow in the coming years, and so will group captives. “Working with Intuitive helps J.W. Terrill deliver a solid option to clients,” says Niederinghaus, adding, “The major issue with captives is being able to hold them up to scrutiny.  I can feel confident that all the documentation is in order, the reinsurance pools are structured properly, and the client will be set if they ever need to undergo an audit.”