Captive Insurance Companies Association Special Section

CICA leadership moves toward the future

Continued networking and monitoring of regulation will be priorities

By Michael J. Moody, MBA, ARM

The Captive Insurance Companies Association's (CICA) annual conference, which is scheduled for March 11-13, 2012, typically marks the advancement of the new leadership that is headed by the board chairman. This year the board chair is Dirk Heim, vice president of Sierra Land Group. Like several of the last chairpersons, Heim is a captive owner who is committed to advancing CICA's mission. By his own admission, "I'm not normally a joiner, but CICA provided so much assistance to me over the years, I wanted to give back something."

Hands-on experience

Sierra has been involved with captives for quite some time. Heim points out that the company "formed its captive in the Caymans in 1982." While Sierra currently is primarily involved with building and operating hotels, he says, "In 1982 their primary business was hospitals and nursing homes." And he notes that this was a class of business that has suffered in the insurance marketplace. But, he points out, while the scope of their business has changed, Sierra's commitment to the captive has not.

Not only does Heim get involved with all of the insurance-related matters for Sierra, he also is responsible for claims management and safety-related issues as well. Included within this broad scope of responsibility is the operation of the captive. For a variety of reasons, Sierra has chosen to maintain the Caymans as its domicile for the captive operations. Today, Heim points out, the captive is used primarily as a funding vehicle for the deductibles on various programs. "We have a good risk management team and good control over our claims, so as a company we take a pretty high deductible."

And, he adds, "Where it makes sense, we have a pretty fair amount of risk and we transfer this to the captive." Regardless of the business or the state of the insurance market, he says, "the captive has played a significant role in our risk-financing program."

CICA involvement

Heim has been a member of CICA for about five years. He notes that it was the ability to be able to talk to other captive owners that initially drew him to CICA. And while the sessions at the meetings are always excellent, it still is the networking opportunities that he enjoys the most. "That is still my favorite part of the conference, meeting other captive owners and learning what they are doing." As a result, he is a strong supporter of the conference session that is restricted to captive owners, where they can discuss topics of mutual interest.

However, the networking goes beyond meeting other captive owners. It also applies to vendors, regulators and other interested parties. Heim notes that it is always good, for example, to chat with exhibitors. He believes that an owner or prospective owner can gain significant insight into the captive movement by talking with exhibitors. And, he says, there is always the possibility of utilizing the services of some of the vendors. In his case, they tried to accomplish a task involving the captive with their normal service provider; however, it became quite complex and difficult to do. "Our traditional service provider had to get their legal departments, and then additional fees soon began to mount," he says. Bottom line, "They were trying to reinvent the wheel."

At this point, Heim says, they decided to use a service provider that he had met at a previous conference. This was a service provider who had "specific captive experience." What a difference. "They were so much easier to work with, and they knew exactly what we needed." He says this was a good lesson for him, since now he makes certain that they always try to secure the services of vendors who have captive experience.

2012 and beyond

CICA's leadership is aware of the changing captive environment that new, worldwide financial regulations will place on its members. While some of these regulations were introduced prior to the financial crisis, most are a direct result of the failing of the financial industry. Heim points out that while CICA has always been active as an advocate for the captive industry, today, "there is a lot more going on, and captive owners typically have limited resources available to them." Additionally, even state captive associations may have difficulty maintaining a global view of these regulations. "Thus, it is important for CICA to continue to find ways to maintain or even strengthen its advocacy role." A top priority for 2012 will be to develop a strategy for CICA to continue to update its members on these important areas of concern.

In addition to more specific advocacy efforts, the annual conference will provide educational sessions aimed at the increasing regulatory landscape. Those include sessions that deal with U.S. legislative issues such as Dodd-Frank, and subsequent amendments such as the Nonadmitted and Reinsurance Reform Act of 2010, as well as international regulations such as Solvency II. Additionally, there are several sessions that deal with potential tax issues that may arise for captive owners.

Heim also notes that there are general sessions where both captive owners as well as service providers can discuss issues of interest. These would include such issues as health insurance opportunities for captives and middle market captives. "We believe that we have put together a conference that will attract participants at all levels of experience," Heim states.

Thanks in large part to the global impact of captives, one of the major issues that occurred during the last half of 2009 is that CICA has established a formal working relationship with the European Captive Insurer and Reinsurer Owners Association (ECIROA). Heim indicates that it is important for CICA to become more international in its focus as more international corporations become involved in the captive movement. He states that CICA is trying "to provide a platform for the captive industry to move forward."

Among other things, this should provide closer monitoring of international regulatory bodies that can have an effect on captives regardless of whether they are state, federal, or even at a county level. Heim adds that this is why it is important to maintain CICA's advocacy role. "Insurance regulations have become international in their scope, and thus it is important that our involvement with ECIROA continues to grow in this important area."

Conclusion

Based on Heim's past performance, one would expect to see more activities to help captive owners that can be provided via peer-to-peer exchange of ideas. He has long advocated a direction that constantly adds value to CICA's membership such as the various networking opportunities. He notes, "The diversity of the membership and the fact that they all have something to contribute" makes a CICA membership that much more valuable.

Frequently a trade association, via its leadership for a given year, takes on the agenda of the chairperson. It appears that this will also be the case as Heim takes over the reins of CICA for 2012. He will remain committed to providing ample opportunity for networking at conferences, not only networking among peers, but also among captive owners and service providers. Additionally, he believes developing a more aggressive advocacy position for the organization will provide CICA with a solid foundation for assisting its members going forward.