The agents and brokers of companies unwilling or unable to explain the spectrum of opportunities in risk management – including forming a captive – will lose clients to the more innovative brokers able to understand the opportunities captives offer.
This is according to Richard Smith, president of the Vermont Captive Insurance Association, who spoke to Captive International ahead of the CICA 2018 International Conference in Scottsdale, Arizona.
“We are hoping that more traditional insurance agents and brokers see captives as not necessarily competition but rather another tool for their clients. That's an important change,” he said.
Smith explained that historically, many insurance agents and brokers have worked directly with the traditional insurance market, getting their commissions from placing insurance with those insurance companies.
“A broker would view an organisation that had set up a captive arrangement as a lost opportunity, or it was at least foreseen to be a lost opportunity,” Smith added.
He believes that this is a mistake, and that if captives are not part of a broker’s risk management discussion with their clients, they could end up losing their clients to an agent or broker that sees that as an opportunity.
“And there are now opportunities for these brokers and agents to participate in a captive with an agency captive - just to make sure that their clients aren't left behind,” he said.
Vermont Governor Phil Scott passed agency captive legislation on May 1, 2017, allowing these structures to operate in the State.
An agency captive refers to a reinsurance company controlled by an insurance agency or brokerage. This type of captive, through a reinsurance agreement with a traditional insurer, receives a share of the premiums written, and is obligated to pay its share of claims. They are designed to create a long-term relationship between the agency and the insured, where interests such as risk appetite, selection, pricing, loss control and claims management are aligned.
CICA 2018 International Conference, Arizona, Vermont Captive Insurance Association, Richard Smith, Insurance, Brokers, Captives