Arizona: The heat is on!
Captive conference features cutting-edge educational opportunities
By Michael J. Moody, MBA, ARM
As we head into spring, this year’s captive conference season begins in earnest. Accordingly, May 6-8, 2008, finds the Arizona Captive Insurance Association (ACIA) scheduled to present its fifth annual conference. The ACIA conference will be presented at the Arizona Biltmore Resort and Spa in Phoenix, Arizona. Participation in the captive conference has grown each year, and early levels of interest this year would indicate another record-setting year.
Arizona is one of those domiciles that is growing despite the soft property and casualty insurance market. According to Michael R. Mead, CPCU, president and director of AICA, “Arizona continues to grow with over 100 captive licenses issued and many more underway.” Mead, who is also the president of Sonora Captive Management, LLC, notes that the domicile has lost its Captive Administrator, “and we are anxious to see a replacement, but the Department of Insurance is responding well with no problems.”
Despite the departure of Arizona’s captive administrator, Rod Morris, the department’s personnel have stepped up to their expanded responsibilities. The Department of Insurance indicates that so far this year it has approved four pure captives plus one agency captive. The pure captives include one local hospital, one local insurance agency and two large national commercial construction contractors. The department also advised that a number of other applications are still in the pipeline.
Annual conference
The first day of the conference will be highlighted by two strong introductory captive sessions. Mead notes that this year “our Captive 101 and Captive 201 sessions have been greatly expanded.” He says that the “Captive 101—an insurance primer” is structured as an interactive session that explores the multiple stages of forming and operating an Arizona domicile captive. Other topics that will be included in this session are feasibility of a captive, various types of captives, legal structures, and business plans. Additional information will be provided on how to get started, as well as ongoing operating requirements.
The other breakout session will be “Captive 201—Operations of an Arizona Captive.” This session is structured around the challenges and issues that must be addressed in the ongoing operation of an Arizona domiciled captive. Among the topics covered will be corporate governance, current accounting and related financial challenges, plus the expansion of the captive uses and corresponding changes in business plans. Both of these introductory sessions will include representatives from single-parent captives as well as risk retention groups, captive managers and legal counsel. They will also include a representative from the domicile’s regulatory agency.
The highlight of the second day of the conference will be the keynote address by David Mair, whose presentation is titled “Climbing Out of the Desert Haze.” He will touch on the alternative insurance market and where it fits in the changing global business and social environments. This will be followed by one of the key sessions of the conference about putting employee benefits in a captive. Speakers at this session will discuss current events as well as emerging trends in the benefits arena.
Other sessions that will round out the day’s events include a discussion of the legal and regulatory developments in the domicile, and specifics regarding the current market for fronting and reinsurance. This session will focus on how issuing carriers and reinsurers are working to help captive owners meet their regulatory and business requirements, while acting as a tool for managing capital and retention levels.
An additional session will provide an overview of risk retention groups and will provide an update on the various states’ challenges to circumvent the federal exemption provisions. The session will also include a discussion of the proposed NAIC governance standards. The second day of the event will also mark the return of the popular “Captive Owners Roundtable.” This session, according to Mead, will provide an open forum for Arizona captive owners to share information about captive uses, issues, challenges and successes.
The final day’s sessions will begin with a proactive look at how captives will fit into the enterprise risk management movement. Now that ERM has become the “gold standard” for measuring the effectiveness of a firm’s overall risk profile, it is critical to find out how to best utilize a captive. The other highlight of the last day’s sessions will be an in-depth view of captives and taxes. Recent developments concerning the Internal Revenue Service’s position on several critical tax-related issues will be discussed by several of the legal representatives who were actively involved with the decisions. A representative of the IRS also is expected to participate in the panel.
State of the state
Morris tendered his resignation late last year, but the Department of Insurance has kept moving forward. In order to address any concerns, this year’s conference will have in attendance the director of insurance, who, according to Mead, will “be widely available for questions and discussions.” And despite a statewide hiring freeze, which currently precludes a replacement, “the DOI has not encountered any delays or glitches in captive formations or regulations,” says Mead.
Consistent with the state’s pro-business approach to captive formations, recent changes to the Arizona captive law have provided for a relaxation of several requirements. The first standard that has been modified is the automatic exemptions for Actuarial Opinions and Audit Requirements. Additionally, the State has also relaxed its standards for the publication of Risk Retention Group’s Annual Reports.
It is clear that Arizona is committed to a pro-business regulatory environment for entities that display a high level of ethics, quality, competence, and stability. And the 5th Annual Conference is certain to be another record setter. Mead points out, “This year’s conference is shaping up to be our best ever.” And he notes, “Registrations in the early days are substantially ahead of previous years.”
All captive conferences provide an excellent learning opportunity, and the ACIA Conference is no different. Its sessions will touch on topics that are bound to be at the cutting edge of the captive movement. Further, the ACIA has planned a number of unique opportunities for interaction between the conference participants. It is easy to see why the Arizona Captive conference has rapidly grown to be one of the “don’t miss” events of the year. *