Agency captives can align the interests of brokers and insurers

Agency captives can allow agents or brokers to build strong relationships with insurers – and sometimes entice an insurer to write difficult to place business, according to David Provost, deputy commissioner of the captive insurance division of the Vermont Department of Financial Regulation.

Provost spoke to Captive International ahead of the CICA 2018 International Conference in Scottsdale, Arizona, about the benefits of agency captives and the reception they have had in Vermont since it amended its captive insurance law to allow them.

“By sharing the risk – having skin in the game – the agent is strongly incentivised to underwrite stringently,” said Provost. “The reception has been very positive.”

Provost noted that Vermont has not issued any licenses for new agency captives yet, but has had a number of discussions with several companies.

“At least one prospective agency captive owner found the sponsored cell legislation so flexible that they opted to form a cell company instead,” he said.

“We haven’t had enough activity to call anything a trend yet. We’re patient and did not expect a flood of new business, but we’ve had conversations and that’s where it starts.”

Vermont did, however, have a strong set of captive formation statistics in 2017, with 24 new licenses.

The new captives included 11 pure captives, five sponsored captives, three risk retention groups (RRGs), three special purpose financial insurers, one branch captive and one industrial insured captive.

Some of the new and notable captives include Life Time Fitness, AAA Northeast, Barclays Group US, and Bright Horizons Family Solutions.

2017 also showed continued growth in the healthcare sector, which represents the largest industry sector in Vermont for captive insurance, with 100 active captives and five new captives formed. This included Practice Protection Association of America, Assurance Agency, Northwell Health, Pharma Management Enterprises and Inspirien Holdings.