2023 recap: the biggest captive stories of the year

A look ahead to what 2024 could have in store based on what were the most read about topics on the Captive Review website during 2023

 

There were a number of huge stories to leave their mark on the captive industry last year, many of which will have great repercussions for this coming year. By looking through at what were our most read stories of 2023, we’ve collated a top ten of the biggest issues to grab your attention, and considered how important they will continue to be in the next 12 months.

 

  1. International programmes: One of our most read captive owner interviews of last year came from Knauf Group as they let us in on how they approached the common challenge of multinationals collating data from across all their international operations. An issue that plagues captive owners of large corporations across the world, the group’s head of insurance management Marcus Reichel explained how the company deployed a new risk platform and worked with Zurich and its API technology to simplify the reporting of data. And it wasn’t the only solution to this age-old problem that caught readers’ interest. Our interview with Specsavers’ group head of risk Lee Worth was another highly-read article revealing how his team’s use of the Big Ticket’s data platform had made for a much quicker and easier insurance renewal, and given him the ‘data confidence’ to retain more risk in the company’s captive going forward. However, it’s clear from both these articles that work in this area is far from complete. Until the industry can catch up and provide rounded solutions able to capture and share all a risk programme’s data, this is sure to continue to be a matter of deep interest for captive owners.

 

  1. Alberta’s first captives: Since passing new laws last year to become only the second Canadian province with specialist captive legislation (the other being British Columbia) all eyes were on Alberta to see if it could garner interest as a captive domicile. And looking at the number of captive formations this year, it certainly has. As of 22 November 2023 there were 15 captives in Alberta, 14 of the which formed this year. Our interview with BLG’s Rick Da Costa, in which he talked about the captives he had helped to form in Alberta, and expectations for more this year, was one of our most-read stories of the year. In addition, our story revealing the first Alberta captives to be formed also received a lot of interest. The subject also has ramifications for Barbados as a domicile, which we have extensively covered. As the place where Canadian firms have traditionally based their captives, Alberta poses a threat to Barbados’ captive industry, both by captives redomiciling out of Barbados to Alberta, and fewer Canadian captives choosing to set up in Barbados. It’s likely why our story about Barbados-based captive manager DGM setting up an Alberta company for Canadian clients interested in having an Alberta captive, was another of our most read stories of the year.

 

  1. Cyber: Cyber is a line that the entire insurance industry has been wrestling with for a number of years. Escalating premiums and limits on coverage have seen many risk managers consider the benefits of writing this risk into a captive, and in 2023 the captive industry put forward a raft of potential solutions to press home the case. Perhaps most notable of these was Marsh’s cyber facility for captive owners, which we were first to reveal after talking to Marsh Captive Solutions president Ellen Charnley at the RIMS RISKWORLD conference. That was one of our most read stories of the year, but elsewhere other new innovative cyber solutions have also grabbed readers’ attention. These included an AXA XL-backed “cyber parametric” policy launched by London MGA Intangic, and a partnership between Hylant and CloudCover on a new cyber cell captive structure. It’s a line that seems perfect for the captive model, but in the clamour to develop new cyber solutions and stronger cybersecurity for a desperate market, it perhaps shouldn’t come as a surprise that as steeply as rate increases rose, there’s been a similarly inclined drop, to the point that prices are now softening in North America, and are flat in Europe and Asia. This, despite the number of ransomware attacks rising. With more capacity coming back to this line, in large part through MGAs, it will be a fascinating line to keep track of in 2024, and in particular how captives are utilised for it. It’s a risk exposure that is sure to keep evolving, and as such we’re confident it will once again be a topic risk managers and captive owners will want to be reading about in the coming years.

 

  1. UK captive regime: The rollercoaster battle that saw France successfully pass new captive-friendly legislation at the start of last year seemed to accelerate the progress in other major European countries towards becoming more attractive as captive domiciles. No more so than in the UK. Our June magazine’s cover story on whether the UK would ever become a suitable domicile for housing captives was a popular story, but it’s stories that have broken in the last few months which have taken things to the next level. Articles about the UK government meeting with the London Market Group to discuss how a potential UK captive regime might look; and the more recent announcement in the government’s Autumn statement that there would be a consultation on new captive regulations, have received a lot of interest. The progress coincides with Lloyd’s getting closer and closer to finalising its first captive syndicate in more than 20 years. Our update from Tom Allebone-Webb that the corporation was optimistic this would come in the first six months of 2024 was another key development, as readers continue to track the situation closely. As a leading global insurance hub, the London market has all the all the infrastructure in place thrive as a destination for captives. With the right legislation this would make it a very appealing domicile, especially for firms already headquartered in the UK. Our article revealing the potential pool of interest in forming a UK captive was one of the most read articles in December. With the spring consultation and developments at Lloyd’s coming soon, expect this story to be another big topic of interest in 2024.

 

  1. Vermont becomes largest domicile: As early as January we alerted to industry to our belief that Vermont had overtaken Bermuda to become the world’s largest captive domicile by number of captives (excluding captive cells). As the numbers trickled in it became clear this was the case, and across the course of the year, Vermont only extended its lead. As the place with the most captives, stories about Vermont, or interviews with the Vermont-based professionals were well-read, with a high number of readers often directly impacted by news stories. Looking at the updates from Q1 and H1, there continues to be healthy growth in captive numbers and premium, so we can expect this domicile will continue to garner a lot of attention in 2024. With one of the most established regulatory regimes, the state has taken on something of an advocacy role for the captive industry in recent years. In 2023 the regulator and VCIA sent a delegation to Mexico to raise captive awareness. Along with its efforts going into colleges to ensure there is an ongoing pipeline of captive talent, both demonstrate the extra mile Vermont goes to for the industry, which is another reason people take notice of the state. Vermont has honed its reputation over many years, but it must continue to uphold its high standards if it is to continue in this leadership role. Choosing the right domicile remains a highly important decision for new captives, and in the US particularly there is no shortage of competition from rival domiciles to attract captive owners to their state. It’s why our annual World Domicile Update continues to be of interest, to see how different domiciles are faring, and why captive owners are choosing some locations over others.

 

  1. Bermuda’s corporate income tax: As a vibrant hub of captive talent and innovation, Bermuda had held the title of the largest captive domicile before 2022, and as a result it continues to be a market of great interest to readers. And based on our most read articles of the year it’s clear that the consultation on a corporate income tax was the issue that most interested affected readers in 2023. The consultation launched in August, although the plans had been mentioned in February’s budget after the Bermuda government signed up to the OECD’s Pillar II initiative for global minimum tax standards. With many captives owned by multinationals and seemingly falling under the scope of the tax, there had been a desperate need for clarification on exactly how any new tax would be applied to Bermuda-based captives. And this is exactly what the tax panel at the Bermuda Captive Conference provided in September. The article was one of our most read of the year, as it explained the circumstances where a captive would fall under the scope of the tax, and highlighted areas where further information from the government is still needed. The subject of tax is always one that gets attention, and exactly how Bermuda, as well as other offshore domiciles, approach the OECD’s efforts to enforce a global minimum tax will be a big talking point among insurance tax experts in 2024.

 

  1. Captive growth slowdown: Tied to a softening in certain lines, speculation that the escalating growth curve of captive formations may have reached its peak caught readers’ interest in 2023. In our interview with Marsh’s Michael Serricchio he alerted readers to the fact there may be fewer new captive formations in 2023 compared to 2022, and explained which classes of business would be the new drivers of growth. That was one of our most read interviews of the year, and it guided another of our most read analysis articles of the year – the analysis of domicile growth at H1. In this article we collated all domiciles’ H1 figures and compared them to the full-year 2022 figures, backing up Serricchio’s claim there may be fewer new formations in 2023. As we highlighted several times last year, property is a market that continues to harden, and unsurprisingly more captive owners have subsequently been turning to captives for this risk. But elsewhere in the market there is softening that will be an important matter for captive managers to handle with their clients in 2024. Marsh’s quarterly insurance market index continues to show that globally the commercial market is still hardening, but a closer look shows in key captive markets like the US and Europe, and in key captive lines, like cyber, the market is softening. How this affects captive uptake of these lines remains to be seen, but the trend this takes is something captive owners and managers will want to be aware of.

 

  1. SRS investment: Among the leading captive managers SRS stands out among all the global broking houses. Against the likes of Marsh, Aon, WTW and Artex (Gallagher), Brady Young has directed SRS to great success over the years, and for that he was in 2023 recognised with a place in our Hall of Fame, and with the outstanding contribution award at our US Awards ceremony. But, what’s most interesting to readers is not what’s in SRS’ past, but what’s in its future. The investment in SRS by Integrum in February set the manager up for its “next phase of growth”, and there have subsequently been a number of developments we have reported on. The story in April that Young would be handing over his president title to Ron Sulisz received a lot of attention, but the most read SRS story came in October, when Young revealed to us how he planned to use Integrum’s investment, and which areas of the market SRS would be targeting. With the announcement that SRS would launch a new MGU called Altitude in Q1, part of that plan is already being actioned. But as Young explained to us, SRS has many more plans in the pipeline across multiple fronts. Seeing how these plans develop this year, and how successful they prove to be is a subject many in the market will be tracking closely in 2024 and beyond.

 

  1. Vesttoo scandal: It’s the story that rocked and shocked the insurance industry in 2023, especially the fronted insurance industry. The reports that alleged fraudulent letters of credit were used as collateral in fronted programmes through the Vesttoo platform left many scrambling for new collateral and a host of lawsuits that could still take years to conclude. On hearing these news reports captive insurance regulators were quick to take action, with Vermont’s Department of Financial Regulation one of those to send around a note asking captive managers and service providers to check on ay exposure their clients had to Vesttoo. Fortunately, no reports of captive exposure to the scandal emerged. However, the story was still of great importance to readers, as experts considered how this could have been allowed to happen in such a tightly regulated sector. Perhaps most significant is the long-term consequences of this whole incident. A commentary note from ratings agency KBRA stating fronters may reassess their use of captives following the Vesttoo scandal and Trisura’s $81.5 million pretax write-down received a lot of attention from readers, and our October cover story took an even deeper look at what damage could come out this incident, related to scrutiny of collateral requirements. The largest captive fronters have since indicated to this publication that they already had robust processes in place for captive collateral and that things should remain unchanged in terms of fronting. Nevertheless, there are sure to be more developments around Vesttoo in 2024, and captive managers will be keenly looking at how fronting relationships are affected.

 

  1. IRS scrutiny of micro-captives: It’s an issue that seemingly refuses to leave the captive industry, but looking at our most read stories of the year, the scrutiny of small 831(b)-tax electing captives is still the topic that readers have the most interest in. Together with the Treasury department, the IRS put forward much-anticipated new proposals in 2023 for identifying micro-captive insurance arrangements as ‘listed transactions’ or ‘transactions of interest’ in April, after accepting previous court defeats in its use of Notice 2016-66. However, these proposals were not well received by the captive industry. Our analysis of the proposals, featuring captive tax experts, was our May cover story, and was very well read. But our most read story of the year came in our follow-up to a July public hearing where vehement opposition to the proposals were heard. Combined with the 109 public comments giving near universal disapproval of the planned regulation, we assessed what could come next in response to this criticism. Our continued reporting on these matters into the second half of 2023 revealed the extent to which these proposals were leading to the closing down of many micro-captives. News that the majority of closed captives in Delaware were micro-captives was another of our most-read stories of the year, as was our interview with David Findlay of Lake City Bank, who explained why his company’s micro-captive would likely have to close under the new proposals. With the creation of the 831(b) Institute, the captive industry has made clear it is prepared to put up a fight to defend micro-captives against what it sees as a serious existential threat from the IRS. The recent letter from the US government’s House Ways and Means committee giving support to micro-captives further strengthens the industry’s position, but this is a fight that seems far from over. Significant developments are sure to come in 2024 on this subject and these are likely to once again be the stories that receive the most attention from readers.
12 August 2024
5-6 November 2025

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