2013 Captive Insurance Companies Association (CICA) Special Section

CICA heads towards “new horizons”

Conference provides education and networking aplenty

Most in the insurance industry agree that 2013 will be a year of change. While the financial results for 2012 were not known at the time this article was written, initial loss predictions called for losses to be much higher than recent years, due in large part to the financial hit from Hurricane Sandy. And any changes in the insurance market, up or down, will, in all likelihood, have a major effect on the alternative risk transfer (ART) market, particularly on the movement towards captive formations.

Even without disruptions in the commercial insurance markets, captives have seen significant growth over the past 8 to 10 years. One of the driving forces for this market growth has been the Captive Insurance Companies Association (CICA). As the only captive organization that is domicile neutral, CICA has served as a source of objective information for those wishing to learn more about captives.

Major objectives

Over the years, CICA has fine-tuned its mission to include several major core items, according to Dennis Harwick, CICA president. The first two elements of its mission are "education and networking, and with regard to those two areas, our crown jewel is the annual international conference," he notes. Education and networking abound at the conference. Harwick says the title for the 2013 conference, New Horizons, is very appropriate. When planning started for this year's event early in 2012, "we noted that there were many unknowns that captive owners would have to face during 2013." For one, the presidential elections were still six months away. Additionally, the roles of the federal and state regulatory agencies were unclear, he points out. And, "what would happen to the general insurance market conditions was still also uncertain." He adds, "As events over the past six months have borne out, it was a good choice.

"A number of excellent education sessions have been scheduled for the 2013 conference," Harwick says, adding that "CICA tries to cover the waterfront where educational opportunities are concerned." He points out that there are sessions specifically designed for individuals new to captives as well as sessions for captive experts, and everybody in between those two extremes. "All the 'must-have' topics will be covered in this year's conference," Harwick notes. "Updates on taxes, accounting, regulatory environment and investments all have dedicated sessions as do newer areas such as enterprise risk management."

The final element of CICA's mission is "member advocacy" and Harwick admits that "2013 will be a year of reflection on the subject." Among other things he says "it's a big issue with lots of subparts." The strength of CICA's advocacy role was tested several years ago when the IRS floated the idea of consolidated statements for captives. Obviously, "this was an important issue to all captive owners," he states. "So we got together as an industry, with CICA and representatives from the major U.S. captive domiciles, and mobilized quickly to intervene."

Harwick notes, "The combined efforts of the groups were successful in helping the IRS better understand the issue and, as a result, the IRS decided to table the idea."

Several years ago CICA began establishing relationships with several other international captive associations. To date, these relationships have benefited CICA as well as the other international associations. Harwick believes that these relationships should continue to mature and grow.

Conclusion

CICA has just concluded a good 2012. It has enjoyed a growing membership and one of the best attended conferences ever. Harwick believes 2013 will be equally positive. But it's not all good news, he acknowledges. He believes that captives are just beginning to see some of the unintended consequences from federal legislation. "Take, for example, Dodd-Frank, which has a number of issues yet to be resolved that could have an adverse effect on captives." Uncertainties related to the Affordable Care Act will continue into 2013. He also believes that the "NAIC bears watching, even more than in the past." This is due largely to the fact that the "NAIC has become the de facto administrative staff for the Federal Insurance Office. This is a new role for the NAIC and no one is quite certain how it will shake out. Nor do we know how the Federal Insurance Office will affect captives."

Harwick notes, "There are many domicile-related associations which do an excellent job promoting their states' advantages." However, he says, "There is only one domicile-neutral association that represents the overall interests of captive owners." As a result, he believes that "organizations that have captive members can benefit from their involvement with CICA." Additionally for those companies that are considering captive formations "they also need to obtain recent and relevant captive industry information provided in an objective fashion." Prospective captive owners also need networking opportunities with existing captive owners. This has long been CICA's "sweet spot."