The National Collegiate Athletics Association (NCAA) has formed a captive ahead of its 2022 tournament to provide directors’ and officers’ (D&O) liability and event cancellation coverage. This follows the cancellation of the 2020 tournament which, despite receiving an event cancellation payout, was not fully covered by insurance. In addition, the NCAA saw a significant loss of ticket revenue in limited sales for the 2021 tournament. The association’s board of governors voted in an October 2021 meeting to approve the recommendations from a captive feasibility study for alternative risk financing conducted by insurance brokerage firm NFP. The study was carried out to investigate creating a captive to address concerns over access to and pricing of D&O insurance, event cancellation insurance and payment of third-party legal fees. Presented to the board of governors, the captive feasibility study determined that the $175 million of funding required to establish the captive would be derived from NCAA’s current budget for third-party legal fees and insurance premiums, as well as the current balance of the NCAA’s litigation reserve. In addition, the study noted that the captive would be configured as an LLC and consolidated in the financial statements of the NCAA. The board voted to approve these recommendations to create a captive as a wholly-owned NCAA legal entity. The board of governors has since also unanimously voted in a January 2022 meeting to approve the recommendations of its finance and audit committee concerning initial lines of coverage, premiums and limits of the captive. It was determined that lines of coverage in the captive will include risk reserve transfer, NCAA office of legal affairs coverage, D&O coverage, event cancellation excess of commercial policy coverage, and event cancellation difference-in-conditions policy coverage.
