Meet the Team: Alyssa Preidt

Title and Role: Underwriting and Claims Manager

Length in Industry: 4 years since college graduation in 2018

During college, Alyssa had several internships within the insurance and risk management industry sector.

Certifications: Associate in Risk Management (ARM) and currently obtaining the Certified Risk Manager (CRM)

Favorite Project: Alyssa’s favorite project has been building and developing a database used to track, manage, and manipulate data concerning claims processing, reinsurance information, renewal processing, captive entities, and coverage information. The database is used for reporting, loss runs, and renewal summary purposes along with numerous other purposes.

Favorite personal activities: She loves to read, spend time with her family and friends, play the guitar, exercise, play with her dog Harley, and travel.

Meet the Team: Jeff Ellington

Title: Senior Vice President

Responsibilities: Jeff is responsible for business development & the oversight of the captive formation process, including risk assessments, feasibility studies, organizational structure and design, and policy production.

Time at Capterra: New in 2022

Time in insurance/financial services: 35+ years; 10+ in captive management and consulting.

Jeff has worked in multiple facets of the commercial insurance industry, including sales, marketing, underwriting and management.

Education/Certification: Jeff is a graduate of the University of North Carolina, Chapel Hill. He achieved and maintains the Certified Insurance Counselor designation.

Personal tidbits:

Jeff is married to Debbie; they live in Indian Land, SC. Together they have 5 children from previous marriages & 3 grandchildren, and 1 dog, Winston.

Jeff enjoys golf, gardening, and reading; he is an avid fan of college and pro football and basketball.

Jeff and Debbie

The Value of Captive Insurance in the Age of COVID and During Other Trying Times

By Jeff Ellington, SVP, Capterra Risk Solutions

The last two years have been challenging for most businesses.

  • COVID-19 and subsequent strains left most business owners scrambling to just stay in business while figuring out a way to keep their customers and pay their employees.
  • From an insurance standpoint, businesses were already dealing with rising insurance rates and shrinking capacity from a hardening market, particularly with regard to property coverage. Then COVID hit, leaving most business owners facing the dire realization that the insurance they paid so much for did not cover business interruption resulting from COVID exposures.

In dealing with the disbelief that their insurance policy would not cover their losses due to COVID, some owners decided to sue their insurance companies to force them to pay.  A few plaintiffs in certain jurisdictions found sympathetic judges who did try to force payment, but the overwhelming majority held that the property policies issued to these owners were not intended to provide coverage for losses related to a pandemic, as the policies were written to provide coverage for direct physical damage.

Let’s face it, having to expend the resources of time and money to sue an insurance company and then wait for a judgment and any subsequent payment is not an ideal situation for a business trying to survive.

 

So, what’s a better solution? 

A captive insurance company can be established to insure the risks a company retains, either by choice or by the fact that they cannot find suitable terms in the standard commercial market.

Many smart business owners have set up captives to efficiently transfer the risks they have retained as an effective complement to their standard insurance program.

These same owners were comforted by finding during the COVID crisis that their captive insurance policies provided coverage for loss of income from business interruption from exposure triggers that did not involve direct physical damage to their property.  Situations such as work stoppage from governmental mandates and contingent business interruption from the permanent or temporary shutdown of the business’s suppliers or other dependent entities were covered causes of loss in policies written by many captives.  Additionally, exposure such as the permanent loss of a key customer or a key supplier, as well as a legislative or regulatory change, even globally, could be covered by captive insurance.

 

Captives have value beyond catastrophes

A catastrophic event like a pandemic is not the only challenging situation for which a captive could provide relief.

As mentioned above, the current commercial property and casualty insurance market has continued to harden, resulting in higher rates and premiums coupled with reduced capacity and product availability.   Just a few short years ago, the market was extremely soft with rates and corresponding premiums very favorable for business owners.

With some policies being priced at less than 50% of the standard premium, it did not make much economic sense for a business to take on a significant deductible as a layer of self-insurance when the reward did not justify the additional risk.   Although there are sound risk management reasons for taking on a layer of risk, such as a greater focus on causes of loss and maintaining a safe and efficient work environment; let’s face it, these reasons were not compelling enough to outweigh the economic impact of taking on a significant amount of risk when premiums were already so favorable.

Fast forward to the current hard market, which continues to harden, and businesses are seeking to take on a meaningful layer of risk to control costs and secure the terms of insurance they require.  In some cases, particularly with property, businesses are being forced to take on high deductibles to obtain coverage with a reduced benefit in the form of premium credit.  So, business owners are looking for a way to reap the maximum economic benefit for the significant level of risk they are taking on.  And again, a captive could be the best solution for progressive business owners.

By forming a captive and purchasing a deductible reimbursement policy from the captive to cover a large deductible assumed by the business, owners have the advantage of deducting the premium paid for the deductible reimbursement policy, just as with the premium for the standard commercial policy to which the deductible applies.

As an insurance company, the captive can establish reserves, or if it qualifies as a small insurance company, it could choose to just be taxed on investment income and not on underwriting profit.  Both these scenarios are much more advantageous than paying for claims within the deductible layer with the retained assets of the company or through a loss fund.  Additionally, the risk management benefits mentioned above can now be realized and further enhance the value of insuring a large deductible through a captive.

Although businesses will undoubtedly encounter additional trying times in the years ahead, captives will remain as lucrative vehicles, enabling business owners to successfully navigate the risk and insurance challenges they face.

Sandra Fenters to Be on Panel @Western Regional Captive Insurance Conference

Tuesday, June 28th, 11am-12 noon.

A Deep Dive into the 4 C’s:

Captives, Control, Consolidation, and Changes

This course will assist service providers in understanding the impact of various captive arrangements on the financial statements and tax returns of captive companies. The ability to communicate the impact of various captive structures, including collateral issues on the financial statements of the insured is an important consideration for financial reporting and tax reporting, whether a separate account, protected cell, incorporated cell, single parent, group captive, or RRG. After attending you will have an overview of the impact of various captive structures on the financial statements of the captive owner/insured.

PANELISTS:

  • Leon Rives, Chief Visionary Officer, RH CPAs

  • Kevin Doherty, Member – Insurance Law Practice, Dickinson Wright

  • Sandra Fenters, President, Capterra Risk Solutions, LLC

  • Nate Reznicek, Head of US Distribution, International Re

A full conference agenda is available here.

Sandra Fenters Debuts on Power 50 List of Influential Captive Professionals

Capterra Risk’s President lands on the Captive Review Power 50 list in 2022.

The Power 50 is an annual list from Captive Review of the 50 most influential captive insurance professionals from the last year.

Captive Review summarized Sandra’s nomination in the following:

President of Capterra Risk Solutions, Fenters and her team manage a number of both national and multi-national captive structures. Passionate about the captive industry Fenters was on the faculty for the University of Delaware’s captive program, and often authors articles on captive insurance. A former broker Fenters has a wealth of experience and is making an impact in the industry.

Fenters began her insurance career with a large international insurance company as a surety underwriter. Her experience spans multiple disciplines including surety, professional liability, commercial liability, and high net worth personal lines insurance. Sandra is an active member of the Self-Insurance  Institute of America, Inc. (SIIA) and sits on committees specific to captives and advocacy. She is joining the Board of Directors of the North Carolina Captive Insurance Association (NCCIA) in 2022.

Congratulations to Sandra and her fellow nominees.

IRS Drops Case against Captive Puglisi Egg Farms

The captive insurance arrangement has been targeted by the IRS in recent years. An autumn court win is a highlight in this long-running battle; it is a victory not only for the captive taxpayer but also for the captive insurance industry.

Puglisi Egg Farms, an owner of a 831(b) captive insurance company, argued that the taxes and fees leveled by the IRS were unfair and unsubstantiated. The IRS decided to drop the fees and taxes before the decision would be announced by the court.

This comes on the heels of a May decision by the US Supreme Court that the IRS does not have special privileges that other government agencies also do not have.

We are pleased to see these cases land on the side of the captive companies. Congratulations to Puglisi Farms. To read more, click here.

 

Captive Insurance Brings Peace of Mind to Houston Business

Client Concern/Issue:

The principals of a Houston-area furniture retailer and interior design firm sought better control over potential business risks that its commercial policies were not covering.

Capterra Solution:

The firm launched a captive insurance program in 2013 to mitigate these risks.

Over 8 years the program has been called upon to cover a number of such claims.  The policy not only covered damage and business interruption losses from Hurricane Harvey, but it also paid claims on lost business due to a key employee exiting the company.

Capterra Risk’s Exceptional Support

The principals value Capterra’s deep expertise in risk mitigation and understanding the retailer’s requirements of their captive program. “Capterra allows us to focus our attention on our business with the ‘peace of mind’ that Capterra has our captive program fully covered.  They rigorously track the program’s details, keep us in full compliance, and update us on regulatory changes that affect our captive insurance company.”

Results/Benefits:

COVID-19: Illustrating the value of captive insurance

The captive program really showed its worth in spring 2020 when COVOD-19 shut down the United States economy. While US government programs did provide some payroll support, the business still suffered closures and significant delays, leading to lost profits. The captive’s Contingent Business Interruption policy paid a significant claim to cover these losses. This claim would certainly have been rejected under a commercial policy.

 

4 Takeaways from WRCIC

By Bill Eleamos

I am just back from the Western Region Captive Insurance Conference.  It was great to be in person with many of my colleagues. And, yes, the Western heatwave got us in Salt Lake City. Daytime temperatures hit 105.

As we expand our client base in the West, the Capterra Risk team felt it was important to invest time in the region – learning about the latest issues and trends there.

I want to briefly update you on 4 insights I gained while at the conference. Capterra already addresses these areas of interest, but it is always good to analyze our best practices to determine if we can improve.

1. The commercial insurance market continues to harden, leading to more captive formations.

Many businesses are experiencing the following in their commercial insurance policies:

    • Rates increasing by 20% – 30%
    • Deductible increases
    • Retraction or decrease in limits
    • Added exclusions to coverages

2. As captive formations and programs become more popular, the industry is seeing a growing interest in several lines of coverage in 2021.

    1. Medical Reimbursement/Stop Loss
    2. Cyber
    3. Workers Comp
    4. Property
    5. D&O
    6. Business interruption
    7. Auto liability

Captive policies fill gaps in the insured Company’s traditional risk management program providing coverage where there otherwise was none or very limited coverage.  Captive Owners and Managers may want to consider moving coverages to their captive, leverage their captive when negotiating their traditional renewals, and request that their traditional insurance carrier and/or broker work even closer with their captive management team.

We should discuss whether you have risk in any of these areas that are not currently insured by your existing policies. If so, your captive may be an appropriate tool to insure for these exposures.

3. As always, there were many discussions focusing on best practices for captive owners and managers. They included confirming:

    • The captive is adequately capitalized.
    • The captive has the ability to pay claims when they arise.
    • The captive is a licensed and regulated insurance company in the state where it operates.
    • The captive utilizes reliable underwriters and actuaries to price premiums with an arm’s length approach.
    • The captive pays premiums in a timely manner.
    • The captive properly documents all activity including but not limited to claims meetings, board meetings, business plan changes, claims procedures, etc.
    • The captive’s insurance policies are working cohesively with the insured company’s commercial insurance policies.

At Capterra Risk Solutions, we focus on these practices intently.

4. We discussed the implementation and growth of CICA’s NEXTGen Program which is a group of young & new professionals in the captive insurance industry.

The program will concentrate on the career development and networking opportunities for young professionals interested in the captive insurance industry. We hope to get more involved.

As a company interested in investing in our Industry, Sandra Fenters is involved in Advocacy efforts on Capitol Hill and Mentorship Programs to aide new captive professionals in their professional growth and career advancement.

We hope to see you in-person soon

As our country continues to remove restrictions after the COVID-19 pandemic, the Capterra team has been traveling more and more.  We have made an effort to visit clients, service providers, and colleagues.

In an ongoing attempt to stay abreast of the latest developments in the insurance world, we will be attending the North Carolina Captive Insurance Association Conference in late August/early September and SIIA’s National Conference in Austin in October.

See you then!

Meet the Team: Jeremy Hirsch

Title: Director of Marketing

Responsibilities: Jeremy is in charge of the firm’s marketing and branding. He was heavily involved in Capterra Risk’s rebranding in 2013.

As a seasoned, senior marketer, Jeremy has run several Marketing departments in both large and small companies.

Time at Capterra: 5+years

Time in insurance/financial services: 5+years

Education/Certification: Jeremy earned his MBA from Carnegie Mellon’s Tepper School of Business.

Personal tidbits:

Jeremy enjoys running, traveling with his family and barbequing.

 

Construction Firm Appreciates Risk Mitigation of Captive Insurance

R.D., Controller of a privately held Pennsylvania-based $150 million construction firm, initiated a review of all the firm’s providers in 2017.  Insurance brokers were asked to complete a comprehensive RFP.

One of the areas the Controller looked to improve was the construction company’s risk mitigation efforts with the possible use of captive insurance.  She traveled to the Cayman Islands to gather more information of this potential risk mitigation tool.

After deciding that a captive plan met the construction company’s goals, R.D. conducted due diligence of 3 captive insurance consulting firms. The construction company selected Capterra Risk Solutions based on its comfort with the team. The construction firm recognized that there are various risks in any business decision, but R.D. is confident that Capterra is a talented partner constantly working to keep the captive in compliance.

R.D. commented that the captive plan provides the following benefits for their Company:

  • Helps risk mitigation as captive covers previously uncovered risks
  • Creates potential to capture underwriting profits with strong loss mitigation techniques
  • Builds awareness of potential claims, risks, and exposures, resulting in improved operations

“Our expectations of launching the captive have been exceeded. The Capterra Risk team keeps us updated on changes in captive regulations and squarely within compliance with the Tennessee Department of Commerce & Insurance.

“We like that Capterra is appropriately cautious. And they encourage us to get involved with activism.”

R.D., Controller, Pennsylvania based Construction Firm