By CYRIL TUOHY, managing editor of Risk & Insurance®.
In the captive insurance industry, dark business suits and silk ties are de rigueur.
U.K.-based Lloyd's brokers come to breakfast in three-piece suits. They think nothing of sporting Turnbull & Asser threads for a big meal at the local steakhouse in Nashville, Tenn., or at Ben & Jerry's in Burlington, Vt. The Lloyd's boys representing England's upper crust wouldn't have it any other way.
Then there's Gary Osborne, the charismatic and hard-charging president of USA Risk Group Inc. No one seems to remember the last time he wore a tie.
"He was on the cover of a magazine article last year or the year before and we were joking,'Who's tie was it?' I don't think he owns one," said Kevin Doherty, an insurance attorney with Burr and Forman in Nashville, Tenn., who's known Osborne for at least a decade
Osborne, born in Scotland, has a reputation for being straightforward, and for offering a refreshing voice. Of his ties, "I own about 50 -- I hate wearing them," he said.
After all, he prowls an industry stapled together by lengthy documents, bound by weighty contractual obligations, often hamstrung by arcane language, and suffused with exclusionary clauses at every turn.
It is, therefore, not hard for Osborne to stand out in a crowd and to make himself noticed. He doesn't even have to try. Ever the Scotsman, he's as frugal as they come, which is good news for clients.
"He's straightforward and a breath of fresh air," said Robert H. (Skip) Myers, partner and co-chairman of the insurance and reinsurance group at Morris, Manning & Martin in Washington, D.C., who has known Osborne for 20 years. "He will tell you when you have a good idea and when you have a bad idea, and his firm always does high-quality work."
So, why is an adventurer like Osborne working in the captive insurance space? What drew him to captives in the first place? "Absolute accident," he said.
The way Osborne tells the story, he wanted to venture out of the confines of Scotland, spread his wings and see the world. He graduated from the University of Glasgow in 1982 with an undergraduate degree in accounting and economics.
After working for Deloitte in Glasgow for three years, and earning his designation as a chartered accountant, he flew the proverbial coop for Bermuda.
If you're an accountant and you find yourself in Bermuda, your future's predetermined: you're going to be auditing captive insurance companies.
That's exactly what he did. In 1985, he was hired on a 20-month contract for Price Waterhouse, and before long he was recruited by Marsh in 1987 as an account manager.
Osborne said he enjoyed auditing, particularly on the captive manager side of the equation. He was drawn to the variety of the work, and the mental exercise of the challenge.
"You're dealing with different companies and a variety of opportunities," Osborne said. "There's really something new every day. I can take what I've seen work for another company and apply it elsewhere. That seems like something I've been able to do well."
In 1989, he joined Johnson & Higgins in Burlington, as a senior account manager, and then jumped to the international insurance broker Sedgwick LLP in Hawaii as a senior vice president.
He stayed for a year and eight months, before joining USA Risk Group in 1995, with marching orders to grow the business. The company was founded in 1981 by H. Lincoln Miller Jr., whom Osborne still considers one of his great mentors.
Even with a legal commercial insurance dispute or two under his belt, for Osborne the past 30 years have been "a great ride."
He's ploughed ahead and established offices in Arizona, Barbados, Bermuda, the British Virgin Islands, the Cayman Islands, South Carolina and Delaware, on his way to what may one day be known in alternative risk circles as the Osborne Supremacy. Last year, the company established an office in the domicile of Malta.
"The joke is he lives on United (Airlines), and his wife and kids live in Vermont," said Jeff Kenneson, senior vice president for business development for USA Risk Group Inc.
Looking back, those first years in the captive industry in Bermuda were akin to gonzo times. It was a free-wheeling era during which regulation and oversight wasn't nearly the burden it has become today, he said.
"That was the back of the napkin, and it's true, back in 1985 we probably weren't doing enough in terms of oversight," he said. "But now there's a whole lot more appropriate regulation."
At times, he said, people seem to have forgotten that captives are an alternative and mainstream market. Remember, captives are not selling their services to the retail public. "We are not exposing the public to these risks," Osborne said. Few would quibble with that statement, except, perhaps, for the most hard-bitten of regulators.
Now, after more than 25 years in the business, after his marriage 22 years ago to his American wife, Osborne has settled into one of the industry's most respected leaders -- should we say characters? -- working on either side of the Atlantic.
Osborne, who had to give up competitive rugby at the age of 22 after 14 shoulder dislocations, now relishes discussions surrounding risk retention groups, 831(b) captives, group captives, and the nuances of premium tax deductibility.
"He is who he is and he's very good at what he does," Doherty said. "He understands captives as well as anyone I know."
Osborne's mannerisms, he said, have become an "interesting quirk," and they are likely to leave an impression on prospects and clients. Clients come away with the feeling that Osborne is indeed different -- which of course, he is. "He doesn't waste people's time and people appreciate that," Doherty said.
Osborne's knowledge is much sought after. He lectures on the subject at industry confabs like the National Risk Retention Association, the Risk and Insurance Management Society Inc., and the Captive Insurance Companies Association.
He's a faculty member at the International Center for Captive Insurance Education as well, and a member of Scotsin, a network of Scottish ex-patriates, and Red Sox Nation.
"Gary is an innovator and will always explore creative solutions for his clients," writes Carol Frey, vice president of alternative risk marketing for ACE USA, on Osborne's LinkedIn web page.
So, what does this industry oracle have to say about coming changes in rates in the insurance market? "The soft market will change in the next six to 12 months," he said. "There's little in terms of reserves left to take down. I'm hearing indications that there will be changes in workers' comp and general liability in captives once again."
Osborne is even more certain that the captive industry is here to stay, and right now alternative energy industries are among the latest sectors to show interest in the alternative risk marketplace.
"There are seven or eight of them on the drawing boards, from bio-diesel to coal recovery projects," he said. "They are a really fascinating area for me. When you see the technology behind it, the regular insurance market simply doesn't't know what to do with it. The pricing doesn't necessarily make sense."
Using captives to help fund medical programs or having small employers band together and form a captive to cover healthcare liabilities continues to generate interest, thanks to the Patient Protection and Affordability Care Act signed into law last year by President Obama, he said.
USA Risk Group, with 17 locations, offered Tennessee as a domicile before many other captive managers even thought of the Volunteer State as an option, he said. "Managers offering one or two places only are not providing those solutions," he said. "That's why I went to Malta."
When Osborne got started in the industry, there were only two choices: Bermuda and the Cayman Islands. Vermont, which is celebrating its 30th anniversary of the passage of its captive law in 1981, was just getting started.
Now, 30 states have captive laws on their books, with New Jersey Gov. Chris Christie signing into law the state's first captive legislation earlier this year. "I don't know if Connecticut and New Jersey will do well," Osborne said, with characteristic outspokenness.
Those states are highly diversified and generate revenue from other, much larger sources. he said. As a result, captive laws there may not in the end matter all that much.
August 1, 2011
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