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Carol Pierce—Captive Insurance Person of Interest

Carol Pierce--SF
August 02, 2017

As part of our ongoing commitment to provide thoughtful commentary concerning issues impacting captives and the broader insurance markets, we sat down for a conversation with Carol Pierce, a director in the Insurance Group of Kroll Bond Rating Agency, Inc. (KBRA), with a focus on captives, reinsurers, and alternative capital providers. She shares her thoughts on rating agencies and regulation and provides a sneak peek at the new KBRA captive insurer rating methodology.

How did you decide on insurance as a career path?

Like many liberal arts majors, I wasn't sure what I wanted to do after college, so I interviewed for a myriad of jobs during my senior year at Smith College. I had already applied and been accepted into New York University Stern School of Business's MBA program, but I wasn't sure it made sense to attend without some business acumen first. What I wanted was to find a job that sounded interesting, which ultimately led me to accept an offer from the Travelers.

Back then, like so many companies, Travelers actually had a training program. So my first year there was spent in learning and studying the many facets of insurance. Upon completion of the program, I was assigned to its national accounts division as an underwriter. 

Your career has taken you back and forth between the primary and reinsurance industries and the rating agencies. What drove these career decisions and any preference between working directly in the industry or for a rating agency?

From the beginning, I always wanted to work in a position that I found challenging and where I could create positive change. Over time, that led me to accept positions in underwriting, business development, marketing, product development, and finance, which allowed me to develop a well-rounded knowledge of insurance. About the only operational job I have not performed is claims management.

Some of my career moves were driven by changes at the company where I worked and some by a desire to explore other options. While at Zurich, I returned to school on a part-time basis to get my MBA from Keller Graduate School of Management. With a new degree in hand, I decided to look at other options, which led me to A.M. Best to build its captive insurance rating unit.

Ultimately, I've learned that I like to work for innovative companies where I can make a difference. It's what led me to accept my new position with KBRA.

Before you joined KBRA, you were with Munich Re in its alternative markets division. Can you compare how a reinsurer and a rating agency may look at a captive?

I think there are many similarities between what a rating agency like KBRA does and what a treaty underwriter does for a reinsurance company. Basically, you need to take the company apart from both a quantitative and qualitative perspective to understand how it works and then put it back together again. While the quantitative factors are important, it's really on the qualitative side that treaty underwriters and rating agency analysts earn their money. 

What you are trying to ascertain is whether the captive has the required risk management programs in place to underwrite the business and if management fully understands and stands by these risk management programs. Once the underwriter signs off on the treaty, it needs to trust that management will execute as per plan. The same is true for a rating agency analyst; you assign a rating based on operating fundamentals and the belief that management can deliver on its business plan.

What do you consider to be the most important challenges facing the captive industry, and what should the industry do to meet those challenges?

I think there are several challenges the industry needs to think about. The first is regulation. Legislation sometimes comes with unintended regulatory consequences. With regulation existing on state, national, and international levels, the captive insurance industry needs to ensure it doesn't open itself up to unnecessary or ambiguous regulation as a result of being swept up into legislation intended to solve problems that don't apply to captives. Captive owners have a responsibility to effectively govern their captives. I think the Vermont Captive Insurance Association (VCIA) and Captive Insurance Companies Association have been good advocates in this regard, promoting both good governance and relevant regulation.

While there has been a lot of discussion over the years about ratings for captives, one thing a rating provides is an independent opinion regarding the current and future financial strength of the company. By allowing the captive to be rated, management is seeking an assessment of its business and governance models.

One other issue I think captives need to pay close attention to is technology—not so much from how it impacts the captive but more so in terms of the new risks being created as a result. It's likely commercial insurers will be cautious in addressing some of these new risks. This provides a natural path for captive insurers to be part of the solution. However, captives will need to be aware of the unknowns embedded within these new risks and recognize how they can effectively finance the exposures being written.

How do we entice younger professionals into the alternative markets? What would you tell someone considering this as a career choice?

Other than insurance and risk management majors, I think enticing college graduates into insurance is a big challenge for the industry. That's unfortunate because insurance is the backbone of the economy. For young insurance professionals, the draw to the alternative markets is the diversity—across disciplines and industries served. The small size and niche nature of the industry allow anyone with drive and ambition the opportunity to assume a great deal of responsibility relatively quickly in his or her career.

One piece of advice I'd like to pass along to all new professionals, especially women, is that you don't need to have all of the attributes a company may list in its job specs either to be accepted for the position or to be successful. I always worked from the viewpoint that if I could do 50 percent of what the company was looking for, I'd apply for the position.

We understand KBRA will be unveiling its new captive rating process at the VCIA 2017 Annual Conference. Any early points on the methodology you care to share? (Readers can access the methodology.)

KBRA did, in fact, release its proposed global captive insurer rating methodology on July 27. Anyone can access it at, where all of our rating and research reports are complimentary. I hope captive industry stakeholders will read the methodology and provide comments—until August 18, when the final version will be published.

The methodology describes KBRA's process for assessing the financial strength of captive insurers. KBRA defines a captive insurance company as an entity whose primary business is to accept the underwriting risk of its owner(s) and that is licensed and regulated under its domiciliary jurisdiction's legislation.

The methodology incorporates both quantitative and qualitative analysis of the captive insurer as well as an evaluation of the strategic importance of the captive insurance company to its owners and whether its owner enhances or diminishes the financial strength of the captive insurer.

We believe that we made the methodology flexible enough to apply to most captives—single-parent, group, risk retention group, big, small, just starting out, well seasoned.

How do you stay up to date in your field?

I read a lot on a wide array of topics. I try to regularly seek opinions from others—both in the insurance space and the broader financial services industry. The issues faced by insurers, including captives, are not always unique and other areas sometimes have a leg up on a viable solution to these challenges.

Any closing thoughts or comments?

I am looking forward to this year's VCIA conference. The program looks excellent. I hope to catch up with many old friends and make some new ones.

Thanks, Carol. We look forward to a follow-up conversation on KBRA's new captive rating methodology after the VCIA conference.

Carol Pierce is a director in the Insurance Group at Kroll Bond Rating Agency, Inc. Ms. Pierce was hired in May 2017 to focus on captive insurance companies and professional reinsurers. Before coming to KBRA, Ms. Pierce worked for Munich Reinsurance America, Inc., for over 13 years, supporting both the Specialty Markets and Reinsurance Divisions. At Munich Re, she performed market and competitor analysis, monitoring (re)insurance industry issues and trends to identify emerging opportunities and threats. Additionally, Ms. Pierce provided financial analysis, benchmarking, and rating agency advisory services for clients. 

Prior to joining Munich Re, Ms. Pierce was assistant vice president at A.M. Best Company, responsible for ratings on alternative risk transfer entities. At A.M. Best, she regularly spoke about ratings and industry issues and authored numerous special reports and articles. Previously, she held various underwriting management positions at CNA, Zurich, and AIG.

Ms. Pierce is a past member of the boards of directors of VCIA and the International Center for Captive Insurance Education. She has also received the VCIA Captive Crusader Award.

Ms. Pierce graduated from Smith College with a BA degree and from Keller Graduate School of Management with an MBA degree in marketing and finance. She is a Chartered Property Casualty Underwriter and holds the Associate in Reinsurance designation as well as the CFA Institute Investment Foundations certificate.

(Photo of Carol Pierce, above, is courtesy of Kroll Bond Rating Agency, Inc.)

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