Wednesday, September 19, 2018

Reasons Why Starting a Captive Insurance Company in CT is a
Great Idea:

#10 Generous Support and Financial Assistance for Captives 
Connecticut provides many options for attractive and lucrative support packages of financial incentives, recruitment and training, research and development support tailored to each captive insurance company’s needs. The state works with captive insurance companies in an ongoing partnership to ensure all the necessary support is given from the start-up phase and throughout the lifetime of the captive insurance companies’ growth to develop and expand the business and to improve legal and financial soundness.

The state offers a wide range of programs to help companies prosper in Connecticut with financing, tax credits and other incentives including site selection services.  Connecticut also has a strategic venture capital arm that serves as a leading source of financing and ongoing support for innovative, growing companies. 

For additional information, please visit CCIA's website and review our October 2018 Annual Collaborative agenda. Registration is open.  Sponsorships are also available.

Monday, September 17, 2018

Connecticut: Still revolutionary in captive insurance

The previous blog post I wrote for this Connecticut Captive Insurance Association (CCIA) site was related to the innovative use of a captive to fund the crisis of crumbling foundations that has hit homeowners in portions of eastern Connecticut. This is a complex, difficult issue and progress continues to be made, led by one of our CCIA members, Michael Maglaras & Company. Connecticut is also pushing forward to form a captive to help stabilize special education costs for towns and municipalities across the state. This is another very difficult issue that Connecticut has decided to tackle head-on with a revolutionary approach.
So why would you be surprised to hear about CCIA’s revolutionary upcoming annual event, the Cap-a-thon? It is a dynamic, “design sprint” approach to learning more about why and how the fastest-growing risk in our business, cyber insurance, is being placed into captives. The structure is a “hack” on a hackathon, which is a concept born out of the tech world, and will provide a condensed amount of time for collaborative, team-based work.
With the standard captive insurance conference competently covered by other domiciles, CCIA tries to continually reengineer and reinvigorate its annual event. This year, we are capitalizing on the innovative hackathon concept with our Cap-a-thon event. By encouraging intense collaboration and teamwork, focused on particular industries, we aim to help attendees uncover new captive solutions that open the door to further business opportunities and relationships. We believe that captive insurance owners, risk managers from companies considering the formation of captive entities, and emerging start-up companies will all benefit from the sharing of innovative solutions to emerging cyber risk issues. In addition to having access to a few cyber expert panelists who will set the stage for approaches to understanding, managing, and quantifying cyber risk, team members will be offered access to live cyber industry data under the direction of a cyber subject matter expert.
The genesis of this idea came from John Thomson, who is currently serving as CCIA’s Executive Director. John, CCIA board member Dawne Ware of Ware Consulting LLC, and I have been actively involved with the many (and I mean many) ongoing events happening in the Hartford insurance innovation “ecosystem.” Much of this activity originated from collaboration between state and local leadership and private company support. CTNext, a quasi-public entity, was created to support the growth and success of companies and entrepreneurs by providing guidance, resources, and networks. CTNext and three prominent Connecticut insurers joined forces with Startupbootcamp to launch the United States’ first accelerator for insurance technology, in Hartford. The accelerator, part of what’s called Hartford InsurTech Hub, also receives matching grants from insurers and others. The goal is to bring innovation to the insurance industry in Hartford and to foster new insurtech companies and growth in local jobs. In addition to the deliberate efforts in insurtech, CTNext has partnered with others in the community to gather large, Hartford-based innovation partners in other industries such as digital health and additive manufacturing. Over the course of the next year, you can expect to see accelerator programs supporting these industries, as well as insurtech, kicking off in downtown Hartford.
CCIA is proud to participate in this ecosystem. Earlier this year, John and I took part in a panel regarding captives and insurtech that was hosted by Upward Hartford. The audience became much more familiar with the benefits of captives and their future uses in the insurtech age. Captives are proven commercial risk-financing vehicles that allow companies to better manage their risks. We and others in the captive industry believe that insurtech and other innovations will have as big an impact on captives as they do traditional commercial insurance.  On October 16/17, with Upward Hartford as our host, we will endeavor to create an exciting new learning environment for furthering growth in captive insurance in Connecticut.  Register here!

We look forward to seeing you there!

Stephen R. DiCenso, President, CCIA

Saturday, January 27, 2018

Captive to their crumbling foundations

It’s not very often that those of us who work in the captive insurance industry can state that the main reason a captive is being formed is to directly improve the lives of individuals. After all, captives are commercial entities typically formed with the intent to improve a company’s risk management processes and reduce its cost of risk.
But we here in Connecticut are still revolutionary, as our state’s advertising campaign indicates, and our state government officials have developed a potentially revolutionary solution to an unexpected problem that has recently beset thousands of Connecticut residents. In June 2017, the state legislature passed SB 1502, which authorized the future formation of a nonprofit captive insurance company to manage the “crumbling foundations” exposure to many Connecticut residents’ homes.
The damage to these homes’ foundations was caused by the use in concrete of a stone aggregate mined from a quarry that contained the chemical pyrrhotite. The ugly cracks that are forming manifested decades after the foundation was poured. Homeowners insurance companies have generally (i.e., with some exceptions) denied coverage, stating that this type of event does not fall within their “sudden and accidental collapse” coverage provision. And the home builders also were not required to carry a home warranty policy that could have provided coverage for such a latent exposure.
The extent of the frequency of damage is still unclear—the Connecticut Mirror reports that nearly 600 homeowners in over 35 towns in eastern Connecticut have seen damage. Estimates of the potential number of homes affected are very difficult to make and have varied widely, but the same Connecticut Mirror report puts it around 5,000. With the cost of raising a home and re-pouring a complete foundation frequently running from $150,000 to $200,000, the total exposure to loss could be in the billions.
Upon licensure by the Connecticut Insurance Department, the proposed not-for-profit captive will be funded by the newly created Crumbling Foundations Assistance Fund. The main contribution to this Fund comes from the state’s authority to issue bonds. The total authorization will not exceed $100 million in aggregate, with a maximum of $20 million authorized for each of the next five fiscal years. The captive funds will allow affected residents to repair or replace their foundations, and will also fund various other programs designed to provide relief to affected homeowners.
A captive structure has a number of advantages over a general state fund: 1) a board of directors will be established, 2) homeowner eligibility guidelines will be developed, 3) the expected payouts will be estimated by an actuary, 4) the claims payments to eligible contractors will be managed closely to ensure a fair distribution, 5) overhead expenses of the captive will be capped, and 6) the captive will provide regular claims and financial reporting to the legislature.
At this pre-formation stage, it appears that the proposed and likely non-profit captive will not be a risk-taking vehicle; it will operate with a maximum payout, likely established by the actuarial estimate. The captive is essentially providing retroactive insurance coverage. Bottom line, it will operate as an insurance company and have multiple layers of oversight, not the least of which is the strong regulatory framework in place at the Connecticut Insurance Department.
We at the Connecticut Captive Insurance Association wholeheartedly support this innovative use of a captive insurance company, and we will support the insurance department’s efforts to get this captive formed and operational. But, more importantly, we hope that it provides true relief for the many homeowners impacted by this very unfortunate set of circumstances.

Stephen R. DiCenso, President, CCIA