CICA
CICA president Dennis Harwick tells CIT why his glass is half full, how the market is growing stronger, and what to look out for at the association’s upcoming international conference
Was 2012 a positive year for captives?
I think it was—I’m an optimist. Captives are supposed to struggle in a soft market and a bad economy, and I’d say that 2012 was an uncertain economic year, but despite that uncertainty, almost every domicile added net numbers of captives. Captives, which used to be considered somewhat exotic, have clearly achieved critical mass.
When the market finally hardens, I think you are going to be delighted with the number of organisations and businesses that will move forward with a captive. In light of everything, 2012 was a positive year for captives.
What is the captive market doing for companies that it hasn’t done before?
The beauty of a captive is that it can, within reason, be creative in covering and shifting risk. An organisation or a company can call on a captive to cover risks that the commercial market doesn’t want to address.
The big thing right now in the US market is healthcare. Healthcare reform is here—it is the law of the land. And there are a lot of people asking how a captive will fit into this landscape.
The CICA international conference is almost upon us—what will be the hot topics? Is there a particular panel discussion that attendees should look out for?
We have a couple of sessions on the impact of the Affordable Healthcare Act. When we started to work on this year’s conference, I asked the programme committee what keeps them awake at night. The members of the committee almost uniformly said that it was the changes that were just over the horizon—things like healthcare reform and regulatory uncertainties. That was the genesis of our theme, New Horizons.
It’s why we engaged a demographer as the keynote speaker. He can talk about demographic trends that are going to affect the industry. We’re also having the keynote speaker followed by an economist who will talk about economic and insurance market trends in 2013.
A session that I’m really excited about is called The Changing Regulatory Environment. It features very interesting speakers from both the US Federal Insurance Office and the Bermuda Monetary Authority.
Good regulatory news has arrived in the form of declarations from prominent US politicians that the NRRA does not apply to captives—what are your thoughts on this?
There are almost always unintended consequences when you have legislation. In this case, the Non-admitted and Reinsurance Reform Act (NRRA) was trying to address a problem with surplus lines insurance, but some state taxing authorities have used the act’s language to try to tax captive insurance. Having two or three of the primary authors of the legislation come out and declare unequivocally that NRRA does not apply to captives will help resolve this troubling issue.
How do you think the captive insurance industry will fare in 2013? Are there any prospective challenges facing the industry?
I think it’s going to be another momentum building year for captives. I don’t know that the market is going to harden this year—at least significantly—but there’s going to continue to be more and more people who will understand the strategic reasons for forming a captive, and that momentum will carry the captive industry forward.
When the market does harden, I think the industry is going to see an explosion in the number of captives, particularly in the US markets. People will find a way to use captives in the healthcare arena and even though the federal government has slowed down the application process for utilising captives to fund employee benefits, that arena remains a huge opportunity for growth.
