Captive Insurance Companies Association Special Section

CICA looks ahead to 2012

Organization's domicile-neutral approach makes it a key international player

By Michael J. Moody, MBA, ARM

Interest in captive insurance companies continues to grow and while there are any number of places to get information about the captive movement and the current state of the captive industry, there is none better than the Captive Insurance Companies Association (CICA). For the past 40 years, CICA has provided the captive industry with unbiased, domicile-neutral information and viewpoints on captives.

As CICA gets ready to celebrate its 40 years of service to the captive industry during its annual conference scheduled for March 11-13, 2012, Dennis Harwick, president of CICA, provides some insight into the past year as well as a forward look at the upcoming year and beyond.

Since its founding in 1972, CICA has worked to foster and support the development of captive insurance companies around the globe. Over that time frame, CICA has expanded the array of services to members, increased resources to any interested parties and generally encouraged greater cooperation with the various worldwide domiciles.

The way we were

For CICA, many of the challenges that faced its members over the past few years continued in 2011. Among the more pressing issues were proposed state and national insurance-related regulations, as well as new tax and accounting issues. Harwick points out that the "complexity of the regulatory, tax, and accounting issues has grown significantly. When you look at the international stage, it is in a state of flux." For example, the issues surrounding the on-shore vs. off-shore "is not as cut and dried as it previously was." As a general observation, he says, "A lot of captive-related issues are still up in the air."

"CICA membership in 2010 and 2011," notes Harwick, "continued at its all-time high." However, CICA realizes that it must continue to provide the types of services that its membership requires. And Harwick points out, "There is a growing consensus that waves of legislative and regulatory change will keep rolling in at all levels: states imposing new taxes (surplus lines and non-admitted), the NAIC and U.S. government imposing laws and regulations (Dodd-Frank, Nonadmitted and Reinsurance Reform Act [NRRA], etc.), and European and off-shore domiciles making adjustments (Solvency II and equivalency)—all in all, creating an unsettled environment."

Accordingly, "The CICA Board spent a lot of time discussing CICA's role in providing advocacy for a balkanized industry." Thus, he points out, "CICA intends to take a more formal role in monitoring, communicating, and responding to these challenges with a more proactive advocacy effort, while continuing to provide its traditional educational and networking opportunities."

One of the areas that CICA has improved during the past year was the CICA Web site. Harwick points out that CICA now has a "new and improved Web site" that offers visitors many additional upgrades and infrastructure improvements. The site now has a section dedicated to current industry and CICA news. Additionally, CICA will be "debuting several 'connected community' discussion groups for captive owners and captive managers to candidly discuss issues among themselves."

Future tense

The year 2011 was a steady one for CICA while the captive industry was holding its own and even making incremental advances in numbers. The economic downturn has kept insurance premiums in the traditional market at low levels, so Harwick points out that captives "were being formed and utilized for strategic reasons—not to chase lower premiums."

Looking forward to 2012, many industry experts believe that it will be a year of transition with firming of most insurance rates. Harwick believes that this will stimulate further interest in the alternative market. Thus, he believes that, overall, there will be much more in the way of captive feasibility studies, etc. This, of course, is good news for CICA, being a domicile-neutral captive association. "I think that more and more, potential captive owners will be looking for relevant information, and that is where we excel."

The primary concern with regard to CICA's regulatory oversight role will be the overall effects from the Dodd-Frank law and subsequent amendments. While Dodd-Frank is now law, it is the ability to add amendments that concerns many in the financial services sector, including captive owners. Fortunately, Harwick notes, the mechanism for the review process had already been put into place when CICA "in conjunction with a number of state captive associations reviewed proposed IRS consolidated return legislation a couple of years ago." Harwick points out, "We were able to come together as an industry and work together for a successful outcome."

At this point, he says, "It is clear that the federal government will now be playing a bigger and bigger regulatory role." For example, the recent NRRA amendment to Dodd-Frank offers a glimpse into how this may play out. Harwick indicates that the amendment had many in the captive community concerned about the effects on the industry. CICA has been reviewing this topic, and one of the education sessions at the conference will address this issue.

With regard to the accounting issues, Harwick notes that Solvency II will continue to be the primary focus. At this point, he says, "Solvency II has been primarily a concern for the European captive community." However, he also notes that with so many international companies being involved in the captive movement, CICA will also have an interest in the outcome of Solvency II. And, as if all this uncertainty were not enough, Bermuda has recently introduced new legislative measures known as "equivalency," which is bound to complicate the issue further.

Moving CICA to a more international organization has been one of the top priorities for the past few years, and Harwick indicates that this will continue in 2012 as well. Attendance at international conferences and workshops, along with state and off-shore domicile captive associations, will be on Harwick's agenda for 2012. He also notes that CICA will be the co-sponsor of the semi-annual European Captive Insurance and Reinsurance Owners Association conference later in 2012. He believes that a closer working relationship between the two groups will benefit members of both groups.

Harwick concludes, "As usual, CICA will continue to work closely with partners in the captive domicile association arena." He also notes that CICA will continue to enjoy a good working relationship with the International Center for Captive Insurance Education (ICCIE).

He notes that ICCIE over the past few years has become the skill-training arm of the industry.

Conclusion

CICA understands the importance of the role it has in promoting the captive concept. For the past 40 years, it has taken on this role willingly. Over those years, it has expanded its focus to a truly international view. Long term, these decisions should strengthen the overall captive movement and provide captive owners with the unbiased educational and networking opportunities that can best serve their members.

Insurance agents and brokers who have an interest in learning more about the captive movement and this approach to risk financing should give some thought to attending the CICA annual conference. The agenda of educational sessions and numerous networking opportunities is not available elsewhere. And as will become apparent to any participant, it is clear that there continues to be a need for a domicile-neutral voice for this movement. CICA fills this role perfectly.