Captive Review chats to Belinda Fortman, the new captive insurance section director at the Tennessee Department of Commerce and Insurance (TDCI), about the growth of interest in captives the domicile is seeing.
Captive Review (CR): Tennessee recently announced the formation of its 700th captive. How has growth been in Tennessee over the past year?
Belinda Fortman (BF): In terms of the growth this year specifically has been particularly strong. That growth we’ve seen due to a couple of factors, one of which being the hardening market. Folks are calling us having had their property coverage increasing exponentially when in their minds, their losses do not justify that.
They’re getting that negative development in their premium costs, but not feeling that it’s just justified for their risk profile. So they’re looking at captive insurance to provide a solution for them, and they’re doing it a number of different ways. Some are increasing their self-insured retention running out through the captive.
The other alternative is they’re also going to the reinsurance market through their captive insurance premium. That’s happening for property lines, general liability lines, professional liability lines. We haven’t seen so much on worker’s compensation, but I think that would be to because with Covid-19 not as many people are working within the operations, they’re working from home.
Covid-19 itself is another aspect. Some folks were surprised to see that their traditional coverages did not include pandemic. So that is making organisations more risk aware. They’re looking not only to obtain coverage for high severity low frequency risks like pandemic, but also just looking at their organisation generally at what else isn’t covered. They want to avoid those surprises and asking how can we best finance this? Those are the factors that we’re seeing that are really impacting the growth. And I think that’s in Tennessee and probably worldwide.
CR: When it comes to that growth, Tennessee just announced it had licenced a new captive, International Paper, which was a redomestication from Vermont. Are you going to be looking for more of those opportunities?
BF: It’s been a very exciting year for Tennessee, we are experiencing phenomenal growth and it’s coming from a number of different sources. It’s new captives, there’s growth within the captives we currently have, and we have had a number of redomestications as well.
Captive International Paper is certainly an exciting achievement for us. Their headquarters is located in Tennessee, they have been working with us on a Tennessee captive for a number of years. And we have shown that we are a responsible, dedicated, customer service driven captive domicile. They built up their confidence to the point that they felt comfortable and happy to bring their Vermont captive home, essentially, to Tennessee.
We’re thrilled that they are doing that. We’re using the term that we’re looking to be the gold standard of the south. And part of that is in recognition of Vermont’s prestige within our industry as the gold standard. We are achieving the same level in our minds of respect and market presence as Vermont, but representing a southern option geographically for them.
CR: Do you expect to see this growth in captives continuing into 2021?
BF: Insurance programme changes, it’s a lengthy process. It involves a lot of analysis, and it does take time. So a lot of folks are moving into the 2021 period looking to revamp their insurance programmes. We’re going to see a continuation of that same thing, not only due to Covid-19, but expecting that continuation within the hardening market.
Our message is that we are business friendly. We take our regulatory responsibilities very seriously. We want good captives, but that said, we work with our service providers, our captive managers and our captive owners to create good captives. Regulatable captives. So they’re following our rules and regulations, but also meeting the risk management needs of the captive owner in the best way.
We see ourselves as partners with our industry folks. We work very closely with our trade association the Tennessee Captive Insurance Association (TCIA). I served on the board there for a number of years, I was the treasurer, so the relationships there run deep and we have a pick up the phone kind of kind of collaboration.
We see the trade association as being our eyes and ears of the market that will give us feedback, help us stay up to date, help us improve and also be our vetting source. That way should there be a challenge that we’re facing as regulators then we can vet it through them on how best to address it within the marketplace.
