Dan Towle refl ects on his fi rst year as president of CICA, his outlook on the
market and the importance of continuing to fuel innovation in the captives sector.
It has been an exciting first year as president of the Captive
Insurance Companies Association (CICA). I continue to be
impressed and invigorated by our membership. Our International
Conference in March was a huge success with the second-best
attendance in our history. It brought together top thought leaders
from our global market and exemplified how when you bring together
intellectual capital from around the globe amazing results can
Captives are an invaluable tool in every risk manager’s toolbox and
our industry drives innovation in the market. It is an exciting time to
be a part of our dynamic industry.
Our industry has challenges and is often misunderstood. One of the
best parts of being a domicile-neutral trade association is that we can
bring together our members, regulators and our domicile association
partners to address challenges. CICA has taken a leadership role with
many issues affecting our industry and that will certainly continue.
We plan to build upon our member benefits and to have CICA play an
even larger role in advocacy for the captive insurance industry, and in
representing captives on a global level.
The market for captives
Looking back, 2017 was a continuation of a prolonged soft market.
Growth among captives worldwide had a negative net growth,
meaning there were more closures than new captive formations
for the first time. Overall growth was down with a total of 498 new
captives being recorded, down from 616 recorded in 2016. Threequarters
of those new formations were in the US, followed by 88 in
Bermuda and the Caribbean. There were 17 new captives formed in
Europe and 11 were formed in the Asia-Pacific market.
The three largest domiciles in the world—Bermuda, Cayman and
Vermont—all had net negative growth in their number of active
captives this past year. However, gross written premium, which is
perhaps a better measure, has remained strong among all of them.
The majority of growth worldwide continues to be in the small captives
sector in the US with continued strong interest of captives utilising
the 831(b) tax election.
Europe continues to experience distractions in the market such
as BEPS, Solvency II and Brexit, which have undoubtedly hindered
some of the growth there. Asia is still in the infancy of its captive
insurance growth, and as a result it will take some time before
captives gain traction there.
The small captives space continues to be an area of interest in
the news because of the IRS Notice 2016-66 and the continued
listing on the IRS’s ‘Dirty Dozen List’. Despite controversy with small
captives, Congress increased the premium volume allowed to be
written in 831(b)s by another $1 million last year and tied it to
inflation, which was seen as a positive advancement. Many of our
members service the small captives market as it continues to grow
at a rapid pace.
2017 was an important year for court rulings. Avrahami v
Commissioner, not surprisingly, confirmed many of the ways not to
operate a captive insurance company. More cases are on the horizon
and will likely shape the future of small captives taking the 831(b) tax
election. CICA and the entire industry will be watching closely.
Overcoming reputational risks
The reputational risk we face as an industry could be detrimental
if captives are deemed not to be doing the right things. This is a
serious risk and one of the reasons CICA has worked so hard to take
a leadership role in developing best practices.
One of the most important practices that we developed is for small
captive insurance companies, which is the adage of ‘do them right
or don’t do them at all’. I would emphasise this is a best practice not
8 US Captive 2018 www.captiveinternational.com