Captives.Insure
Nate Reznicek, president and principal consultant at Captives.Insure, discusses how the firm's independent approach to captive consulting and underwriting benefits brokers and captive managers
As an independent captive insurance consulting and underwriting firm, how does Captives.Insure's unaffiliated status allow you to provide more objective and value-added services to your broker and captive manager partners compared to other providers in the market?
The market naturally and understandably eschews engaging with captive managers owned by other brokerage firms. Although there are many instances where a broker-affiliated captive manager is successfully able to firewall information received by the submitting broker, there are also certainly instances where key information on accounts miraculously ends up in the hands of a competing broker after being sent to the affiliated captive manager.
This approach can also limit the available solutions and/or result in proposed solutions that frequently inject unanticipated regulatory risk into the transaction. As managers only present what their current knowledge and experience can support, brokers are often unintentionally entering the game with one hand tied behind their back.
Brokers may also lack the experience and exposure in the captive insurance space to fully understand the risks associated with engaging managers who are either inexperienced or have a history of engaging in questionable transactions or business practices. They frequently assume that managers are licensed individuals who have passed a regulatory credentialing exam before becoming captive managers. Unsurprisingly, most brokers and insureds are shocked when they learn that this is not the case.
On the captive manager side, they have a tendency to focus almost entirely on what they have historically done well — like many successful businesses. Although understandable, this siloed approach can quickly become a hindrance when the needs of insureds or the general market change. For example, managers who have historically operated in the enterprise risk or medical stop loss space may not have the experience and expertise to address their clients' traditional property and casualty needs.
Just as we do in the broker space, Captives.Insure does not operate as a captive manager or receive any type of revenue or compensation from management activities. Captive managers are free to use our services to help fill gaps in their offerings without fear of introducing competition. We simply underwrite, structure, and complete the transaction by ceding the ultimate risk back to a captive formed and/or managed by a third-party captive manager.
Can you elaborate on Captives.Insure's expertise in conducting enterprise risk assessments and how this data-driven, third-party evaluation process helps clients determine the optimal captive insurance structure to address their unique risk profiles?
Keeping in line with best practices, Captives.Insure often works with clients to complete thorough enterprise risk assessments. These assessments provide our clients with a formal deliverable, based on extensive research, that outlines our opinions on what can go wrong within a business to cause a loss of income or extra expense, whether or not those risks could be considered insurable, and if the risks meet the necessary threshold where Captives.Insure would suggest that captive insurance is a viable solution for the insured.
Beyond just the risk identification, the process also allows us to gain a thorough understanding of the general risk tolerance and business practices of the potential captive owner. Assuming that Captives.Insure found that a captive to be a viable solution, we then provide multiple captive solutions (different managers, domiciles, corporate structure, reinsurance, etc) that are truly tailor-made to the unique needs of the future captive shareholder.
Our findings, developed by experienced captive insurance professionals, are independent, objective, and free of conflicts of interest, as we receive no compensation for the formation or management of the suggested captive.
Walk us through Captives.Insure's programme design and formation consultation services. How do you work with clients to navigate the complexities of captive regulatory environments, risk distribution structures, and captive service provider selection to ensure a successful captive implementation?
Some clients come to us with a very specific goal in mind, for example being able to participate in the risk of their property, workers’ compensation, or professional liability programmes.
We simply do not need a full enterprise risk assessment in these instances. In these situations, we operate as a traditional underwriter. By gaining an understanding of the premiums, loss, and exposure history, we are able to then provide bespoke terms. These terms use the right insurer partners and account for all the expenses associated with the suggested transaction (fronting, reinsurance, collateral, service providers, etc).
As long as the selected service providers are capable, competent, and qualified, the insured/captive shareholder is free to select their desired captive manager, domicile, captive structure, etc. It is important to note that Captives.Insure does not charge a fee for this service. This allows new captive owners to gain a full understanding of all of the details of the proposed transaction without having to worry about the risks and expenses associated with a traditional feasibility study. The elimination of the feasibility study at the initial stages of captive insurance exploration removes one of the largest hurdles in starting the process, providing a major benefit to our broker and captive manager partners.
In almost all cases, we agree with Benjamin Franklin when he commented on how the city of Philadelphia needed to be better prepared to prevent and react to fires: "An ounce of prevention is worth a pound of cure."
Given the rapid growth in captive consultants, how does Captives.Insure's independent approach and focus on education help establish your firm as a trusted partner for broker and captive manager clients looking to expand their captive capabilities?
Despite all the good and exciting things happening in the captive insurance space, it still has a Wild West feel to it, because where opportunity exists, money quickly follows. The phenomenal growth of the captive insurance industry has resulted in not only insurance brokers and carriers developing captive practices, but has also attracted significant interest from private equity and opportunistic entrepreneurs. With little to no regulatory guardrails to define the minimum standards a competent captive manager or consultant must exhibit, it is often left up to the business owner or their broker to decide what good looks like — quite a risky proposition.
We believe that only foundational education can build the trust necessary for sustainable and long-lasting relationships. We back up these statements with a steadfast commitment to formal captive insurance education and are huge advocates for the International Centre for Captive Insurance Education (ICCIE). I have had the privilege of being a longstanding faculty member for ICCIE, and firmly believe in the quality of my fellow instructors' education and competency. As a testament to this dedication, Captives.Insure is a certified ICCIE Trained Organisation, and we require that all members of our staff have either already completed their Associates in Captive Insurance (ACI) or are enrolled to complete it.
We strive to eliminate statements of puffery or exaggeration, presenting an objective, fair-handed, and honest perspective on the proposed ideas. Even though we are the company that came up with the proposal, we take into account all aspects of it.
The good news is that at Captives.Insure we know what good looks like and are able to ‘separate the wheat from the chaff’. Whether we are conducting public speaking engagements at universities, industry events, or imparting foundational captive insurance education to our broker partners, our clients can rest assured that the information they receive is accurate and truthful.
This approach is one of the biggest reasons we are the first call our partners make when they encounter captive insurance opportunities.
For clients with existing captive arrangements, what does Captives.Insure's captive insurance structure evaluation and reporting process entail? How do these comprehensive assessments identify potential issues or areas of concern, and what types of unbiased recommendations do you provide to remediate problems or optimise the captive's performance?
We often engage with captive owners, whether current or prospective, seeking reassurance and peace of mind due to the complexity, nuances, and variance of captive insurance transactions. Perhaps they recently saw some news about their manager or structure and want to ensure that things are as they should be.
Perhaps they have received a proposal or feasibility study and are uncertain about its suitability and value. Maybe the captive has been in operation for years, and they want a true, independent opinion on the health and trajectory of their captive.
For these clients, we dissect and evaluate all of the captive components. We will clearly outline all the parties involved, uncover unreported conflicts of interest, time in business, reputations, services provided, and costs charged, in order to provide a clear picture of where things stand today.
If we notice any material discrepancies or opportunities for improvement, we also provide recommendations for how they could rectify the situation and any anticipated costs that they may incur to make the change.
I understand Captives.Insure has developed specialised captive insurance programmes like EmpoweredRE and DealerCell. Can you expand on the unique features and value proposition of these offerings, and how they align with the needs of specific industry verticals or client segments?
We developed both programmes to address significant market gaps. For DealerCell, we partnered with the world's leading auto-related insurer to provide inventory and other property and casualty coverages in a captive insurance company arrangement.
High-performing auto, outdoor, and equipment dealers have faced market constriction due to natural catastrophe losses, which has resulted in increased premiums and lower inventory levels, making it even more challenging to recoup their higher insurance premiums.
EmpoweredRE is our larger, heterogenous programme. Under this programme, we are able to provide captive insurance solutions for nearly all types of coverage throughout the US and in select international jurisdictions.
Via EmpoweredRE, we have been able to successfully bind coverage for property, general liability, land marine, workers’ compensation, commercial auto, professional liability, and many more lines of business for well-managed business owners.
Regardless of the ultimate solution, a few things always remain true when working with Captives.Insure — our insureds can continue to use their chosen broker, and our structures are purposefully designed to allow participation without the client having to sacrifice the power and flexibility offered by the selected captive manager.
Beyond the initial captive formation or evaluation, how does Captives.Insure continue to provide ongoing strategic advisory and consulting services to help broker and captive manager partners navigate the evolving captive insurance landscape and identify new opportunities for their clients?
We believe that a captive insurance company should possess flexibility and adaptability, mirroring the evolution of the business(es) it insures in their operations. It should not be viewed as a ‘set it and forget it’ solution.
Captives.Insure recognises the market's current gaps and provides genuine, impartial strategic advice by serving as a non- voting board member or not participating in the director/resident director appointment process.
Through our strategic advisory engagements, we not only guarantee the successful execution of the transaction, but also establish a framework for ongoing risk evaluation and performance monitoring to optimise the captive's use and meet the needs of its shareholders.
What is Captives.Insure's approach to staying at the forefront of captive industry trends and regulations? How do you ensure your team's expertise and the solutions you provide remain cutting-edge and responsive to the changing needs of the market?
Staying apprised of captive industry trends and regulations is critical to the success of any service provider. We do this in several ways at Captives.Insure: one, by remaining in tune with what our clients are experiencing through regular and consistent communication — their input and feedback is crucial; two, by our presence at industry conferences, which allow us to gauge, measure, and put into perspective the data we gather on our own; three, the purposeful pursuit of formal continuing education, attending seminars, doing our on research into the marketplace, and consuming a voracious amount of trade media content, so that meaningful macro changes in the industry remain on our radar; four, by actively participating in leadership positions in various associations, events, and lobbying groups; and five, by maintaining solid relationships with regulators and trusted stakeholders we are able to stay apprised of changes in the regulatory and political environment of various domiciles.
Massive losses caused by multiple, or even singular, events can have a significant impact on the insurance and reinsurance markets, which in turn inevitably affect the captive space. We have seen this more recently with property markets, but also with other kinds of risks, including cyber.
Changes, whether positive or negative, in captive statutes, captive regulatory teams, and the mindset of captive regulators can significantly influence a specific domicile and the captive industry overall. We simply cannot highlight enough the interconnectedness of all aspects and stakeholders of the insurance world.
Can you share some examples of successful captive insurance programmes that Captives.Insure has helped design, implement, or optimise for clients? What were the main challenges or objectives that your team was able to address, and what were the measurable outcomes and benefits realised by the captive owners?
Recently, we completed a review of the captive structure for a client who is contemplating the formation of a new captive insurance company. The client had some questions about the proposed structure and its alignment with their captive ownership goals. We thoroughly examined the transaction, offering a formal opinion on all key components and service providers, including the manager, third-party administrator accounts (TPA), trust accounts, fronting and reinsurance arrangements, domicile, and more.
Our opinions covered not only the providers' expertise and experience, but also proposed expenses in relation to a fair market rate. The resulting recommendations outlined how to adjust the current programme to maximise efficiency, provided significant reductions in capital and collateral, and reduced operating costs. This saved our client hundreds of thousands of dollars in the first year alone.
Often we end up being the folks people turn to for more difficult risks when others have failed to provide solutions. In this vein, we have recently bound builders risk programmes for several residential home builders and developers, addressed sexual assault and molestation risks, provided standard commercial auto coverage for large trucking fleets, transferred loss portfolios for legacy liabilities, and provided property cover for insureds in habitational accounts with significant Natcat exposures — just to name a few.
For all of our clients, we returned at least 60 per cent of the gross written premium as a reinsurance premium, and, in many instances, up to 85 per cent.
Although our clients have vastly different exposures and operations spread around the globe, they all have one thing in common: they hate buying insurance.
Regardless of the solution, our clients and partners can rely on us to consistently deliver a swift, precise, and truthful assessment of the acceptability of the submitted risks, along with practical solutions that aim to optimise the client's capacity to manage risk and premium.
Looking ahead, what do you see as the most significant growth drivers and emerging opportunities in the captive insurance industry? And how is Captives.Insure positioning itself to capitalise on these trends to drive continued success for the firm and its partners?
Like many, we are excited about the growth of the captive industry, the recent pace of captive adoption, and alternative risk transfer mechanisms within the larger insurance industry.
Addicted to innovation, we are not taking our foot off the gas any time soon.
As an example, we are launching a new, open distribution, heterogenous group captive in 2025 that is specifically designed to allow our captive manager partners the ability to retain the management and formation responsibilities and revenue they are accustomed to without our broker partners having to figure out how to overcome the reduced compensation they often receive when placing clients in more traditional group captive arrangements.
Our mission with this programme is pretty simple: deliver a captive solution with single parent power at group captive premium levels.
Our captive managers and broker partners continue to appreciate our ability to help them expand their service offerings, allowing them to retain more business and drive new revenue.
Our reputation for consistently delivering underwriting results provides our carrier partners with an incredibly high level of confidence in the risks we assess, how we assess them, and the structures we design. We remain excited about the opportunity to show our mutual clients a clear, profitable, and predictable path to insurance company ownership.
It is nearly impossible to beat the traditional global insurance market, but we can show clients the way to successfully join in, retain, control, and efficiently finance their risk.
This ultimately levels the playing field and adds immense value to their parent company's operations, which can provide significant competitive advantages.
They may still end with the same ‘hate’ as the traditional insurance market, but they will ultimately love their captives, and we couldn't be more excited for their win.
