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Missouri insurance officials credit a state law enacted earlier this year simplifying the formation of captives in the state for interest in the local captive industry and the formation of a new captive there by Ralcorp Holdings Inc.
St. Louis-based Ralcorp is a producer of private-label foods and foodservice products.
Missouri Gov. Jay Nixon signed the new law in July, easing the relocation of captives to Missouri and making it more attractive for out-of-state companies to form in Missouri. Missouri regulators say that since the law was enacted they've seen considerable interest in the domicile from companies across the country.
Missouri regulators also said that premiums written by Missouri captives have increased from $30 million in 2007 to $123 million in 2008, and they estimated they would reach approximately $1 billion by the end of this year.
I'm at the 19th Annual World Captive Forum in Bonita Springs, Fla., where Zurich Global Corporate CEO Mario Vitale offered some interesting thoughts in his keynote presentation this morning.
Among the perspectives Mr. Vitale presented was the notion that many global businesses are too large to be served adequately by insurers that might be forced to reduce their scale by efforts to address problems posed in the financial crisis by companies deemed “too big to fail.”
“We simply can't expect small insurers to meet the needs of large customers operating in all corners of the world,” Mr. Vitale said. Like it or not, he said, large financial institutions are necessary, and the “too big to fail” issue must be solved without limiting the size of financial institutions.
As for captives, Mr. Vitale said the alternative risk transfer mechanisms play “a very important role in the utilization of capital” in insurance. And, he said, the captive insurance industry also plays a vital part in driving innovation in the traditional insurance market.
“I think the captive insurance industry is pushing us all and should push us to develop new products and services,” he said.
Interesting to see the joint approach some captive domiciles in the western United States are taking to promoting their efforts.
The Arizona Captive Insurance Assn. and the Utah Captive Insurance Assn. announced recently that they'll co-sponsor a Western Region Captive Insurance Conference next year in Phoenix. The joint April event at the Arizona Biltmore Resort is intended to allow participants to maximize value by attending a single event.
During a webcast Wednesday on domicile issues sponsored by A.M. Best Co. Inc., Joel S. Chansky, consulting actuary at Milliman Inc. and vp of the Arizona captive group, said that the combined format will be particularly beneficial to captive industry service providers who will be able to reach captive owners and prospects in both domiciles while incurring the costs of just one conference.
The two captive groups noted that they'd like to get other western domiciles involved in the regional event, saying that Nevada, Montana, Colorado and Hawaii had all been invited to co-sponsor the inaugural regional conference, but “the timing was not quite right for them.”
By the way, if you've got any thoughts about that or any other posts here, I'd like to invite you to use the blog's easy-to-use “Comments” function.
I posted an item a few weeks back talking about the growing pet health insurance market and explaining our reasoning for purchasing a pet health plan for our dog, Smoke, when we brought him into our pack about a year ago.
A bit of an update: In that post, I suggested that we hoped not to have to tap that insurance until Smoke's senior years. Well, if you happened to read my column in the print BI today, you know that that was a bit of wishful thinking, as I'll likely be making a claim to recover some of our costs for Smoke's recent treatment for pneumonia.
Smoke's illness caught us by surprise, but the good news is we have pet health insurance, and the better news is that Smoke seems to be doing quite well. So well, in fact, that restricting the exercise of a not quite two-year-old flat coated retriever for seven days has been the most challenging aspect of his recovery.
At any rate, Smoke has a follow up visit with the vet tonight, and hopefully will be cleared to return to his normal tennis ball chasing routine on our morning walk tomorrow. Meanwhile, I'm going to continue following the development of the pet insurance market, and any signs of growing interest in including it as a standard employee benefit!
There have been suggestions from time to time that the alternative risk transfer market and the traditional insurance market are drawing ever closer together.
I think there's evidence of that trend here in Orlando at the annual meeting of the Property Casualty Insurers Assn. of America, where Janice M. Abraham, president and chief executive officer of United Educators Insurance, is set to become PCI chair.
Chevy Chase, Md.-based United Educators, of course, is a reciprocal risk retention group, owned and governed by nearly 1,200 member colleges, universities, independent schools, public school districts, school insurance pools and related organizations across the United States.
UE formed during the 1980s liability crisis, when many educational institutions couldn't find coverage in the traditional market. It's operated as an alternative to the commercial market ever since.
Ms. Abraham cites the diversity of PCI's membership as one of the organization's strengths. Her role in the organization and that of United Educators speaks to the breadth of that diversity.
This will be little surprise to parties to reinsurance discussions taking place at this year's PCI meeting, but, the word from the annual reinsurance gathering in Baden-Baden, Germany is there's no hard market in sight.
That makes a notion put forth in a Monday conversation with Grace Osborne at the PCI's annual gathering in Orlando particularly interesting for insurers, I'd think.
Talking about the development of insurers' enterprise risk management programs, Ms. Osborne, managing director and head of North American insurance ratings at Standard & Poor's Corp., noted that companies that define their risk tolerances more clearly should see better monitoring of their risk and reduced capital volatility as a result.
“If that is the case, then the length of depressed cycles and the length of peak ones—which are always shorter—should be more moderated in the future,” Ms. Osborne said.
I'd think that sort of development—a more moderated cycle--would be good news to insurers. Of course, as Ms. Osborne noted, as with many things, “The difficulty's always in execution.”
I'm in Orlando for this year's annual meeting of the Property Casualty Insurers Assn. of America. This year's meeting obviously takes place against the backdrop of a year unlike any many of us have experienced.
Given the events of the past year, it's appropriate that this year's PCI conference will revolve around a theme of dealing with risk. The property/casualty industry's understanding of risk and how it deals with it has been a key factor in allowing the P/C industry to perform better than many other sectors of the financial service industry during the recent financial crisis.
“We take risk seriously,” David A. Sampson, the PCI's president and chief executive officer said of the property/casualty industry recently. “It's taking risk seriously that's allowed us to perform so well.”
Throughout this year's agenda are sessions focusing on dealing with various forms of risk, subjects which couldn't be more fitting in this environment.
I'll be posting to the blog throughout the conference.
I was in New York yesterday for a luncheon celebrating the honorees in this year's first Business Insurance Best Places to Work in Insurance program. It was a great event, drawing representatives from a good many of the 33 companies recognized this year.
Working on this first Best Places to Work program for BI gave me an opportunity to see various ways companies strive to create high quality workplaces. And many of the companies had quite a bit in common.
One common element was an emphasis on the company's culture. Another was a recognition that creating a great workplace wasn't just good for employees, it was good for clients and, in turn, good for business.
They'll be more about this year's Best Places to Work in Insurance in Monday's BI. And, if you want to sign up to be notified about registering for the 2010 program, you can do so online at www.bestplacestoworkins.com.
Hope to see you at next year's event.
Warren Buffett is said to invest only in businesses he understands, which makes me certain he must be a pet owner.
According to a story this week from TheStreet.com, Berkshire Hathaway company Central States Indemnity of Omaha announced last week that it was going to partner with Nestle to market pet insurance products. According to the article, Central States will underwrite pet health plans written by a pet health insurance division formed last year by Nestle's Purina unit.
The story goes on to note that this summer Aetna teamed with Pets Best Insurance Services to provide discounted rates on pet insurance plans to a number of business and Chambers of Commerce in Connecticut and Western Massachusetts. And Progressive, according to the article has been promoting a policy feature covering pets injured in car accidents.
The point is, while the pet health insurance market is small today, with 60% of U.S. households having at least one pet and the state of the art of pet health care—and the accompanying cost—constantly advancing, pet health insurance is seen as a market primed for growth.
Our dog, Algren, had various health issues in his senior years that required ongoing treatment and various regular and special examinations. When he was about nine, Algren developed an autoimmune disorder that almost got him before we found a wonderful veterinarian who was able to diagnose the illness and—though for a time things looked grim—ultimately treated it successfully.
Over the following years, the regular examinations intended to ensure that the autoimmune disorder was being held in check served to turn up various other issues that had arisen. Algren developed a high triglyceride count, which required regular medication. Later, he developed an irregular heartbeat, which also was treated with regular medication, but not before a visit with a canine cardiac specialist who administered a doggy EKG.
We begrudged Algren none of that, of course, and in fact were happy that we had the resources to provide him the care that meant that—until we finally had to say goodbye in the summer of 2008—we were able to enjoy several quality years with our wonderful family member and friend that we wouldn't have experienced without the fine veterinary care Algren received. But, those resources we called upon to provide that care didn't include pet health insurance.
So, when we brought Algren's successor, Smoke, home late last year, we quickly enrolled him in a pet health plan. Just a couple months shy of two-years-old, Smoke is the picture of canine health, and—knock on wood—we won't have to call on his health insurance until his golden years. But, I'm glad to know it's there, just the same.
And I'm pretty sure Warren Buffett has owned a pet or two.
It was interesting to see that Mexico is turning to the capital markets once again to reinsure catastrophe exposures in its national catastrophe fund.
The $250 million catastrophe bond will provide coverage for both earthquakes and hurricanes that meet its parametric triggers. Issued through a Cayman Island-based special purpose vehicle, the bonds are sponsored by FONDEN, Mexico's Fund for Natural Disasters, which will enter into an insurance contract with state-owned insurer Agrosamex S.A., which will then be reinsured by Swiss Reinsurance Co.
It's the second time Mexico has been to the cat bond market, placing a 2006 deal to reinsure earthquake risks.
The move is part of an interesting trend, which is more and more cat bond issuers becoming repeat participants in the market. It would appear that having experience with the process of cat bond issuance and established relationships with players in the market offers some advantage to participants when they choose to make repeat visits.
Just a note, I will be out of the office Wednesday Sept. 30 through Tuesday Oct. 6, and will resume posting when I return to the office Oct. 7.
