Nancy Gray of Aon discusses the expansion of Aon’s White Rock Group into the District of Columbia
On 11 March, Aon announced that it was expanding its protected cell company (PCC) facilities under White Rock Group into the District of Columbia (DC). The expansion into DC means White Rock now operates PCCs in seven domiciles, managing 250 cells, with $730 million in gross written premium and over $2.6 billion in assets.
During the Captive Insurance Companies Association 2019 conference in Tucson, Arizona, we spoke to Nancy Gray, regional managing director, captive and insurance management, commercial risk solutions at Aon, about the expansion, the motivation behind it, and the trends in the PCC market.
What was the motivation behind expanding White Rock into the DC?
We are quite excited about expanding White Rock into DC. In the US we have White Rock USA, domiciled in Vermont, and we have White Rock Bermuda for the Americas. It was a strategic decision to expand White Rock into the DC market. It is recognising the geographic preference of our clients and that there was a need for us to be forming a sponsored captive in DC. We are responding to that need and are able to offer that as an additional choice for our clients.
There are different opportunities for White Rock, as there are different solutions that it offers, depending on the clients needs. In the Americas and the US, a lot of the White Rock cells are formed more as either retention or a pass through. A typical corporation wants to set up a captive, instead of a standalone captive they’re using the cell to respond to that unique need that they have, whether that is retention or access to reinsurance.
Should we expect to see more expansion?
It is one of those things I think when you look at, in terms of the US, how the captive domiciles have really expanded beyond just Vermont and Hawaii. There are now close to 40 states with captive laws, so it has become a lot more strategic from a geographic standpoint, compared to domicilign a captive closer to where you are headquartered or in your home state.
That has been fuelling a lot of growth in the US, in terms of new formations, but very similarly to White Rock it is a strategic decision based on needs of clients to be in DC. If we do have another opportunity, absolutely we will continue to expand to meet the changing needs of our clients.
Do you have any plans for significant additions to the White Rock staff?
We are continuing to grow from a talent perspective just because we are growing in terms of the number of captives. It is the same with White Rock, it will add in terms of additional work we will need to do for the expansion but we don’t expect necessarily that we will be adding colleagues in DC, we will just be adding to some of our existing teams in South Carolina or in Vermont.
What trends are you seeing in the PCC market?
The PCC space is somewhere we have seen quite a bit of growth because you have a lot of companies not necessarily looking to form a new captive but this provides a much easier streamline approach or solution if they have a need.
For instance, the wildfires out in California created a need for a client for the reinsurance access. So, rather than set up a standalone captive, we are utilising the cell to provide that insurance coverage to allow them to access the reinsurance market just for that specific coverage.
The PCC space is more unique in terms of addressing specific needs and requirements from the clients.
Are you expecting this to continue or do you forecast any new trends in the PCC space?
It will be impacted by any changes in the market. It is one of those things that it has been difficult to predict where we are going to see some hardening in the market. But I think that whole market cycle where you had a soft market and then hardening of the market and then a return to a soft market, the market has changed, it doesn’t respond that way any longer. You still have specific lines of coverage or specific industries that have more hardening and that is where White Rock is a unique solution for those clients or for those unique lines of business.
What targets does White Rock have over the next 12 to 14 months?
We think 5 percent growth is very achievable looking at this segment of the business. White Rock has been growing significantly for us over the last few years and we think that it will continue to generate at least 5 percent annual growth in the foreseeable future for us.
What do you see impacting the PCC market?
I think it is a very favourable marketplace for PCC legislation. All the various US states have been updating their laws and regulations as it deals with this. If anything the marketplace is very attractive for a PCC marketplace. Just in general, there is always certain regulatory changes or tax changes that might impact captives but those aren’t specific to PCCs, they’re industry-wide, such as the Washington state issue with Microsoft.
In that case, Washington state is trying to tax the captive that is writing coverage for risks located in the state. That potentially increased costs for insureds. Microsoft didn’t fight it, they just settled, but if they continue to pursue other companies and no one is willing to fight that battle with Washington state, potentially that is going to increase the cost of doing business for captive insurance companies, and PCCs wouldn’t be isolated from that, they’re also potentially impacted by that.
The US market continues to be an active marketplace for captives and when you look at the number of captive formations across the domiciles in the Americas they continue to add captives, so, it is a useful tool that is being used by captive owners, as sophisticated risk buyers. They’re using captives as a risk management tool that they use to manage the volatility of risk in their organisation. I don’t think that this will be impaced by changing market conditions, regardless of whether it is a soft or hard market, captives continue to have a useful purpose.
