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.
R&I: What was your first job?
I worked for The Women’s Royal Naval Service — part of Britain’s Royal Navy. I was a so-called wren and worked in communications: I did coding, decoding, air traffic control, ship-to-shore communications, that sort of thing.
R&I: How did you come to work in risk management?
When I was still living in England I worked for a P&I club — a third party liability insurer. I was a maritime adjuster. This was back in the late ’70s and early ’80s. Soon thereafter I came to America.
R&I: What precipitated the move?
Koch Industries asked me to come to America and work for them. [They] had been one of the companies whose claims I handled in London. The company needed my maritime law expertise so they asked me to come and work in their risk management department. I was there for over two years. I got back into risk management in 2000, when I was hired by the Chesapeake, Va., public works department.
R&I: What is the risk management community doing right?
We’re realizing there’s a lot more to risk management than just looking at the bottom line and finding a way to incorporate into our plans the less obvious factors that lead to increased risk.
What the risk management community is doing more of, I think, is looking beyond the bottom line at things like: What are the other parts of the company or the entities doing that we can incorporate into improving safety, reducing our exposure to injuries and the costs of injuries, and asking more questions from the other parts of our organizations. One sign of that is we’ve begun talking a lot about predictive analysis, which incorporates a lot of factors that never used to be incorporated.
“We have a ‘geographic isolation’ tendency as American businesses. We tend to think that we are safe from a lot of things.”
R&I: What could the risk management community be doing a better job of?
That’s the other side of the coin. For those still working under the old system we used to operate by, we do need to bring more people into the wheelhouse. This is why I try to go out to other parts of the organization so I can see them in action. That helps me to identify areas we need to look at. It also helps people in the other parts of the organization to communicate with me their needs and how we can work together.
R&I: What emerging commercial risk most concerns you?
For public entities, law enforcement liability is one of the big issues these days. In the past year, there has been so much in the news about police and lawsuits against law enforcement. I know that is something that is concerning many public entities right now and this is going to be a big one for us as a local government.
R&I: What insurance carrier do you have the highest opinion of?
CCG is basically self-insured. However, our excess coverage on workers’ comp is carried by Safety National of St. Louis, and I really like Safety National.
R&I: How much business do you do direct versus going through a broker?
Most of our business is through a broker. We place our workers’ comp excess coverage through broker APEX Insurance, and we are doing property and casualty insurance through a different broker.
R&I: How do you grade the insurance industry’s response to the threat of cyber attacks?
This is a big issue for us as well. For the industry as a whole, I think it’s been a little off the mark. We have a “geographic isolation” tendency as American businesses. We tend to think that we are safe from a lot of things. For instance, look at how the U.S. credit card industry has only recently begun to catch up to what Europe is doing in terms of the upgraded security of the card.
R&I: Are you optimistic about the U.S. economy or pessimistic and why?
In the short term, I think we are basically treading water but long-term, I am optimistic. Americans work hard and want to succeed so I think that in the long term, we will.
R&I: Who is your mentor and why?
There have been a lot of people who come to mind but probably the key person would be my boss when I was a temporary researcher working for the Secretariat at the Council of Europe in Strasbourg. He told me I could do or be anything at a time when there were no women or almost no women in my field.
R&I: What did you do there?
I was a temporary researcher working for the Secretariat. I actually prepared the documentation for the first ever European Parliamentary hearing on maritime pollution. I even got to meet Jacques Cousteau.
R&I: What have you accomplished that you are proudest of?
I think probably it was when I worked for a nonprofit organization that helped people uphold their constitutional rights. It was for people who couldn’t afford expensive lawyers.
R&I: What’s the best restaurant you’ve ever eaten at?
The Chop House in London.
R&I: What is your favorite drink?
R&I: What is the most unusual or interesting place you have ever visited?
It’s a hard question since I have been around the world since I was 15. Probably New Zealand, because there is a bit of every country in the world in New Zealand in terms of its landscape and weather.
R&I: What is the riskiest activity you ever engaged in?
Probably going down into a coal mine, which happened to be in New Zealand. It was an educational expedition. I was only about 15 at the time and in the summers we went on wonderful field trips with my school and I got to pan for gold and all sorts of wonderful things.
R&I: If the world has a modern hero, who is it and why?
Our military. They risk their lives to save ours and to keep us free.
R&I: What about this work do you find the most fulfilling or rewarding?
I get to help our employees recover their health and get fit while at the same time saving the taxpayers money.
R&I: What do your friends and family think you do?
They think I try to make things safer for our employees, that I talk to a lot of unhappy people, and that I’m always trying to save money!
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.