The past five years has seen significant growth of the captive insurance industry and the next five years will likely continue this trend, Jeremy Huish, senior vice president, captive business development at Artex, North America, tells Captive International.
Despite challenges the captive insurance industry is currently confronted with, Huish believes that the industry will continue to grow.
“It has faced challenges for 40 years. Every industry has challenges, and the captive insurance industry is no different,” Huish said.
However, he has also listed three risks that could threaten the captive insurance industry.
“First, the kinds of risks that clients are facing are evolving – think cyber the past five years – and the captive insurance industry has traditionally been on the forefront of innovation to help clients manage these risks,” Huish said.
He added that the commercial industry can move at a slower speed, but ultimately catches up and that the captive industry should continue to evolve and solve problems for clients.
“Second, there is regulatory uncertainty on certain high demand areas for clients,” he pointed out.
“For example, there are certain kinds of employer-provided employee benefits that an employer may wish to insure through a captive, but because of uncertainty of the Employment Retirement Income Security Act (ERISA) and the challenges involved in a DOL waiver, many of these ideas never get utilised by a captive.”
The cost of medical care continues to increase in the US, and captives could be a bigger part of the solution if the regulatory rules get ‘ironed out’, Huish added.
“Third, in some areas of captive insurance law there is a difference between what the courts determine to be insurance and what the regulators determine to be insurance. This includes what risks can be insured and what standards satisfy the tax rules.”
According to Huish, Artex has been working with a variety of industry and trade groups to engage in conversation with state regulators and federal policymakers.
“These discussions focus on the need for using a captive as a risk financing vehicle for middle market and large businesses, and to find solutions for challenges facing the industry,” Huish said.
When talking about his view on the future of the captive industry, he said: “Having highly experienced, well-educated service providers and regulators is healthy for the industry.
"For example, the credentialing from the ICCIE courses for providers is excellent, and I expect more of these kinds of industry-supported initiatives to continue to evolve.”
The management of captives can be further developed and improved by adding captive insurance best practises, he added.
“A domicile with clear, reasonable regulation and policies is a good domicile, and there are many to choose from today. I hope more states update their laws to allow captives to be formed in their jurisdiction, and that those states will commit resources to staffing the department that will regulate captives,” Huish concluded.
Artex Risk Solutions, North America, Jeremy Huish, Insurance, Captive, Regulation, Law, ERISA, Risk management