By DAN REYNOLDS, senior editor of Risk & Insurance®
One of the things captive insurance leaders and executives often feel compelled to talk about are the results of unintended consequences--like when Uncle Sam or one or more state governments get involved in the dealings of the private sector.
Or, how about when our duly-elected governing officials decide they have a role to play in the direction of the economy. Does any of this sound familiar? If so, then perhaps you should be attending this year's annual conference of the Captive Insurance Companies Association (CICA).
At this year's CICA meeting in Orlando, Fla., scheduled for March 7-9 at the Omni Orlando Resort at ChampionsGate, the unintended consequences of the most exhaustively analyzed government reform measure in the past decade may very well come home to roost, and in a good way.
We're talking about healthcare reform, of course. Now the prevailing prejudice/wisdom is that, when the government gets involved, it's bad for the private sector. But in the case of healthcare reform and the captive insurance industry, this could prove very much not the case.
As you read this story, the odds are that the healthcare reform effort will still be playing out in Washington, D.C. What the finished product will look like is anyone's guess, but you can bet it will be gerrymandered worse than the most dog-legged political district you can point to.
What is just as sure to happen is that on Monday, March 8, between 1:30 p.m. and 3 p.m., CICA will host a workshop titled "Establishing Captive Value by Building a Healthcare Cooperative."
"Regardless of what happens with healthcare legislation in Washington, people are going to be talking about healthcare captives," said Dennis Harwick, the president of CICA, in an interview with Risk & Insurance® in late January.
But what does happen if the federal government does indeed mandate that more and more employers are obligated to provide healthcare coverage for their employees?
It stands to reason, doesn't it, that more companies will at the very least be considering captive formation as a way to manage what will inevitably, let's not kid ourselves, be an unfunded mandate.
"Using captives to fund health insurance gives employers the opportunity to manage a cost that has escalated out of control for many years," is how the CICA conference literature frames the dynamic.
"For existing group captives and risk retention groups, adding health insurance to the risks covered can create real cost savings for members and attract new participants," the literature goes on to state.
Our in-depth series on healthcare reform published in the spring of 2009 quoted research by the Robert Wood Johnson Foundation that found that as much as 18.4 percent of working adults lacked healthcare coverage. If even a third of those employees work for someone else, that's a lot of people who are going to need to be covered, and you know that's a conservative estimate.
On the other hand, we remained at 10 percent unemployment nationally as February opened in our calendars. At the depths of the recession in April 2009, as many as 14,000 people were dropping off health-plan rolls every day, according to estimates by the Center for American Progress Action Fund, a liberal think tank in Washington, D.C.
However you interpret those numbers, the wagering in this corner is that that 1:30 p.m. time slot on March 8 is going to be one very heavily attended seminar. And even though 2009 was classified overall as a modest year for captive growth, the healthcare reform effort might have the unintended consequence of firing up captive formation in 2010 and beyond for healthcare coverage purposes alone.
The moderator of that forum will be Arthur Perschetz, an attorney with Baker & Daniels LLP. Perschetz has an extensive history in creating and interpreting captive insurance policy.
Speakers for that forum include John Cassell, a senior partner with Spring Consulting Group; Phil Collyer, a vice president with National Human Services Assembly, which represents nonprofit organizations in the fields of health, human and community development, and human services; and Marta Hayes, a program director with ASAE Business Services Inc., a subsidiary of the American Society of Association Executives.
It may just be his lucky week, but Perschetz is also moderating a March 9 morning forum that we are betting is sure to get a lot of attention: a session on captive redomiciling.
According to CICA's Harwick, as the domestic captive industry matures and as the U.S. government looks for more ways to generate revenues through taxation, companies are considering or acting on the notion that they might want to move their captives onshore.
Whether the Obama administration, in its drive to clean up the financial sector, ends up clamping down on offshore captives and other financial entities remains to be seen.
What is more clear is that as consumer and regulatory anger builds over a perceived or real ethical morass in the financial sector, it is becoming hipper to move your captive onshore if for nothing else than the public relations benefit it affords.
Harwick reported that captive managers and owners have mentioned that "political correctness had compelled some companies, particularly publicly held ones, to come back onshore."
That's why the session, "Captive Re-Domiciling: Is Now the Time? What are the Issues?" is sure to be well attended.
In addition to Perschetz, the 10:30 a.m. session on March 9 will feature Gordon Rowell of the Cayman Islands Monetary Authority; Tom Jones, a partner in McDermott Will & Emory LLP; and Dana Sheppard, an associate commissioner of the Risk Finance Bureau of the D.C. Department of Insurance.
Was one of the hand grenades that almost blew up the financial sector in the past two years a failure of ratings agencies?
That question will also be addressed in a session onMarch 9 from 1:00 p.m. to 2:15 p.m. The session is titled "Rating Agencies Under Attack, Will they Survive Regulatory Reform?"
The National Association of Insurance Commissioners is so peeved by the failures of ratings agencies that they are considering forming their own.
A panel on this topic will be moderated by John Andre, group vice president of the A.M. Best & Co., and will feature Chris Evangel, a managing director of the Securities Valuation Office of the National Association of Insurance Commissioners, and Skip Meyers, a managing partner in the insurance group of the law firm Morris, Manning & Martin LLP.
Do you want to hear about captives directly from those who run them? You might want to sit in on another session scheduled for 10:15 a.m. on March 9. Mike O'Neill, the president of the American Contractor's Insurance Group Ltd., will be part of a panel discussion titled "Maximizing Value With Successful Management of Captive Claims."
That panel will also feature Derek D'Onofrio, account executive for captives and risk retention groups with Gallagher-Bassett Services Inc., along with colleague Robert Bulter and Peggy Kehoe, a second vice president with Discover Re.
March 1, 2010
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