Our pitch to clients is that we can handle all their captive insurance business, including structural and corporate formation issues, reinsurance and coverage issues, tax planning and advice, Internal Revenue Service audit assistance and any related litigation.

We have been intimately involved with domicile establishment and growth, drafting of legislation, maintenance of good relationships with regulatory authorities, and generally working to keep the domicile strong. We make sure that all three legs of the proverbial three-legged stool remain strong: the executive (governor, commissioner, and regulators), the legislature, and the private sector.

Captive insurance is a vital and growing industry in most areas of the world. The pandemic and the hardening market have combined in 2020 to create unprecedented challenges, but remarkable growth for the captives industry.

The most important thing that members of the industry and the regulators need to do is communicate and work together. A strong public-private partnership is the only way to guarantee growth and secure the future for captives in any domicile. This means that the concerns and needs of each of the industry and the regulators must be understood and addressed by the other.

Both must be dedicated to a vibrant, solvent, and productive captive insurance industry. This does not mean that every captive idea from industry will be approved, but it does mean that every reasonable and responsible captive financial proposal should be given every chance to succeed by the regulators within the reasonable bounds of the law.

Industry must recognise the foregoing and work in a dedicated fashion to make sure this environment exists in every domicile. We must work hard to make sure that every captive proposal is clear and accessible to the regulators so that all reasonable proposals can be approved and successful.

Captives have become infinitely more complicated and diverse as the industry has matured and captives have grown in numbers. In the old days, we basically had single owner and group captives. Now we have segregated portfolio and cell captives, with all sorts of possible corporate structures and combinations.

We also have sponsored captives with a variety of different types of cells (incorporated, unincorporated, etc) within the same captive, something that was unimaginable a short few years ago. This means that those of us in the industry who help design captives and submit proposals to regulators have to work harder to make sure that any proposal is clearly understandable, and easily capable of being approved. It is important that the benefits for the owners and the domicile are clear to everyone.

Mark Twain once apologised to a friend for writing a long letter—he said he would have written a shorter letter, but he didn’t have enough time. I feel like we are living like that right now in the captive insurance industry. This growth has meant that all professionals in our industry have to spend much more time on applications and yearly maintenance than in the past.

There is not a short cut to success, unfortunately, which means we will continue to have to spend substantial time on each captive in order to be successful.

We are fortunate in our business that we are able to work remotely. A good computer and a cell phone is all most people in our industry need to be able to work and to be productive. Most of us are now working at home more than in an office.

In part because most people are not travelling very much now, our productivity actually has increased. We have more time in the day because we don’t commute much and we don’t travel. It seems as though we have filled that time and more with productive endeavours, and our business has grown significantly.

Moreover, with the advent of Zoom and other virtual meetings, we are able to meet with more people in less time than ever before. We can literally go from one meeting to the next via virtual or video call without any lost time for travelling. Granted, we could do that before with phone calls, but I believe the ability to do it with video makes these meetings more valuable and more similar to in-person meetings.

“With the advent of Zoom and other virtual meetings, we are able to meet with more people in less time than ever before.”

I wouldn’t pretend that a Zoom call is a substitute for an in-person meeting, and there are many important things that in-person meetings still offer. But I do believe, given time constraints, that we have discovered a new and exciting way to work productively.

Of course, I am saying this from the perspective of someone who has been in this industry a long time and knows a lot of people. This type of work environment would be much more difficult for younger or less experienced people who simply don’t know as many people. For that reason, I believe it is incumbent upon all of us who are experienced in the business to help younger people get to know others in the industry as much as possible.

We have reached a new normal in our industry, like many others, where travel will be less frequent even after the pandemic is behind us. Captive insurance professionals are amazingly flexible, and as far as I can tell most, if not all, have adapted well to this new environment. Consequently, I believe the captive insurance industry will continue to grow and flourish for a long time as captives expand more into the mainstream economic life of more businesses.

In many ways, captives are the same as other corporate clients. They have a structure, a definite life span, and can enter into agreements once they are licensed. However, captives live in a much more complicated regulatory and tax environment than most other corporate clients.

As regulated entities, captives are required to have their basic business plans approved, they can invest their assets only as the regulators deem fit, and they are restricted from doing business outside of their domicile.

In addition, they exist under a very uncertain and complicated federal tax environment, where there is still no certainty regarding what constitutes insurance and what doesn’t. While this makes the captives industry challenging, it provides great opportunities for captive insurance practitioners.