Keep Head Trauma in Mind- Part 2
This is part two of a two-part Risk Insider post by Allied World’s president of North America Casualty Joe Cellura on the dangers of scholastic athletic head injuries.
Part One can be seen here.
In last week’s post I detailed the breadth of the athletic head injury program and talked about how substantial legal settlements with the National Football League could become.
One question now before us is can municipalities be liable for student injuries that occur on the sports fields, or even those that arise years later when students’ time playing at their alma mater has become a blurred memory?
While team sports are a huge part of school cultures, the coverages in place today are unlikely to address this risk.
Municipalities and risk managers alike must ask, is being reactive the right strategy here? Is education and response enough or do we need to do more in terms of prevention?
Do waivers cover any responsibility in this regard? Contact sports, football especially, are deeply embedded in American culture, core to the identity like apple pie or Uncle Sam.
While team sports are a huge part of school cultures, the coverages in place today are unlikely to address this risk. As a result, municipalities could be on the hook. For such a critical topic, the insurance industry to date has taken very little proactive action to address very real concerns.
Insurers need to immediately start treating this emerging risk with focused underwriting, engineering and appropriate coverage terms. The exposure is upon us and remaining silent could ultimately become a recipe for expensive litigation and loss.
Underwriters should have exposure specific questionnaires targeted to sports related head injuries. An example could include questions regarding history of incidents, training, injury documentation and tracking.
Loss control and engineering services could be provided focusing on appropriate preventative measures and safeguards, which could include everything from appropriate liability waivers to on-site medical staffing, injury identification and treatment protocols.
Finally, exposure specific coverages will need to be developed. These coverage’s could address the date of, as well as the number of, occurrences, how to address pre-existing injury and defense obligations.
Long-term monitoring costs could also be considered along with policy conditions for notification and liability waiver warranties. The public entity sector has seen similar advances in underwriting, loss control and coverage in the wake of the increased incidence of sexual abuse cases.
It’s time for the industry to consider similar advances in the area of sports related head injury.
The growing trend of concussions at the municipality level, and the rise of attention given to research and settlements at a collegiate and professional level, presents insurance carriers and risk managers with an opportunity to address this issue head on – pun intended – and be more proactive in thinking about how to address the serious risks associated with contact sports at all levels.
As the number of concussions grows among student athletes, perhaps the number of conversations among insurers will grow as well. And that’s a good and necessary thing.
Keep Head Trauma in Mind
This is part one of a two-part Risk Insider post by Allied World’s president of North America Casualty Joe Cellura on the dangers of scholastic athletic head injuries.
He runs the plays from yesterday’s practice in his head.
Flashing back to last week’s game, he remembers the sharp crack of the helmets as he and the other team’s wide receiver collided. He vaguely remembers everything going black as teammates and coaches gathered around him in a circle of concern.
He needs to push aside fear and get pumped up. What are the chances he gets hit again anyway?
Pretty high, actually.
Concussions among high school and middle school athletes are becoming increasingly common. While high school football accounts for 47 percent of all reported sports concussions, it is estimated that one in five high school athletes will sustain a sports concussion during any given season.
The rising prevalence of concussions in sports at the high school and middle school levels pose a difficult dilemma for risk managers and insurers.
Today, the risks of injury from high impact sports at these levels have serious implications for the risk management landscape and for municipalities more broadly.
While football is a key driver of concussion related injuries at the high school level, and the focus of much attention at a college and professional level, ice hockey and soccer pose significant head health risks as well.
Across all sports, four to five million concussions occur annually, with the numbers rising among middle school athletes. When signing their children up for team sports, most parents do not expect that their child will sustain injuries to this level of severity at such a young age.
In fact, many would think that concussions are more likely to occur in a professional setting, where the stakes of winning or losing are higher, and players are more willing to take risks.
But here are the stark facts. Concussion rates among students age 8-19 have more than doubled in sports such as basketball, soccer and football between 1997 and 2007, even though participation in these sports overall has declined.
Research shows the number of concussions across all high school sports to demonstrate the amount of risk associated with each sport. The chart below indicates the average amount of sports concussions taking place per 100,000 athletic exposures.
An athletic exposure is defined as one athlete participating in one organized high school athletic practice or competition, regardless of the amount of time played.
While the numbers vary, the trend is alarming as concussions occurring in both male and female athletes continue to grow. Fully 33 percent of high school athletes who have a sports concussion report two or more in the same year.
High school athletes who have been concussed are three times more likely to suffer another concussion in the same season. While the first hit can prove problematic, the second or third head impact can cause permanent long-term brain damage.
Ninety percent of most diagnosed concussions do not involve a loss of consciousness, so it’s not always glaringly obvious when a student should step off the field. Perhaps even more troubling, 15.8 percent of football players who sustain a concussion severe enough to cause loss of consciousness still return to play the same day.
Fifty percent of “second impact syndrome” incidents – brain injury caused from a premature return to activity after suffering initial injury (concussion) – result in death.
Cumulative sports concussions are shown to increase the likelihood of catastrophic head injury leading to permanent neurologic disability by 39 percent. The most prominent place where the effects of this kind of head trauma are evident is in the NFL.
NFL athletes have historically experienced concussions and head traumas as part of the sport, and for many years, the full extent of neurological damage was not appropriately discussed or acknowledged.
Rumors of retired players becoming disabled and whispers of players dying young from head injuries began to build, until a bright light was cast on the reality of the situation in a court of law.
In April the organization was ruled to be responsible for baseline medical exams for retired NFL players, monetary awards for diagnoses of ALS, Alzheimer’s, Parkinson’s, Dementia and certain cases of CTE, as well as education programs and initiatives related to football safety.
This settlement is costing the NFL an enormous amount of money, with some estimating the cost at $1 billion over 65 years. The NFL itself expects that 6,000 of the nearly 20,000 retired players will someday suffer from debilitating diseases caused by traumatic brain injuries.
It stands to reason that other organizations in the world of sports could face similar financial consequences. In my post next week I’ll discuss how broad the risk could spread and what carriers and risk managers should be thinking about.
7 Questions to Answer before Choosing a Captive Insurance Domicile
Risk managers: Do your due diligence!
It seems as if every state in America, as well as many offshore locations, believes that they can pass captive legislation and declare, “We are open for business!”
In fact, nearly 40 states and dozens of offshore locations have enabling captive insurance legislation to do just that.
With so many choices how do you decide who is experienced enough to support the myriad of fiscal and regulatory requirements needed to ensure the long term success of your captive insurance company?
“There are certainly a lot of choices,” said Mike Meehan, a consultant with Milliman, an actuarial firm based out of Boston, Massachusetts, “but not all domiciles are created equal.”
Among the crowd, there are several long-standing domiciles that offer the legislative, regulatory and infrastructure support that makes captive ownership not only a successful risk management tool but also an efficient entity to manage and operate.
Selecting a domicile depends on many factors, but answering these seven questions will help focus your selection process on the domiciles that best fit your needs.
1. Is the domicile stable, proven and committed to the industry for the long term?
The more economic impact that the captive industry has on the domicile, the more likely it is that captives will receive ongoing regulatory and legislative support. The insurance industry moves very quickly and a domicile needs to be constantly adapting to stay up to date. How long has the domicile been operating and have they been consistent in their activity over the long term?
The number of active captive licenses, amount of gross premium written in a domicile and the tax revenue and fees collected can indicate how important the industry is to the jurisdiction’s bottom line. The strength of the infrastructure and the number of jobs created by the captive industry are also very relevant to a domicile’s commitment.
“It needs to be a win – win situation between the captives and the jurisdiction because if not, the domicile is often not committed for the long term,” said Dan Kusalia, Partner with Crowe Hortwath LLP focused on insurance company tax.
Vermont, for example, has been licensing captives since 1981 and had 589 active captives at the end of 2015, making it the largest domestic domicile and third largest in the world. Its captive insurance companies wrote over $25 billion in gross written premiums. The Vermont State Legislature actively supports an industry that creates significant tax revenue, jobs and tourist activity.
2. Are the domicile’s captives made up of your peer group?
The demographics of a domicile’s captive companies also indicate how well-suited the location may be for a business in a particular industry sector. Making sure that the jurisdiction has experience in the type and form of captive you are looking to establish is critical.
“Be among your peer group. Look around and ask, ‘Who else is like me?’” said Meehan. “Does the jurisdiction have experience licensing and regulating the lines of coverage for other businesses in your industry sector?”
3. Are the regulators experienced and consistent?
It takes captive-specific expertise and broad experience to be an effective regulator.
A domicile with a stable and long-term, top-tier regulator is able to create a regulatory environment that is consistent and predictable. Simply put, quality regulation and longevity matter a lot.
“If domicile regulators are inexperienced, turnaround time will be slower with more hurdles. More experience means it is much easier operating your business, especially as your captive grows over time,” said Kusalia.
For example, over the past 35 years, only three leaders have helmed Vermont’s captive regulatory team. Current Deputy Commissioner David Provost is one of the longest tenured chief regulators and is a 25-year veteran in the captive insurance industry. That experienced and consistent leadership enables the domicile to not only attract quality companies, but also to provide expert guidance on the formation process and keep the daily operations running smoothly.
4. Are there world-class support services available to help manage your captive?
The quality of advisors and managers available to assist you will have a large impact on the success of your captive as well as the ease of managing the ongoing operations.
“Most companies don’t have the expertise to operate an insurance company when you form a captive, so you need to help build them a team,” Jeffrey Kenneson, a Senior Vice President with R&Q Quest Management Services Limited.
Vermont boasts arguably the most stable and experienced captive infrastructure in the world. Many of the leading captive management companies have their headquarters for their Global, North America and U.S. operations based in Vermont. Experienced options for captive managers, accountants, auditors, actuaries, bankers, lawyers, and investment professionals are abundant in Vermont.
5. Can the domicile both efficiently license and provide on-going support to your captive as it grows to cover new lines of coverage and risks?
Licensing a new captive is just the beginning. Find out how long it takes for the application to get approved and how long it takes for an approval of a plan change of your captive’s operations.
A company’s risks will inevitably change over time. The captive will need to make plan changes which can include adding new lines of business. The speed with which your domicile’s regulatory branch reviews and approves these plan changes can make a critical difference in your captive’s growth and success.
The size of a captive division’s staff plays a big role in its speed and efficiency. Complex feasibility studies and actuarial analyses required for an application can take a lot of expertise and resources. A larger regulatory team will handle those examinations more efficiently. A 35-person staff like Vermont’s, for example, typically licenses a completed application within 30 days and reviews plan changes in a matter of days.
6. What are the real costs to establishing and managing your captive?
It is important to factor in travel costs, the local costs of service providers, operating fees, and examination fees. Some states that do not impose a premium tax make up for it in high exam fees, which captives must be prepared for. Though Vermont does charge a premium tax, its examination fees are considered some of the least expensive options in the marketplace.
It is also important to consider the ease and professionalism of doing business with a domicile in the ongoing operations of your captive insurance company.
“The cost of doing business in a domicile goes far beyond simply the fixed cost required. If you can’t efficiently operate due to slow turn-around time or added obstacles, chances are you have made the wrong choice,” said Kenneson.
7. What is the domicile’s reputation?
Make sure to ask around and see what industry experts with experience in multiple domiciles have to say about the jurisdiction. Make sure the domicile isn’t known for only licensing certain types of captives that don’t fit your profile. Will it matter to your board of directors if your local newspaper decides to print a story announcing your new insurance subsidiary licensed in some far away location?
Are companies leaving the jurisdiction in high numbers and if so, why? Is the domicile actively licensing redomestications — when an existing captive moves from one domicile to another? This type of movement can often be a positive indicator to trends in a domicile. If companies of a particular size or sector are consistently moving to one state, it may indicate that the domicile has expertise particularly suited to that sector.
Redomestications made up 11 of the 33 new captives in Vermont in 2015. This trend is a positive one as it speaks to the strength of Vermont. It reinforces why Vermont is known throughout the world as the ‘Gold Standard’ of domiciles.
Asking the right questions and choosing a domicile that meets your needs both today and for the long term is vital to your overall success. As a risk manager you do not want surprises or headaches because you did not ask the right questions. Do the due diligence today so that you can ensure your peace of mind by choosing the right domicile to meet your needs.
For more information about the State of Vermont’s Captive Insurance, visit their website: VermontCaptive.com.
This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with the State of Vermont. The editorial staff of Risk & Insurance had no role in its preparation.