Download PDF - Vermont Captive Insurance

RISK&
INSURANCE
April 2014
VERMONT
2014
®
Captive
No. 1,000
Eric Dethlefs and a health
care risk retention group
create a milestone in
Vermont.
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RISK&
INSURANCE
®
www.riskandinsurance.com
APRIL 2014 | vol. 25 no. 3
contents
cover story
A4
Hospital
Group Hits
Milestone
The captive’s health care
parent has a long history
in alternative risk transfer.
BY MATTHEW BRODSKY
COVER PHOTO BY Dave Londres
A11
Who’s Who in
Montpelier
When considering whether to form a captive in Vermont, feel free to reach out to
these five domicile stars.
BY Matthew Brodsky
A8
Managing Change
With the advent of the Affordable Care
Act, the health care industry is facing perhaps greater uncertainty than ever before,
and as in the past, such times usually call
for more conversations about captives.
BY Matthew Brodsky
A14-15
Charts featuring summaries of captives
formed in Vermont listed by gross written
premium and industry sector. Includes a
list of captives formed in 2013.
A P R I L 2014
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david londres
eRIC dETHLEFS, the president and CEO of Cassatt RRG Holding Co. The parent company
created Vermont's 1,000th captive by establishing a segregated cell captive.
Hospital Group Hits
Milestone
The captive’s health care parent
has a long history in alternative risk
transfer. By MATTHEW BRODSKY
B
ack in 1991, a group of
Pennsylvania hospitals dipped
their toes into the water of captives.
That water happened to be offshore.
Their other insurance option was
the “turmoil” of the traditional
market. So they decided to dive in
with a class-2 insurer called Cassatt
Insurance Co. Ltd. It provided
members with excess professional
and general liability insurance.
A4
The group thrived — enough to
encourage the formation of another
captive in 1997. This time, Cassatt
planted its flag firmly onshore, in
Vermont, with a risk retention group
(RRG) called Cassatt Risk Retention
Group Inc. Coverage was for the
primary level, set beneath what
was then called the Pennsylvania
CAT Fund, which became the
Pennsylvania MCare Fund in 2002.
(Essentially, MCare, or Medical
Care Availability and Reduction
of Error, guarantees “reasonable
compensation,” according to the
Commonwealth, for persons injured
due to medical negligence by paying
from the fund for claims in excess of
primary insurance coverage.)
The RRG today has five
shareholders, nine hospitals and
more than 1,200 physicians insured.
risk & insurance®
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DAVID LONDRES
The next big step in the group’s
evolution came in 2006, when
Cassatt RRG Holding Co. gained
a far greater role in the everyday
operations of the captives and their
members. The holding company
assumed responsibility for claims,
risk management, underwriting and
finance.
“It is really a service organization
to the membership,” said Eric
W. Dethlefs, president and chief
executive officer of the Malvern, Pa.based holding company.
What the increased role of
the holding company — and the
overall development of Cassatt —
demonstrates is truly an innovative
progression; the ability to anticipate
trends as they emerge. It’s a trait
particularly handy for health care
organizations, especially as of late,
when issues appear to be rising
faster than most organizations can
understand, let alone manage.
Take the most recent examples
of Cassatt’s growth. In 2012, Cassatt
RRG Holding Co. launched the
Cassatt Patient Safety Organization.
This past October, it formed
Cassatt Insurance Group Inc. —
coincidentally, Vermont’s 1,000th
captive formation. Both demonstrate
Cassatt’s handle on 21st century
health care exposures and strategic
imperatives.
A CAPTIVE FOR
CONVENIENCE
The Cassatt Insurance Group is
a sponsored captive — or in other
common parlance, a segregated
cell captive. Vermont’s 1,000th
captive is designed, Dethlefs
explained, to provide insurance
coverage flexibility for members
as they merge and form affiliations
with other hospital systems in the
coming months and years, as they
address the Affordable Care Act and
other challenges. Many health care
systems are scrambling to find such
partners, Dethlefs said. (See the
article on health care captives on
page A8 for more information.)
Cassatt’s sponsored captive
will provide a flexible solution for
the health care organizations that
partner with Cassatt members.
Dethlefs described the concept as
each cell being similar to a new
spoke off the sponsored captive’s
wheel. The RRG is one established
spoke. If new partners want the
claims, patient safety and other
benefits of Cassatt involvement, yet
aren’t prepared to share in the other
members’ liabilities as they would in
the RRG, they can form their own
cell, or a new spoke. One key benefit
of segregated cell captives is that
each cell’s liability is walled off.
Roughly six months into the
new captive, Dethlefs said, talks
are underway with several health
groups.
It’s an attractive model for health
care organizations, according to
someone who has seen plenty of
captive business models (not all
1,000 of Vermont’s, but plenty).
“It is a neat process for them
to expand their services to other
hospitals,” said David F. Provost,
deputy commissioner in Vermont’s
Captive Insurance Division. “The
result is going to be better patient
care.”
“The regulators in Vermont
clearly understand the needs of our
member hospitals, and this new
company will help us to grow and
to continue to provide the members
and their patients with the benefits
of Cassatt’s success,” said Gerald
Miller, chairman of the Cassatt board
of directors.
A CAPTIVE FOR CARE
Cassatt member hospitals have
enjoyed a surge of benefits from
the aforementioned Cassatt Patient
Safety Organization (CPSO),
which has been approved by the
Department of Health and Human
Services’ Agency for Healthcare
Research and Quality.
“It’s not a one-and-done kind of
thing. It’s continual,” Dethlefs said.
The CPSO can, for example,
conduct risk assessments. It brings
in experts in a given medical field
that represents a high degree of
liability exposure — say, obstetrics
or surgery — and works with them
to analyze the current practice and
delivery of care. They learn what
they are doing well, and where they
could improve.
Another function of the patient
safety organization is protected
knowledge sharing. Chief medical
officers, chiefs of obstetrics and other
leaders from member hospitals can
gather around a meeting room — a
“safe table,” as designated by the
federal government — and essentially
compare patient safety notes.
Dethlefs called the patient safety
organization “just as important, or
maybe even more important” than
the insurance underwritten by the
captives.
“The founding members believed
then and continue to believe today
that the sharing of risk and the
sharing of best practices across
the membership is something very
important and one of the reasons
they formed a group captive,”
Dethlefs said.
Indeed, the same rationale went
into leveraging the holding company
for in-house claims and risk
management in 2006. The holding
company now has four case handlers
and one director making up the
claims staff, representing more than
125 years of collective professional
liability experience, he said.
They investigate each case,
evaluate liability and damages, and
make recommendations on whether
to settle or litigate. The claims
personnel are capable of following
a claim from the initial incident
to the case disposition, working in
conjunction with member hospital
staff and in-house counsel. They
will even attend trials. The results of
hands-on claims management pay
for themselves.
“We have a very, very good, solid
record in terms of favorable loss
development,” Dethlefs said.
Cassatt’s holding company
also employs a patient safety staff
Summary
• The group of hospitals formed its
first captive in 1991.
• Captives allow health providers
to address regulatory and other
challenges.
• Captive members share patient
safety practices.
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consisting of an administrative
director, a medical director and
other staff members.
All of this investment was a
conscious decision that Cassatt
could be capable of managing
its members’ exposure better than
third-party vendors.
“We had the belief that if
we internalized these functions
of claims, risk, finance and
underwriting, and held people
accountable, results would be
better,” Dethlefs said.
A CAPTIVE FOR COPYING?
Cassatt’s growth — particularly
the patient safety organization
and the sponsored captive —
are not mere symptoms of ACA
implementation, though the
dynamic nature of health care risk
today has a lot to do with it.
“Changes in health care — and
particularly in the economics of
health care (including the advent
of the Affordable Care Act and
other legislation and initiatives) —
“The result is going to be
better patient care.”
insurance solution,” said Miller,
Cassatt’s board chairman.
“The members’ continued
—David F. Provost, deputy commissioner,
attention to and investment
Captive Insurance Division, Vermont
in Cassatt has resulted not
only in what we believe is a
require hospitals to find better, more superior insurance program but also
in Cassatt’s capability to provide
efficient ways to deliver consistent,
first-class patient safety and risk
high-quality care,” said Laurence
management services to the member
M. Merlis, president and CEO of
hospitals.”
member Abington Health.
Developments since then have
“Cassatt is an indispensable
been improvements on that theme
partner for Abington as it addresses
and responses to current trends.
both challenges: cost and quality.
Although Cassatt’s model may
Through its first-class patient safety
well be considered innovative and
and risk management work and
worthy of imitation by others facing
innovative solutions to insuring our
the current turbulence — we’ll leave
risks, Cassatt plays a major role in
that to the experts to determine
ensuring that Abington remains a
center of excellence in health care in — Dethlefs doesn’t think it’s
particularly innovative. “I think it’s
the Philadelphia region,” he said.
getting back to the basics of doing
Collective risk management
things correctly and holding folks
has been a long-term view of the
accountable,” he said.
member companies.
“Cassatt was created more
Matthew Brodsky is editor of
than 20 years ago in response to
Wharton Magazine. He can be reached at
the member hospitals’ need for a
[email protected].
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Managing Change
D
octors rely on data from tests
and diagnostics to help diagnose
patients, so it’s apropos to use data to
ascertain the health of captives that
underwrite exposures for physicians,
hospital systems and others in the
health care industry.
In Vermont in 2013, health
care was tied with insurance as
the industry with the most captive
formations. Eight new captives
became active in health care and
insurance each, out of a total of 29
new captives. That brought the total
number of active health care captives
at year end to 94, making the sector
No. 2 in the domicile. It is closing in
on manufacturing with its 101 active
captives.
“Health care is clearly a growth
sector for the captive industry and
certainly our fastest growing sector in
Vermont,” said Dan Towle, director
of financial services in Vermont’s
Agency of Commerce & Community
Development. “I anticipate it will
become our largest sector in a matter
of a few years.”
Keep in mind, historically, that
when captive activity reaches a
feverish pitch, it usually is a sign that
health care is in the middle of a crisis.
Is that the case now, as the health care
industry continues along a path of
uncertain reform in the United States?
A HISTORY OF CRISIS
Captives and health care have
always seemed to go together like
doctors and white coats. The history
goes back to the late 1970s when
the first hospital professional liability
captive was formed offshore. By
the 1990s, smaller hospital systems
learned to value the control and
security of captive insurance for
such exotic exposures as Medicare
reimbursement trusts. Then, captives
proved their value again during
the most recent, and perhaps most
traumatic, crisis of the traditional
insurance market, when in the early
A8
With the advent of the Affordable Care Act, the
health care industry is facing perhaps greater
uncertainty than ever before, and as in the past,
such times usually call for more conversations
about captives. BY MATTHEW BRODSKY
CAPTIVES HAVE long been used for housing health care-related risks. With the advent of health care reform, their
use is getting increased attention.
2000s, the medical professional
liability market convulsed from
unsustainable claims trends. Rates
jumped. Capacity went into shock.
The largest underwriter of the line,
St. Paul, left the market altogether,
bringing seizures that rippled across
multiple states. Private physicians
were particularly hard hit.
Tim Padovese, president and CEO
of Ophthalmic Mutual Insurance
Co. (OMIC), a risk retention group,
recalled the moment when 80,000
physicians had to find a new home for
coverage.
“That put a huge strain on the
market to absorb that business from
both capital constraints and staffing
expertise,” he said.
OMIC formed in 1987 when about
400 ophthalmologists received notice
of cancellation on their med-mal
insurance policies. These physicians
approached the American Academy
of Ophthalmology and asked it to
create an insurance program.
In the 2000s, physicians often
turned to nearby hospital systems
— and their captives — for new
coverage. Some hospital captives
responded by providing an antidote
to the crisis: third-party coverages to
private physicians. That was when
some offshore domiciles grew their
reputations as purported health care
domiciles because of their willingness
to accommodate these third-party
arrangements.
RISK & INSURANCE®
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To be fair, Vermont came to the
rescue too. David F. Provost was just
beginning his tenure with the Captive
Insurance Division of the Vermont
Department of Financial Regulation
in 2001, but he looks back on that
time now, as Vermont’s deputy
commissioner. When traditional
medical-malpractice insurers went
bankrupt or left states en masse,
followed by physicians, whether in
Pennsylvania or in New England,
Vermont filled the need, particularly
for risk retention groups (RRGs), he
said.
“Not only did we fill a huge gap in
the market by getting the RRGs up
and running quickly; in the long haul,
it’s led to reduced losses,” Provost
said.
With its steady and fair regulation,
Vermont built its reputation as a place
health care organizations could go to
form captives and/or expand existing
ones toward third-party business —
with a focus on risk management and
patient care. Such “gold standard”
captives get doctors to focus on
avoiding losses in the first place as
well as having appropriate insurance
coverage.
“It winds up as a tool to provide
better medical care,” said Provost of
the RRGs.
As Vermont’s 2013 formation
numbers show, health care
organizations are again looking for
flexible, respectful and respected
regulation — and they are looking to
Vermont for it.
“Some would lead you to believe
you need to go offshore for your
hospital or doctors group captive, and
that is clearly not the case. Hospital
captives continue to thrive onshore
and in Vermont,” said Towle.
Given the issues now confronting
health care, they will need
somewhere to thrive.
As captive attorney Tom Jones of
McDermott Will & Emery LLP said,
the implementation of the Affordable
Care Act (ACA) is “starting to bite
now.”
One visible effect is the nowcollective wisdom that bigger
will be better among health care
organizations when it comes to
surviving shrinking reimbursement
under the ACA. Consolidation was
trending before the 2010 health care
reform bill, but it’s been accelerated
by its incentives, particularly with
the formation of accountable care
organizations (ACOs). ACOs are
integrated networks of doctors,
hospitals, nursing homes and other
providers that share responsibility
for the care of a group of Medicare
patients. The goals are to promote
accountability, efficiencies and better
clinical outcomes.
“The current perception is bigger
equates to survivability,” Jones
said, explaining that health care
systems are seeking mergers or ACO
affiliations to improve care but also to
gain efficiencies on the back end —
insurance, billing, financing and more.
What will “bigger” equate to for
captives? More risk as bigger exposures
mount from bigger organizations
and as formerly private physicians
now become full-time employees of
hospitals? Fewer captives as new
systems built out of M&As shut down
legacy captives? It could be both.
OMIC’s Padovese has heard from other
med-mal writers out there that some
captives have lost insured physicians
to ACOs, while others have added
physicians to their captives.
For Padovese, another of the
ACA’s effects to watch is the impact of
millions of newly insured Americans.
“One of our concerns is as more
people sign up for government health
care and join the ranks of insureds,
their access to our physicians
could cause an increased workload
that could potentially affect care,”
Padovese said.
If emerging symptoms seem
confusing and contradictory, it’s
because it’s really too early in the arc
of reform for clarity.
“If this were a football game, this
would be the end of the first quarter
— maybe the middle of the first
quarter,” Chicago-based Jones said.
Organizations are still “bumping into
the walls” figuring out what’s next, he
added.
Some health systems, like the
Mayo Clinic or Geisinger Health
System, have already integrated
well. They have deep experience
with electronic medical records and
using data for better treatment and
prevention, uniting teams of doctors
to treat one patient.
“Both are adamant captive
owners,” Jones said. “They want
to own the risk because they feel
confident they can best mitigate the
risk.”
And when organizations own their
existing risk through captives, there’s
a good chance that they’ll find ways
to innovate to address unexpected
exposures arising out of systemic
health reform too.
PATIENT UTILIZATION
A KEY RISK
One new exposure health care
risk organizations may consider
managing through captives is patient
utilization risk. Under the ACA, the
U.S. government pays an ACO a
certain amount of money to provide
care, potentially unlimited, for a given
population.
If a hospital system is really
efficient and its given population isn’t
too sick, money can be made in the
new business model. If not, the ACO
members could take a hit to their
bottom line.
ACO groups, however, could hedge
this financial risk with their captives,
which would act as a “shock absorber”
smoothing results between good and
bad years. Large dollar investments
notwithstanding, some firms are in the
early stages of exploring this approach,
Jones reported.
Robert H. “Skip” Myers Jr., partner
in the insurance group of Morris,
Manning & Martin LLP, also foresees
other kinds of liability emerging
from ACO and other affiliation
arrangements, such as electronic data
keeping or cyber liability, given the
focus on technology in health care
reform.
Summary
• Health care captive formation is
picking up steam in Vermont.
• The health care industry still
remembers the early 2000s, when a
coverage crisis rocked the country.
• Larger health care organizations
will likely lead to an increased use
of captives.
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At least one health care
organization has employed a
captive for another ACA-impacted
exposure: employee health benefits.
The Community Hospital of the
Monterey Peninsula formed its
Central Coast Community Mutual
Insurance Co. in 2011 to serve as
a group stop-loss captive, helping it
and other employers to transfer the
excess health risk of their employee
populations.
CFO and Vice President Laura
Zehm admitted that 2012 was a rough
year to convince other employers
to join, given the uncertainty
surrounding health care reform.
“Most employers were sitting
tight,” she said.
But now with the Covered
California insurance exchange in
full swing, the group captive may
take off. Zehm shared anecdotes to
explain — one employer she knows
is experiencing 47 percent premium
increases on their traditional
insurance, because carriers are feeling
the brunt of adverse selection in the
intents and
purposes,
with the same
priority: manage
the health of its
population.
—Dan Towle, director of financial services, Vermont’s
Health care
Agency of Commerce & Community Development
reform “lit a
fire under us,”
said Zehm, essentially forcing the
exchange. The group captive is now
organization to realize it needed to
in talks with 10 interested California
change how it did business.
employers.
The hospital moved away from
The Community Hospital of
pay for service for sick patients
the Monterey Peninsula also runs
and toward integrated care to keep
an insurance plan, a fully insured,
patients healthy. Liability risk could
California-licensed Medicare
erupt, however, if its health plan were
Advantage Plan in Monterey County.
to fail to keep someone healthy.
As a member of Health Plan Alliance
Would a captive be useful to help
— a national association of roughly
the Community Hospital of the
50 U.S. health care systems with
Monterey Peninsula and its partners
such plans — Zehm knows it is a
transfer this risk?
growing trend, representing another
Yes, maybe down the road.
new exposure: enterprise population
management risk.
MATT BRODSKY is the editor of Wharton
The Community Hospital of the
Magazine. He can be reached at riskletters@
Monterey Peninsula partners with a
lrp.com. He can be reached at riskletters@
physician group to run the Medicare
lrp.com.
plan, so consider it an ACO for all
“HEALTH CARE IS CLEARLY A GROWTH
SECTOR FOR THE CAPTIVE INDUSTRY
AND CERTAINLY OUR FASTEST GROWING
SECTOR IN VERMONT.”
Visit: www.springgroup.com/ebcaptives
to download our white paper:
A Risk Manager’s Guide to Funding
Employee Benefits in a Captive
Actuarial Services | Alternative Funding Solutions & Captives | Brokerage | Employee Benefits
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RISK & INSURANCE®
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Who’s Who
in Montpelier
When considering whether to form a captive
in Vermont, feel free to reach out to these five
domicile stars. BY MATTHEW BRODSKY
W
hen you need someone you can trust to fix your car, sell your
home, invest your life savings or buy insurance, it helps to know
someone. And when you need to form a captive, it helps too.
Who should you know in the No. 1 onshore domicile? The head
regulators, key economic development officials and the president of
the industry association, for starters. But you don’t have to wait for an
introduction. Pick up the phone and talk to them yourselves. Better still,
come meet them face to face.
As you explore this important area of risk transfer, these key players in
Vermont can and will answer your alternative risk transfer questions and
set you on the best captive course.
DAVID PROVOST
When David F. Provost took
over as Deputy Commissioner
of Vermont’s
Captive
Insurance
Division in 2008,
one thing he
stressed again
and again,
during the 1,001
interviews he sat
through at the
time, was continuity.
“I’m just going to keep on doing
what Vermont’s been doing,” he told
Risk & Insurance® back then. “It’s
going to be a while before it looks
like it’s Dave’s Vermont.”
Six years later, no doubt it is
“Dave’s Vermont,” and the domicile
is still the same steady-as-she-goes,
No. 1 onshore home for captives.
“We’ve changed things, but our
basic approach is still the same,”
Provost said in 2014.
With a quarter-century of
experience in captives, first on the
business side at Johnson & Higgins,
Sedgwick and AIG, then on the
regulatory side as an examiner and
assistant chief examiner, Provost
has come from within the ranks to
lead them. So on top of consistency
add approachability to the list of
qualities that he imbues upon the
department. Provost estimates that
his office receives calls nearly every
day about how to start a Vermont
captive. His team takes the call and
spends the time to walk prospective
parents through the basics, pointing
them in the direction of captive
managers and feasibility studies.
“We don’t have an answering
machine,” Provost said. “You don’t
have to press any buttons when you
call the phone here.”
Provost himself will field the
questions, whether on the phone
or in person at an industry event
or in individual business meetings.
He knows it’s part of the job. Even
regulators must wear the marketing
hat now and again.
He has his funny memories of
interactions — such as the time one
prospective captive owner asked
how he could solve his company’s
$16 billion pension problem with
a captive; Provost’s response was
to put $20 billion in the captive —
and his memorable moments, such
as when Bass Pro Shops came to
Vermont, a “blast” of a formation
because Provost is an angler.
There is also his pride. It shines
through when he said about
potential owners:
“It’s an education process to tell
them what some of the benefits are
to companies and to society as a
whole when you get into some of the
niches that captives fill,” he said.
SANDY BIGGLESTONE
Like her boss, David Provost,
Sandy Bigglestone climbed nearly
every rung on the
ladder to reach
the director of
captive insurance
position in 2010.
In her 17 years
with Vermont,
she has served
as director
of financial
examinations, chief examiner,
assistant chief examiner, examinerin-charge and insurance examiner.
And like her boss, she said there
is no “trigger point,” after which
prospective captive owners can
contact the Vermont regulators.
Reach out any time.
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Bigglestone and team are
particularly good to contact, though,
after a captive has been deemed
feasible and a business plan drafted.
That is when the famed Vermont
face-to-face can occur.
“It establishes a relationship,
to meet and shake their hands,”
Bigglestone said about the first
official (and mandated) meeting
between prospective owners and
regulators.
Such meetings are much more
than just a regulatory requirement;
they are beneficial to all. Bigglestone
appreciates being able to learn
what the parent company is all
about, business-wise and valuewise. For parent companies, it’s
an opportunity for risk managers
and financial executives to look
Bigglestone and the other regulators
in the eye. It’s also a chance
to appreciate the regulators as
individuals, as well as see their
collegial teamwork in action.
“Obviously, I have had a great
run working with several excellent
colleagues in the 17 years that I’ve
worked for the state,” Bigglestone
said of her team.
For about a dozen of those years,
she’s worked with Provost. And
what a combination they must be
to see in action, chatting about the
intricacies of the Vermont captive
law, the one oft copied but never
quite duplicated. Better yet, be the
fly on the wall for discussions about
two of their other favorite topics —
craft beer and CrossFit training.
Dan Towle
As director of financial services
for Vermont’s Agency of Commerce
and Community Development since
1998, Dan Towle
is one of the most
familiar faces
of the Vermont
captive industry.
And as perhaps
the industry’s
top advocate and
chief marketer,
he creates
goodwill that’s recycled in a virtuous
cycle.
“It allows us to focus on what
we do best, which is regulating,”
explained Bigglestone. “And the
better we are at regulating, the easier
A12
Dan’s job is.”
But Dan is not just the Vermont
salesman. He also can serve as
shepherd. Often, interested would-be
owners inquire directly to him about
forming a captive.
“Very often companies do not
know if what they are trying to
accomplish is feasible with forming
a captive and how to accomplish
putting it together. They often need
to be pointed in the right direction,”
Towle said.
As someone who has been on
staff during the licensing of more
than half of the 1,000 current
captives, Towle knows where
to direct them. A few big-name
regulators have come and gone in
his day, a VCIA president or two, but
Towle knows their replacements and
is confident in their competency.
“I think we have continued to
build upon the depth and breadth
of our team in Vermont. We have
never rested on our laurels,” he
said. “We have a great team and we
enjoy the challenges of coming up
with solutions for the benefit of our
captives and our industry.”
Richard Smith
Richard Smith has steered
the Vermont Captive Insurance
Association (VCIA) as its president
since 2009. He came to advocacy for
captive owners
after years
working in state
government,
most recently
as deputy
commissioner
of the State
of Vermont’s
Public Service
Department and policy analyst in
the Office of the Governor. It’s that
background in government that
helped him earn the position in
the first place, but it’s also perhaps
that background that helps explain
why he’s so comfortable working
with regulators today, and directing
businesses to work with regulators
too.
Who are the first people a
prospective captive owner should
contact? Regulators, Smith said.
If a business wants a “quick lay of
the land,” a good first indication of
whether its captive idea would fly,
reach out to Provost or Bigglestone,
advised Smith.
Next steps beyond that would
involve commissioning a feasibility
study and laying out a business
plan, then returning, yes, to the
regulators. This is the perfect
chance for that face-to-face with the
Vermont regulators.
Of course, Smith said that he
and his VCIA team are available
at any point in the process to
brainstorm ideas, and prospects do
contact VCIA at various times in
the formation process, Smith said
— even right off the bat. And again,
who will Smith and team direct
them to? The regulators.
“What makes those folks unique
is their depth in their knowledge of
the captive industry,” Smith said,
noting how Provost and Bigglestone
“came up through the trenches.”
Smith is humble in heaping praise
on his fellow captive industry mates,
but is also quick to stress VCIA’s role
in the “three-legged stool” analogy
for the industry — with the legs
being formed by regulators, the
knowledge base of service providers
and VCIA. All three legs aim to keep
Vermont on top. Smith ensures that
VCIA does its part.
“For me, the biggest success that
we have had as an organization
is that we have provided the
leadership, the education and the
networking opportunity to lead the
captive industry to thrive in this
state,” he said.
“Rich has provided VICA
with respectable leadership,”
complimented Bigglestone.
Dan Petterson
Out of the five members of
our who’s who, the freshest face
is the current director of captive
examinations, Dan Petterson. Yet,
even this newest leader on the
captive team
has been in
regulation for
eight years —
the first four on
the traditional
insurance side
and the last four
in his current
position. Some
in the Vermont industry may even
know Petterson from his previous
risk & insurance®
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stint on the business side with
accounting firm PwC.
Since joining the captive
regulatory team, Petterson has
been implementing a risk-focused
examination system, something he
had accomplished on the traditional
side. He has brought the worldclass Vermont team up to the same
examination standards that the
auditing world is headed toward.
He has also continued a Vermont
tradition.
“One of the other things that’s
important for us is to provide a
value-added examination,” he
said, explaining that he and his
team strive to make the exam as
much a learning experience as a
requirement. Exams are designed
so that companies learn where
they might improve. Petterson’s
team takes the time to explain
their comments and offer proven
strategies to overcome any
identified weaknesses.
“A good regulator is going to
be out to find where a company
is lacking. A great regulator will
offer help to improve those issues,”
Petterson said. “We’re basically
looking to ensure the success of the
industry, and that goes with every
company we look at.”
He has maintained another
Vermont tradition: the excellence of
the exam department. Professional
development for his team is critical,
he said. They have 25 examiners on
staff now, guaranteeing that if one
examiner doesn’t have expertise in
a particular topic, another examiner
will.
The Bigger Who’s Who
Picture
You have met five of the top, and
most visible, stars of the Vermont
captive industry and have gotten a
sense for their professionalism, their
expertise and their camaraderie.
But of course the industry is far
bigger than these five, and they’ll
be the first to tell you. Over 30
years, Provost and two others have
served as deputy commissioner, but
in that span there have been six
governors and countless members
of the bi-annual legislature who
have supported the business, he
said. There have been hundreds, if
not thousands, of individuals who
power the regulatory departments
and each and every service
provider, from the accountancies
and auditors to the lawyers and the
captive managers.
“Every year, year in and year
out, everyone supports captives
here,” Provost said, “and we have a
really deep bench.”
What’s the best way to meet all of
these people? In person, of course.
“I often suggest that a prospect
should come for a day to Vermont
and meet with the state and
schedule meetings with three
different captive management
firms. I believe it is one of the best
days of free advice a prospective
captive can have,” Towle said.
Matthew Brodsky is editor of
Wharton Magazine.
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A PR I L 2 014
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3/25/2014 2:05:17 PM
New Captives In 2013
Company Name
Date
Licensed
Type
Manager
Spectrum Medical Insurance Company, LLC
Usable Partners, LLC
Seton Indemnity Company, LLC
Mailroom Solutions, Inc.
IQS Insurance Risk Retention Group, Inc.
River Lake Insurance Company X
Educators Health Insurance Exchange Of New England
Battenkill Insurance Company. LLC
Greystone Insurance Company, L.L.C.
Pratt Insurance (VT), Inc.
Southern New York Indemnity Company, LLC
Palladium Risk Retention Group, Inc.
Green Roof Insurance Company, LLC
CS Reinsurance Company
Gotham Re, Inc.
Cassatt Insurance Group, Inc.
Lincoln Reinsurance Company Of Vermont V
Excela Reciprocal Risk Retention Group
UnumProvident International Ltd.
Attorneys’ Liability Assurance Society Ltd.
Pacific Baleine Reinsurance Company
Mayday Insurance Company, Inc.
LPT Risk Management, Inc.
Tully Financial Services, Inc.
Enero Insurance Company
O’Sullivan Insurance Group, LLC
Copeland Casualty Insurance, Inc.
Kenwood Re, Inc.
Olympic Insurance Company, Inc.
1/2/13
1/2/13
2/6/13
2/20/13
3/21/13
4/3/13
4/18/13
6/6/13
6/26/13
6/27/13
7/16/13
7/3/13
7/23/13
9/24/13
10/2/13
10/11/13
10/18/13
10/30/13
11/15/13
11/19/13
12/9/13
12/23/13
12/23/13
12/23/13
12/23/13
12/23/13
12/23/13
12/16/13
12/31/13
Pure
Sponsored
Pure
Pure
RRG
SPFI
Industrial Insured
Pure
Pure
Pure
Pure
RRG
Pure
Sponsored
SPFI
Sponsored
SPFI
RRG
Pure
Industrial Insured
SPFI
Pure
Pure
Pure
Pure
Pure
Pure
SPFI
Pure
SRS
Marsh
SRS
Kane
Aon
Marsh
AIG
AIG
Marsh
JLT Towner
SRS
Aon
Aon
JLT Towner
Marsh
Aon
Marsh
Marsh
Marsh
JLT Towner
Marsh
SRS
Willis
JLT Towner
Willis
JLT Towner
JLT Towner
Marsh
SRS
NUMBER & TYPE OF CAPTIVES BY GROSS PREMIUMS WRITTEN
Based on 12/31/12 Gross Premium Written
TOTAL
ASSOCIATION
INDUSTRIAL
INSURED
PURE
BRANCH
RRG
SPONSORED
SPFI
Less than $1 million
148
2
7
114
2
15
7
1
$1 - $5 million
140
3
9
95
1
25
7
0
$5 - $10 million
63
3
2
37
0
18
2
1
$10 - $50 million
124
4
5
86
0
20
2
7
$50 - $100 million
31
0
0
20
1
2
1
7
$100 - $500 million
41
0
1
25
0
4
0
11
over $500 million
12
0
0
5
0
0
0
7
559
12
24
382
4
84
19
34
29
0
2
16
0
3
3
5
588
12
26
398
4
87
22
39
Licensed in 2013
Total
Source: The Vermont Department of Financial Regulation
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R I S K & I N S U R A N C E ®®
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Parent Co.
Industry
Spectrum Medical Group
Usable Corporation
Saint Raphael Healthcare System, Inc.
Mailroom Finance, Inc.
Covenant Transportation Group, Inc.
Genworth Life And Annuity Insurance Co.
Educators Health Risk Mgt. (VT), LLC
UBS Real Estate Securities, Inc.
Friedkin Companies, Inc.
Pratt Holdings, Inc.
United Health Services, Inc.
PA & NY Hospital Members
Amcol International Corporation
CSM, LLC
Presidential Life Insurance Company - USA
Cassatt RRG Holding Company
Lincoln National Life Insurance Co., The
Excela Health
Unum Group
ALAS Member Firms
Pacific Life Insurance Company
Burns & Scalo
LPT Risk Management Holding, Inc.
Tully Construction Company, Inc.
Tri-National, Inc.
Navillus Tile, Inc.
Total Safety Consulting, LLC
Ohio National Life Insurance Company
Catholic Medical Partners
Healthcare
Healthcare
Healthcare
Financing, Lending
Transportation
Insurance
Education
Banking
Transportation
Manufacturing
Healthcare
Healthcare
Other
Insurance
Insurance
Healthcare
Insurance
Healthcare
Insurance
Insurance
Insurance
Construction
Securities
Construction
Transportation
Construction
Construction
Insurance
Healthcare
VERMONT CAPTIVE
INSURANCE COMPANIES
LICENSE SUMMARY
Licensed In Current Year
Association
Industrial Insured
Pure
Branch
RRG
Sponsored
Special Purpose Financial Insurer
12/31/13
Total Licensed
Source: The Vermont Department of Financial Regulation
0
2
16
0
3
3
5
29
NUMBER OF CAPTIVES
BY INDUSTRY
Total at
12/31/13
MANUFACTURING
101
105
HEALTHCARE
94
89
INSURANCE
70
68
BANKING
42
45
CONSTRUCTION
36
32
PROFESSIONAL SERVICE
31
34
RETAIL
28
28
ENERGY
26
26
TRANSPORTATION
26
24
REAL ESTATE
19
20
EDUCATION
19
18
RELIGIOUS INSTITUTIONS
19
19
NONPROFIT OR MUNICIPALITY
13
13
SECURITIES
12
11
COMMUNICATIONS
9
11
ENTERTAINMENT
9
10
OTHER
7
6
FINANCING, Lending, Leasing
5
5
TECHNOLOGY
5
5
HOTELS
5
5
MEDIA
5
5
AGRICULTURE
4
4
WASTE MANAGEMENT
3
3
588
586
Total Active Captives
Source: The Vermont Department of Financial Regulation
AA PP R
R II LL 22 00 11 44
R4-14pA14-A15_TipIn_charts.indd 15
Total at
12/31/12
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3/24/2014 1:57:59 PM

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