Dawn Hiestand, head of group captives at Zurich North America, speaks to Captive Review about the recent launch of Impact Re with Innovative Captive Strategies. As a group captive with a focus on advancing the sustainable business practices of its members, the firms are demonstrating another innovative way captives can play a role in bringing forward the ESG performance of companies in various industries around the world

When Zurich North America and Innovative Captive Strategies (ICS) first announced the creation of a new group captive at the start of the year, with a focus on advancing the sustainable business practices of its members, it’s fair to say that it piqued the captive community’s interest.

For one thing, this was a reversal of the usual way group captives are formed. Rather than having the starting members in mind first, this project would start with the creation of the group captive and proceed on the basis of ‘if you build it, they will come’.

And so they have. Details have been revealed to Captive Review of the first members to join Impact Re, the new name of this sustainability group captive previously launched as ‘Envision Re’.

All founding members are US companies and their membership was effective as of March and April. The captive is underwriting auto, general liability and workers’ compensation lines, and is expected to write over $5 million in premium this year.

One of the first members is a distributor and fi eld installation support company providing energy-efficient windows for commercial and residential properties. Another provides public transportation options using electric vehicles.

But what is Impact Re, and why are these companies so keen to get involved?

Domiciled in the Cayman Islands – while taking the 953(d) tax election to be taxed as if it were a US domestic company – Impact Re uses a standard group captive structure, with limits typical to the group captive model, being primary limits with potential for some excess capacity.

ICS manages Impact Re using the same captive management model as the other 35+ group captives it manages in both the property-casualty and employee benefits space.

But what makes it stand out is that in addition to risk control, finance and underwriting committees, it also has a sustainability committee and supports members to achieve their sustainability goals.

Target membership

Prospective members must be vetted by the captive with a sustainability assessment of their carbon footprint and energy consumption.

This is led by Zurich Resilience Solutions. The vetting procedure also looks at the quality of risk and whether it falls within Zurich NA’s risk appetite, which fronts the programme.

“Members may be companies that provide products or services dedicated to sustainability and the environment as well as companies with typical operations within appetite that are committed to reducing their carbon footprint,” Zurich NA’s head of group captives, Dawn Hiestand, explained to Captive Review.

“Sustainability is an ever-changing proposition with new technology and innovations emerging daily, and the target customer profile will evolve and expand as well.”

Hiestand revealed additional prospects to have submitted applications represent a number of different industries, and include a moving company, an LEED-certified general contractor, and a recycler.

“We knew from listening to companies that concerns related to ESG issues were growing and that the captive model had the potential to help tremendously,” she said. “But there wasn’t a captive that had sustainability at its very core. Zurich came up with the concept for this captive and has worked with ICS to bring the solution to the marketplace.”

The first few founding member companies will have an opportunity to help establish how the captive will operate going forward, Hiestand added, although the underwriting and risk control processes, including evaluations and assessments, is a Zurich role, consistent with its group captives model.

Vetting process

While Zurich NA and ICS announced the creation of the sustainability captive publicly in January, the captive had a soft launch in October 2022.

Zurich NA previously announced it had been vetting members and types of risks since then in sectors such as agriculture, alternative energy, construction, manufacturing, professional services, supply chain, technology, transportation and logistics, as well as wholesale.

The captive will therefore involve companies from many different industries. What binds them together will be this shared interest in taking steps to being more sustainable.

“The power of a group captive is the collective dedication and commitment of the members to improve by sharing ideas and best practices, and to hold themselves accountable for results both individually and as a group,” Hiestand adds. “Our expectation is that members who join this captive will do so because they share real passion and commitment for advancing sustainability.”

Prospective members can be at various different stages of their sustainability journey – from those already actively reducing their carbon footprint to those only now looking to get started – according to Hiestand.

The vetting process will provide the prospective member with baseline data and a report from which they can develop or adjust their roadmap to progress their plan towards further sustainability goals.

“The vetting process is designed to provide a clear picture of a prospective member’s commitment to sustainability,” she adds. “It not only entails a standard risk assessment for auto, general liability and workers’ compensation lines, but also a sustainability assessment to review prospective members’ goals and commitments on sustainability.”

Sustainability support What makes Impact Re particularly enticing as a proposition to prospective members is the fact that not only will they gain all the advantages of sharing best practices in risk management and sustainability with other members, but they will also have access to the vast sustainability expertise held by Zurich.

As best practices on sustainability evolve, Zurich Resilience Solutions will offer Impact Re members a range of tools and support to help manage both operational and embodied emissions in a company’s energy infrastructure, construction, product development, manufacturing, distribution and more.

“Regardless of where they are at the beginning, joining the captive is a commitment that signifies a seriousness about moving forward on their journey,” Hiestand adds. “They will receive a lot of support along the way from Zurich and ICS, which will also be providing specialised knowledge and experience, dedicated resources and unique tailored services.”

Zurich Resilience Solutions has developed more than 18 sustainability-oriented services, including climate change modeling and energy-saving infrared scanning to do this. But why take this approach now to form a group captive focused on sustainability?

Hiestand says it comes down to market forces.

“ESG concerns have come to the forefront for many customers of Zurich’s,” she says. “Consumers, B2B companies, nonprofits, employees and job seekers want to work with companies demonstrating a strong commitment to sustainability.”

In addition, Hiestand points to environmental compliance standards and changing expectations that continue to grow for private and public companies around their ESG practices.

“Sustainability is a bottom line issue that can affect operational cost, business continuity, buying power, reputation and more, not just long in the distant future but in the here and now,” Hiestand adds.

“Zurich just celebrated its 150th anniversary last year. That kind of longevity isn’t possible without thinking about tomorrow. We want to be here for customers for the next 150 years, and they do too.”

ESG priority

Hiestand says sustainability is a high priority for the entire Zurich group and highlights Zurich’s own ESG rating was recently upgraded to the highest possible score by finance company MSCI, which provides research and analysis to the global investment community.

The group has committed to a carbon-neutral underwriting portfolio, plus a fully decarbonised investment portfolio, both by 2050.

It also recently shed 20 years off its target to achieve net-zero emissions in its operations, moving the target from 2050 to 2030.

Hiestand says taking this approach to ESG commitments makes sense not just because of customer needs, but also because Zurich as an insurer has its own financial interest in limiting the number of catastrophic environmental events.

“Climate change is one of the most urgent risks confronting our customers. We’re committed to helping them better understand the opportunities to change and adapt to better face climate risk,” she says.

“Managing climate risk is not just the right thing to do, as research shows $1 spent in prevention saves $5 in future losses. At Zurich North America, we also have financial skin in the game. Our products cover the financial impacts of severe weather, increasing in frequency and severity due to climate change.”