Author Archives: jeremy

Sandra Fenters Debuts on Power 50 List of Influential Captive Professionals

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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

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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

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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

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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

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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

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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

Captive Insurance Pays Off Over the Years for Specialty Chemical Maker

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10+ Years of Captive Coverage

The owner of a specialty chemical manufacturer has long utilized a captive program to mitigate company risk.

As a business owner, R.L.E. must look at the big picture and consider long-term decisions including purchasing insurance and best practices in risk mitigation.  With Company exposures in mind, the owner is constantly looking for products to help shore up uncovered or undercovered risks in the business his grandfather started two generations before. R.L.E. first learned about captive program benefits in a Vistage group and began working with Capterra Risk Solutions President Sandra Fenters in 2010.

At the time, the CEO found that his Pennsylvania-based Company could not purchase a policy insuring environmental pollution liability with a traditional insurance carrier. He found that a captive program could write a policy to insure for that risk as well as many other uncovered risks.

“We view our captive as a competitive advantage against our competitors.”

Captive Insurance during  COVID

More recently, during the COVID-19 pandemic, the chemical manufacturer had issues with its supply chain and struggled to get specific packaging parts delivered on-time or at customary prices to produce the company’s key consumer products. R.L.E. found it had to pay premium prices and to airfreight the pieces to his factory in order to fulfill customer orders. The additional expenses caused by the extraordinary situation were insured by a policy written by the captive; they would not have been reimbursed by their traditional insurance policies. The owner comments “After 10 years and as illustrated by the pandemic, our captive continues to serve our risk mitigation needs.”

“We view Capterra Risk Solutions as a very efficient team that serves our needs well. They know the industry and counsel us to ensure our captive is in compliance with regulations.”

Meet the Team: Bill Eleamos

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Title: Controller & Fiscal Officer

Responsibilities: Bill manages the day-to-day accounting functions of all captive insurance companies under Capterra Risk Solution’s management.

He is also responsible for the accounting operations and strategic planning of Capterra Risk Solutions, LLC.

Time at Capterra Risk: 5+ years (Bill joined in 2015)

Time in insurance/financial services: 10 years

Education/Certification: Bill graduated from Clarion University of Pennsylvania with a Bachelor of Science in Accounting. Subsequent to his undergraduate degree, he obtained his Master’s in Business Administration (MBA) from California University of Pennsylvania.

Bill has also obtained his Associate in Captive Insurance (ACI) designation from the International Center of Captive Insurance Education.

Personal tidbits:

Bill is married to Victoria; the couple has a two-year old son (Maxon). They live in the Canonsburg, PA area (south of Pittsburgh).

During his free time, Bill enjoys golfing in a local league, taking his son to gym class and swim lessons, and vacationing in Myrtle Beach, SC with his family.

Bill is an active member of the All Saints Greek Orthodox Church in Canonsburg.

 

What Brokers Really Need to Know about Working with Captive Managers

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Sandra participated on a panel discussion at the SIIA 40th Annual National Conference & Expo in October titled “What Brokers Really Need to Know about Working with Captive Managers.”

Park Eddy from Active Captive Management and Ken Kotch from Ryan, LLC joined Sandra on the panel.  The panel discussed how the Broker and Captive Manager work together to best serve their joint clients.

Major Takeaways from Panel

Sandra and her fellow panelists highlighted these points:

  • The market is hardening: The panel discussed the hardening market where clients are seeing rising premium rates (20+%), reductions in limits and capabilities, and cancelation increases. All of this hardening is in absence of significant claim payouts.
  • Speak as one unified voice to the client: Captive Managers partner with brokers to fill in gaps in coverage for the client. It’s critical that the broker and captive manager provide one valuable solution, delivered in one consistent voice.
  • Eliminate duplicative coverage: After filling in gaps in a client’s coverage, it is key for the team to cut products that are overlapping.
  • Brokers benefit from working with captive managers: A complete risk mitigation solution leads to a happier client whose captive company fills in gaps in coverage as well as potentially being a profit center. Also, fruitful broker relationships with captive managers create access to a broader network of professionals that is likely to provide the broker with new business opportunities.
  • Captive Managers often fill the role of a quarterback: We are creating an insurance company so a number of qualified professionals with specific skills such as actuary, legal, and tax need to be brought to the team. Captive Managers have the expertise to recruit and coordinate these disparate functions to deliver on best practices.
  • Accounting experience for Captive Manager: Sandra recommended that accounting expertise, especially tied to insurance, is particularly valuable for this leader.
  • Recent business interruption losses due to COVID shutdowns are a big issue: Many brokers have unhappy clients who have suffered losses due to the pandemic. Given that traditional insurance is typically not paying business interruption claims, captive insurance can cover these losses. This should be attractive to brokers’ clients.
  • Code of conduct important for clients and brokers: Sandra discussed her work on a SIIA committee that created and distributed its code of conduct for Captive Managers. Clients and brokers should assess a Captive Manager’s adherence to these principles.
  • Quarterly claims reviews are important: Firms get busy and often neglect to make the appropriate and required claims for losses. These reviews are significant to ensure that a captive insurance company is taking on the required financial risk transfer within a company.

SIIA members can view the complete webinar on SIIA’s Canoe site.

Brokers are encouraged to contact Sandra for more discussion about these best practices. Sandra can be reached at sfenters@capterrarisk.com.

How Should You Best Manage Your Risk Given the Hardening of Commercial Insurance Markets

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Are you getting decline letters from insurance carriers? Did rates go up at renewal resulting in higher premiums charged?  Are you seeing restrictions or retractions in coverage terms and conditions or reduction in limits available?

The pandemic has caused the greatest economic disruption in generations.  All industries are affected, causing many firms to rethink their business models, operations, and risk appetites.  Given the current circumstances, many companies are reviewing their risk management plan and uncovering potential risks and exposures they hadn’t considered in the past.

At Capterra Risk we have played active roles in the insurance industry for 25 years. There has never been one global shared risk that enacted such extensive global changes including those we are seeing in the commercial insurance market encompassing so many lines of coverage.

We are sure you are seeing some of these changes:

  • Premiums are going up, even if claim histories are low
    • Commercial property insurance pricing in the U.S. increased 22% in the second quarter of 2020, according to the Global Insurance Market Index by Marsh LLC.
    • Commercial financial and professional liability insurance average rates in the U.S. increased 30%, as pricing in the directors and officers market was up 59%, with more than 90% of clients experiencing an increase, Marsh said.
  • Insurers are limiting coverage or adding more exclusions
    • Several D&O insurers are also trying to impose both bankruptcy and COVID-19 exclusions in their policies
    • Joe Peiser from Willis Towers Watson adds “we’ve seen intense underwriting reviews, reductions in available limits, non-renewals and even some cancellations.”
  • Companies are scaling back or exiting sectors
    • According to Peiser, for distressed industries like retail, hospitality and health care, rate increases could be even worse, given a dramatic fall-off in insurance capacity for these sectors.

Hardening of Market

In the fall of 2019, the market began to firm and has continued to harden, meaning that insurance companies are reevaluating their coverages offered in light of the changing market and uncertainty. Consequently, we are seeing premium increases, reductions in available limits, retractions in coverage terms and conditions, denials, and even some insurers exiting markets.

With the pandemic, resulting recession, and current social unrest, this hardening market is not likely to change anytime soon.

As an owner looking to cover business risks, the limitations being added to the commercial insurance policies in this hardening market will likely impact you in a significant way.

What Does This Mean to Business Owners?

You have various (some undesirable) options including, but not limited to, (1) purchasing coverage in the traditional market with reduced limits, (2) purchasing coverage in the traditional market with higher deductibles, (3) going without certain coverages and taking on more risk in your business, (4) purchasing coverage with truncated terms and conditions, (5) reducing your highest-risk operations within your Company.

Another option that is getting more attention in 2020 is forming a captive to write coverages and ultimately reduce some of the effects of the hardening market.

Benefits of captive insurance include:

  • Captive owners better control their own risks, customizing policies to fit their operation and needs.
  • Take higher deductibles on traditional policies and have the captive write a deductible reimbursement policy.
  • If there is not capacity in the traditional market for higher limits, the captive may be able to write an Excess policy with additional limits above those written in the traditional policies.
  • A difference in conditions policy can be written to fill those gaps in the traditional policies.
  • Owners retain profits as opposed to simply paying premiums to commercial programs.
  • Encourages you to be better educated on risks, incenting your business towards better risk management behaviors.

Large companies have taken advantage of the benefits of operating a captive for many years.  The 1986 Tax Act provided the 831b captive framework for smaller companies to have the opportunity to form a captive and the ability to manage risks the way a bigger Company could, by utilizing a Captive.

The lines of risk customers are most keen on insuring through a captive are property DIC, directors and officers, cyber, professional liability, product liability, and trade credit.

 

Does it make sense for you to form a captive?

Contact Capterra Risk Solutions, LLC to find out if your Company is a good fit to form a captive.

Now might be the time to consider captive insurance.  Let us provide a free evaluation of your business’ risk mitigation needs and whether captive insurance can benefit you in this hardening market.