Captive Insurance News

The COVID-19 Pandemic: Opportunities and Implications for Captive Insurance

The COVID-19 Pandemic: Opportunities and Implications for Captive Insurance

A FREE 12-page special report from

The COVID-19 Pandemic: Opportunities and Implications for Captive Insurance explores the challenges presented by today's business and economic upheaval, as well as the hardening insurance market, and what it means for the captive insurance industry.

Show Me My Free Report

Mike O'Neill—Captive Owner of Interest

September 05, 2018 recently spoke with Mike O'Neill, president and CEO of the group captive American Contractors Insurance Group Ltd. (ACIG). Together with its subsidiaries, ACIG writes insurance policies and provides related services to the construction industry. The policies cover workers compensation, general liability, automobile liability, and financial guaranty exposures. ACIG provides underwriting, claims supervision, policy filing and issuance, risk management, safety, and quality services to its 39 currently active members. ACIG and its subsidiaries are rated "A" (Excellent) in the Financial Size Category (FSC), VIII ($100 million to $250 million), with A.M. Best Company.

In 1981, ACIG was organized as a Bermuda reinsurance company. Five years after forming ACIG, its leaders started "Project Independence" with the goal of becoming independent of the traditional insurance marketplace. The first step in this process was the formation of Texas-based American Contractors Insurance Company Risk Retention Group (ACICRRG) followed by the formation of Illinois-based ACIG Insurance Company. ACIG has also formed ACIG Insurance Agency Inc. and American Contractors Risk Purchasing Group Inc. Both are Texas-based corporations, and the latter is nonprofit.

Tell us about your current position and industry experience and how you got to where you are.

Prior to taking on my current position as president and CEO, I served as ACIG's president for 10 years. Before joining ACIG in August 1984, I was vice president at Alexander & Alexander in Lincoln, Nebraska. Prior to this, my first position after graduating from the University of Nebraska Kearney was as an underwriting trainee at Aetna Casualty and Surety Company in the Omaha branch office. In 1978, I received the Chartered Property Casualty Underwriter designation followed by my Associate in Risk Management designation in 1981. I am a strong believer in lifelong learning in your specific field of endeavor.

ACIG's stated mission is to save lives, prevent injuries, and reduce the overall cost of risk for its members. Please explain the importance of this mission and how it has contributed to the organization's long-term success.

We are singularly focused on our mission statement, which has guided our operations for the past 37 years. By focusing on the elimination of workplace fatalities and reducing losses, we are attacking risks that have been endemic in the construction industry for decades.

According to the latest published Department of Labor statistics, there were 991 construction deaths in 2016. The total number of occupational deaths was 5,190, meaning the construction industry accounted for 19.09 percent of all occupational deaths.

Serious injuries and fatalities produce significant financial costs and human suffering. To address this, ACIG developed its Project Lifesaver initiative in 2003 to reduce the frequency and severity of losses. We work closely with our members to identify and implement best practices in the areas of risk management, safety, quality, and claims. By employing best practices and focusing on loss reduction strategies, we have been able to greatly reduce our loss rates.

Improvements from our 2002 baseline year are as follows.

Workers Compensation  53% reduction 
General Liability 73% reduction
Auto Liability 43% reduction

Tell us about some of the benefits ACIG members receive by being part of the ACIG group captive.

Our members receive the following financial benefits.

  1. Underwriting profits on their retained risk layer
  2. Investment income on their retained risk premiums and loss reserves
  3. Underwriting profit and investment income on our pooled layer of risk

In addition, they receive these benefits and services.

  1. The broadest and most comprehensive commercial general liability insurance coverage
  2. State-of-the-art risk management, safety, quality, and claim services
  3. Benchmarking and peer-to-peer analysis
  4. Sharing of best practices

Please tell us how ACIG ensures the decisions it makes are in the best interest of all its members.

Corporate governance has always been a hallmark of ACIG. While we are a privately owned company, we employ a sophisticated corporate governance structure. Each member is able to appoint two individuals to serve on the Board of Directors (BoD). With a BoD consisting of over 80 members, we employ an Executive Committee to provide oversight.

The Executive Committee is made up of 12 construction company CEOs who approve our vision and strategy. In addition, we have subcommittees of the Executive Committee consisting of compensation and investments.

A separate Audit Committee made up of construction chief financial officers (CFOs) meets regularly with ACIG's CFO on matters pertaining to the following: financial statements, outside accounting firm, actuarial results, regulatory compliance, and tax advisers.

In addition, we have a number of steering committees made up of our members. These committees are called Serious Injury and Fatality Committee, Best Practices, Safety/Claims Workshop, and Forums—CEO, CFO, Risk Management, etc.

ACIG uses an offshore captive, a risk retention group, a licensed insurance company, and a risk purchasing group (RPG). Tell us more about ACIG's use of multiple entities to finance its members' risk.

ACIG has a number of resources that can be deployed to finance and transfer risk. These resources include ACIG Ltd. (Bermuda), which is utilized to provide risk funding for a number of high-deductible programs. ACIG Insurance Company (Illinois) is used exclusively to underwrite workers compensation and employers liability insurance. The group's auto and commercial general liability insurance is underwritten by American Contractors Insurance Company Risk Retention Group (Texas).

We also formed an RPG, American Contractors Risk Purchasing Group (Texas), which is used to develop group insurance programs in which ACIG does not take any risk. Currently, the RPG is used to negotiate, implement, and manage our members' contractors professional protective and pollution liability program and cyber-liability program.

In terms of opportunities and challenges, what do you consider to be some of the most significant construction industry trends and why?

The US construction economy is a significant contributor to the US gross domestic product, and it is very strong, estimated at $1.5 trillion. For many decades, the means and methods of construction used by many of the construction trades have involved employing considerable manual labor. This creates a demand for labor that currently is under pressure.

The 2008 recession began a dramatic reduction in the US construction industry resulting in construction workers without jobs and leading many of these workers to seek non-construction jobs. A good many of these workers have not returned to the construction industry, which has resulted in a "war for talent" and increased wages for experienced construction workers. As demand for talent continues to exceed supply, many new workers can be found on construction sites. Consequently, their inexperience has the potential to impact the safety and quality of projects.

Accordingly, the national and local construction trade associations all have identified this as a critical problem and have established recruiting and training programs to develop the next generation of construction workers.

How do you stay up to date with ongoing developments in your field?

To stay up to date on the issues affecting ACIG, I have four areas of focus.

  1. In order to stay current on issues impacting the entire insurance industry (e.g., regulatory and compliance, Terrorism Risk Insurance Act Reauthorization, mergers and acquisitions), I attend the Property and Casualty Insurers Association of America executive sessions.
  2. To stay up to date on issues affecting the captive insurance industry, I regularly attend a number of conferences, including the Bermuda Captive Conference, the Captive Insurance Companies Association's conference, and the World Captive Forum.
  3. In addition, I serve on the client advisory council for Swiss Re, which provides some of ACIG's reinsurance coverage. This is a great venue to network with other primary insurers and discuss challenges that impact primary insurance companies.
  4. Lastly, since ACIG's sole focus is the US construction industry, I stay current by reading construction industry trade press, Engineering News Record (ENR), Associated General Contractors of America (AGC) Constructor Magazine, and Construction Dive publications. I have also attended 37 Construction Risk Conferences held by International Risk Management Institute, Inc. (IRMI), and have presented more than 30 times.

Mr. O'Neill has been involved in the construction insurance industry for more than 45 years; he joined ACIG in August 1984. He is responsible for the overall operations of ACIG and its subsidiary companies. Mr. O'Neill is a frequent speaker for construction industry trade associations and is the recipient of IRMI's Construction Risk Conference Words of Wisdom Award. His expertise lies in the areas of captive management, risk management, retention analysis, contractual risk transfer, development of specialized coverages, and risk funding programs. Mr. O'Neill has written many articles for construction industry publications, including AGC's Constructor, CFMA's Building Profits, and ENR.

(Above photo of Mike O'Neill courtesy of American Contractors Insurance Group Ltd.)

Copyright © 2018 International Risk Management Institute, Inc.

Captive Insurance Company Reports
Follow on Twitter

Twitter Feed