Captive Insurance Companies Association (CICA) Special Section

New CICA chair prepares for 2011

Svoboda brings captive owner experience to his role

By Michael J. Moody, MBA, ARM

The annual conference of the Captive Insurance Companies Association (CICA) typically includes numerous new agenda items, such as the change in the makeup of the CICA board, including the selection of a new chairperson. The 2011 CICA conference will name John F. Svoboda, CPCU, ARM, AIC, as CICA chairperson for the upcoming year. In addition to being the chair of CICA, he is the president of two risk retention groups (RRGs): the National Home Insurance Company (A Risk Retention Group) and the Residential Insurance Company, Inc. (A Risk Retention Group).

Svoboda's involvement in CICA is as a captive owner, which provides him with a unique vantage point with regard to many captive-related issues. Of particular concern to him are the legislative challenges that face all captives, but which are particularly acute for RRGs.

Personal perspective

As noted above, Svoboda manages two RRGs, both of which were established to provide liability insurance to home builders for new home warranties. Membership in the RRGs is currently approximately 8,000 builders, down from more than 15,000 builders at the peak of the housing market. The coverage is tailored to provide protection for the builders for one- and two-year workmanship/defects as well as 10-year major structural defects. According to Svoboda, National Home Insurance Company (NHIC) was one of the first captives to take advantage of Congress's amendment to the original RRG legislation in 1986. The amendment, in essence, broadened the definition of "liability" in the original act from products liability and completed operations to any liability.

In addition to his active involvement with RRGs, Svoboda has a significant insurance background. Prior to joining NHIC in 2000, he was the claims director for Claims Management Group Limited (CMGL) in London. CMGL is a specialist claims management administrator serving the London market, as well as self-insureds, captives, and traditional insurance carriers. In addition, during his 34 years in the insurance business he has held management positions with Risk Enterprise Management, Home Insurance Company, Continental Western Insurance Company, and Liberty Mutual. He also has earned several professional designations. According to CICA President Dennis Harwick, "John's significant experience in the insurance business will be invaluable in his position of chairperson."

CICA's agenda

While a number of issues will be addressed during 2011, Svoboda says one of his major goals is to successfully manage the expectations of association members. CICA has always tried to be responsive to its members and tailor its programming to the members' desires. However, over the past few years more emphasis has been placed on "determining just what our members expect from CICA," he says. Right from the start, it is important to understand what motivated them to join "and then meet those expectations."

"Our educational resources are a good case in point," he says. CICA needs to be the "reference point for our members' needs." Whether it is general industry information regarding topics such as captive feasibility studies or RRG legislation; or more specific information on domiciles; or tax and accounting issues, "CICA needs to be a trusted source they can turn to."

Further, he says, "Since CICA is a domicile-neutral organization, we can provide this data on an objective basis for our members." Svoboda believes that since "we don't have a 'selling point' for any specific domicile," members get the most appropriate and relevant information for their specific situation.

One issue that is sure to receive attention during 2011 is recently enacted legislative changes. Svoboda points out that while the new laws will not take place for several years in most cases, planning for these eventualities must begin now. Additionally, CICA has taken steps (including forming a legislative advisory committee) "to take a more active role in trying to have more influence in how new laws will turn out," says Svoboda. "If it has an effect on the captive industry, we want to be involved." CICA wants to be a part of any legislative changes that are discussed and have input into how the law is drafted.

2011 conference

No discussion of CICA's educational efforts is complete without a discussion of the annual conference. "We put a lot of thought into our conferences," says Svoboda. Over the last few years, CICA has worked hard to take into consideration the desires of its membership. Many of the session topics and speaker suggestions come directly from the participants. He indicates that the participants have said that they wish to have "more specific, detailed sessions that are more technical in nature."

One of the suggestions that was advanced a couple of years ago had to do with assigning some type of rating system (101, 201, 301) to the session descriptions. This way the participants can gauge the level of expertise needed to gain maximum understanding from each session. CICA began using this practice and has received positive feedback from the conference participants for doing it.

However, Svoboda points out that while the original intent was to provide the attendees with information to make better session selection, it turns out that the rating system has also greatly assisted the speakers as well. "The speakers can now better tell how to appropriately position their presentations." So a speaker at a 301 session knows that "he or she does not have to cover the basics."

In addition to moving to this grading system, CICA also began to request that speakers peer review their presentations as well. This process was instituted last year, Svoboda indicates, and for the most part, speakers have accepted the process and "embraced the idea." They have quickly found the value of "outside eyes reviewing their presentations." From CICA's standpoint, it has been a real "win-win" situation for the presenters and participants alike.

Conclusion

CICA's leadership for 2011 is set to offer excellent vision in plotting a course for captive owners and related service providers. Having a captive owner at the helm provides some obvious benefits. Chairperson John Svoboda is addressing some of the very same issues that challenge other captive owners. For example, he is currently embarking on an in-depth analysis of his risk retention group's excess capital accumulation. Like many other RRGs and captives, his company has accumulated significant amounts of capital over the past few years. Developing the most appropriate approach to capital deployment, given the current investment climate, is a major issue for the captives, as it is for many other CICA members as well. It's this first-hand perspective that will help the CICA membership.

As it heads into the future, CICA has based its game plan on staying in tune with its membership and listening to feedback. While, as noted above, several major legislative initiatives will ultimately have a major impact on CICA and its members, these effects will not be fully realized for several years. And with CICA's commitment to stay actively involved in the earliest stages of future legislative actions, the membership should be well served in this important area. The new board should have no problem fulfilling its members' expectations.