27 September 2022Reinsurance

South Carolina captives thriving, claims conference

The South Carolina Captive Insurance Association held its twenty-first Annual Executive Educational Conference from September 20-22, 2022 in Charleston, South Carolina.

In an opening speech acting director Michael Wise, deputy director Dan Morris, and director of captives Joe McDonald from the South Carolina Department of Insurance (SCDOI), said that the captive industry in South Carolina continues to thrive, with 195 active captives and numerous in the pipeline.

Among the sessions in the conference, Perspectives on the Meaning of Insurance was discussed in different viewpoints: from the role of the accountant, actuary, taxation, and the regulator. A common theme mentioned included risk shifting and risk distribution, a significant chance of material loss, sufficient exposure of units, accurate financial projections, claim activity, and appropriate use of insurance policies. For example, a captive in the Midwestern portion of the United States would not need hurricane insurance.

Additionally, combating social inflation was discussed as the insurance industry has seen a dramatic increase in nuclear verdicts. Due to well-funded plaintiff attorneys, publicity of large settlements and verdicts, and third-party liability funding, insurance companies have been on the hook for unprecedented bills. Defense attorneys have had to find alternative means to defeat plaintiffs by dividing and conquering the plaintiffs, combat anchoring, or bias towards the first piece of information heard by a jury which influences their final decision, and using organizations such as the American Legal Connection, a collection of like-minded defense attorneys.

The session on Leveraging Surplus to Support Business Plan Expansion highlighted the importance of building surplus to support ongoing operations and a company’s initial business plan should be a “living breathing document”, according to Ann Marie Towle of Hylant Global Captive Solutions, as business plan changes should be communicated to the service provider and the regulator. Additional reasons for building surplus allows a company to issue dividends or loan-backs, expand on existing coverage or add new coverage, increase limits and lower reinsurance, or fund loss prevention and risk management processes.