The NCCIA’s annual conference held in Asheville, North Carolina, on 7 to 10 May, showcased more than 40 speakers representing the best of the global captive insurance industry. Frances Jones reports on the highlights
The North Carolina Captive Insurance Association (NCCIA)’s 2023 Annual Conference saw captive industry experts, associates and newcomers descend on the Renaissance Asheville Downtown in the heart of the Great Smoky Mountains.
The event was titled “Elevate: Reaching New Heights” to represent the conference’s new location in Asheville, North Carolina.
During the opening panel, which was introduced by Claire Richardson, captive consultant at Hylant, panellists gave “An Introduction to the Fundamentals of Captive Insurance.” They reviewed the roles of seven vital providers and their impact on the five main stages of a captive’s lifecycle. No stones were left unturned in the discussion, with an in-depth evaluation of a company’s feasibility assessment for a captive programme — a process that takes roughly five years to complete when including a claims history evaluation and tax considerations.
Bailey Roese, a partner from Dentons, compared the tax auditing stage to reality TV show The Bachelor. She said: “Every year there is at least one contestant that isn’t there for love, instead using the reality show to leverage social media fame and advance their careers — they are on the show for the ‘wrong’ reasons. So when firms come to me for advice on whether to set up a captive. I channel The Bachelor and ask: ‘are you here for the right reasons?’”
This is a topical subject, in light of the recurrence of microcaptives in the IRS’ dirty dozen list every year. The misconception and stigma around people setting up captives purely for the ‘tax benefits’’ is a challenge most industry participants will be familiar with.
This issue was addressed in more detail in the conference’s panel “Perceptions Versus Realities in Dealing with the IRS’’, which included an up-to-the-minute report on pending captive audit and appeal cases. The introductory panel framed a captive as “a problem-solving vehicle” which enables companies to “contain and manage its own risks.”
Panellists explained that the captive feasibility study is a meticulous process in which a variety of professionals assess the suitability of a firm’s claims background against the regulatory requirements of a domicile. North Carolina’s suitability was articulated by the association’s deputy commissioner Lori Gorman.
She said: “Regulators are here to help and support captive growth in their domiciles.”
Another panel was entitled: “You Want to Insure What?” in which the speakers were Aaron Hillebrandt, principle and consulting actuary at Pinnacle, and Andy Rhea, president of Align Risks Solutions.
An auditor and captive manager explored some of the potential for future policy as well as more obscure areas such as ChatGPT, music and psychedelics.
Rhea asked attendees whether they used ChatGPT in their roles, to which the majority replied that they didn’t, although some admitted to testing it out.
This begs the question: “how can captive insurers utilise the platform?”, particularly in an environment where AI use is exponentially on the rise.
Rhea said: “ChatGPT can be used to analyse vast amounts of data. If used correctly this could be extremely useful for insurers. It is important to consider where all that data is going. There are issues of privacy and data protection, leaving companies open to cyber exposure.”
Following the topic of psychedelics, the panel “Drug and Alcohol Policies: Dealing with Changing Atmosphere,” explored the legalisation of Tetrahydrocannabinol and revision of drug policies as well as their effect on the workplace.
This comes as the number of cannabis captives has increased over recent years, due to the difficulties of insuring the substance in traditional markets.
Bespoke or tailor-made?
In the panel: “Taking Parametric Insurance to the Next Level Using Captives,” parametric insurance and captives were described by Nick Lamparelli, head of product at Green Shield Risk Solutions, as “a match as good as Friends’ Ross and Rachel.”
The panellists explained that parametric insurance “requires a trigger and is more simple than indemnity loss”.
They cited the incentives for captive owners as “needing no deductibles and being especially useful in hard market conditions.”
Jeff Kleid, founder of Elite Risk Insurance, provided an example of just how ‘tailor-made’ and ‘targeted’ a parametric policy can be.
“There is a parametric policy in place for a specific acre of a hemp farm where the trigger is the water level. A parametric trigger can be almost anything, even a single moment in time.’’
Incorporating parametric policies was another best-use example for business interruption, which is a crucial challenge for captive insurers in the age of climate change and COVID-19.
Business interruption can be quantified and insured by parametric triggers, whether that is flood-, hurricane- or sickness-related.
Jeremy Colombik, president of Management Services International, added: “The ultimate decision in parametrics is determining what the best triggers are. Parametrics are measurable. It’s a balance of finding the right trigger payout when needed, but not too much. The fact that parametrics can be so bespoke makes them such a nice fit for captives.”
From dawn till dusk
On the second day of the conference, industry veteran Mike Causey, North Carolina’s insurance commissioner, shared his thoughts on the state of the industry during the ninth Annual Commissioners Lunch.
The lunch also featured the award ceremony of outgoing North Carolina directors RH CPA’s Diana Hardy, Milliman’s Mike Meehan, and Marsh McLennan’s Adam Forstot in recognition of their three year board tenures.
Notably, Hardy had finished her term as the association’s first female chair. For her outstanding contributions to the board, Hardy was presented with a plaque of honour by Nate Reznicdek, the association’s incoming president.
Later that evening, RH CPAs and Pinnacle’s “Views and Brews” event showcased curated local microbrews from the city of Asheville, which is dotted with highly-rated independent microbreweries and tapas-style eateries.
The final networking event, held on a warm and sunny evening, saw RH CPAs host again, with a drinks reception accompanied by a live band on the conference’s patio terrace.
The Renaissance Asheville Downtown’s sky-high venue catered for a brilliant orange sunset over the blue-grey hazy silhouette of North Carolina’s Great Smoky Mountains.
