8 August 2019

Captives should regularly review the business they write

Steven McElhiney, chairman and president of Dallas-based EWI Re, and president of the captive Tall Pines Insurance, has advised captive owners attending the VCIA conference to continually review the business written by their captives after they are set up.

“You should be using it as a strategic risk tool if you want to get the most value out of it,” said McElhiney. The captive is then a viable alternative if the availability of off the shelf insurance is limited.

He advised companies launching their own captives to start slowly and expect there to be a learning curve when dealing with claims processing and other elements of running an insurance company.

“Over time you can grow the business, driven by whatever your business needs,” said McElhiney. “Your captive is a living, breathing thing, risks are always changing. If after ten years you have not changed what the captive is covering it is probably time to look at it again.”

McElhiney said Tall Pines had recreated a supersedeas bond when the terms being offered in the commercial market were not attractive, mimicking the 100 percent collateral required by the surety company. But where the commercial bond required the collateral be cash, Tall Pines used stock as collateral, the value of which rose dramatically, meaning the captive saved money on the premium as well as making a return on the collateral. “It was a great example of the creative use of a captive,” said McElhiney.