Captive benefits outweigh insurance market’s competitive pricing, says AM Best panel

The advantages of a captive outweigh the competitive pricing found in the marketplace, according to a captives leader panel hosted by AM BestTV at the Vermont Captive Insurance Association (VCIA) conference in Burlington, VT. The panellists said their insureds focus on service, support and claims handling, which helps keep business flowing despite competitive pricing in the traditional market. “It definitely makes sense to have a captive today,” said Kevin Jones, vice president, Iron Horse Insurance Company (a subsidiary of Chevron Corporation). “Regardless of the market, we still need that captive as a vehicle to implement our risk retention and risk management philosophies throughout the company, since we are somewhat resistant to the changes in the insurance market.” The panellists said they believe captives do many things better than the traditional market. “Our retention rate is in the high 90s, and has been for years, so our members get it. They have seen us in action. If they have had a claim, they have seen how we approach it,” said Colin Donovan, president, STICO Mutual Insurance Co, a risk retention group focused on manufacturers, installers and distributors of storage tanks, vessels and related products. Pamela Davis, founder, president and chief executive officer, Nonprofits Insurance Alliance Group, said: “For almost 30 years, my company has served only 501(c) (3) non-profit organisations. Our only mission is to support the non-profit sector and we are continuing to grow in this soft market.” AM BestTV hosted another panel of captive experts at the VCIA conference to assess the growing range of tools and strategies that captives use to measure themselves, focusing on benchmarking. “As a rating agency, benchmarking is a big part of AM Best, whether it is a rating of a captive, a standard automobile carrier, a workers’ compensation writer or a reinsurer,” said John Andre, managing director, AM Best. “AM Best issues credit ratings in 90-plus countries now, totalling approximately 3,400 ratings. At the end of the day, they all bear risk and all have a different story. A huge part of our rating committee for any kind of company is going to be peer analysis.” Andrew Baillie, vice president, AES Global Insurance Co, spoke from the captive owner’s viewpoint. “As a captive owner and an insurance buyer for AES, our view is trying to find equity in what we are doing. That means representing the stakeholders by making sure that the pricing for the cover that we buy is fair and reasonable in the market and being able to ensure that the terms and conditions attached to that are the same,” he said. Peter Mullen, chief executive officer, Aon Captive and Insurance Management, said potential clients demand much more of brokers these days, and benchmarking helps to map out a client’s overall risk profile. “From a broker’s perspective, we look at benchmarking as part of our overall data and analytics function, since we use it to help assess and quantify risk. Overall, what is does is lead to a better decision around capital,” he said.

Captive benefits outweigh insurance market’s competitive pricing, says AM Best panel

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