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Corporate Regulation and Governance in Captives

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Delve into captive insurance governance matters including board attributes, board structure, and board accountability. With 30 years of insurance experience from the auditing, regulatory, and management side, Derick White, managing director of corporate governance and regulation for Strategic Risk Solutions, offers key insights into captive board governance.

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Captive Insurance Exit Strategies, Solutions Topic of Webinar

Exit Sign
February 16, 2016

Earlier in February we reported on the Strategic Risk Solutions (SRS) webinar that offered 2015 captive statistics. As part of the presentation, Brady Young, SRS president, noted approximately 296 captives were closed in 2015. Additionally, a number of group captives and risk retention groups (RRGs) were sitting on significant surplus, leading to internal discussions on how best to deploy those dollars.

In light of this information, the American Bar Association Business Law Section Captive Insurance Committee's webinar titled "Captive Exit Strategies and Solutions" was very timely. The February 12, 2016, presentation featured Andrew Rothseid, principal of RunOff Re.Solve, LLC, a specialist company providing solutions for discontinued insurance and reinsurance operations. 

While specifically targeted at legal counsel to captives, the talk provided some essential points for boards to consider when discussing putting their captive into runoff. Mr. Rothseid gave the audience a perspective on the size and growth of the runoff market in the United States and Europe, saying there are more than 400 US entities currently in solvent runoff.

He commented on the conditions driving the increases in runoff, as follows.

  1. Low interest rates and soft market conditions are putting downward pressure on returns.
  2. Cash tied up in legacy reserves continues to increase.
  3. The first two items increase the demands on capital.
  4. This leads to boards, shareholders, and regulators pressuring companies to increase capital efficiency and clear away the legacy drain.

The remainder of the presentation focused on successful paths to runoff, insuring an effective resolution of the problems. Mr. Rothseid compared and contrasted the differences between the United States and Bermuda/United Kingdom. He talked about the various options open to captives and provided several examples of successful runoffs. In particular he focused on the Rhode Island statute regarding the "Voluntary Restructuring of Solvent Insurers" and its applicability to captives.

A similar set of slides to Mr. Rothseid's ABA presentation can be viewed on the RunOff Re.Solve, LLC, website. Members of the ABA Business Law Section can access a recording of the webinar on the ABA website.

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