12 Helpful Captive Insurance Statistics and Facts

captive insurance statisticsCaptive insurance companies have been a risk funding option for decades, but the captive insurance industry has really grown significantly in size and scope over the past twenty years. What used to be a somewhat niche property & casualty funding option for the largest of corporations, is now a viable finance vehicle for business of all sizes covering all types of business risk, including employee benefits.

So how far has the captive insurance company come? Here are some helpful captive insurance statistics and facts that we have been able to uncover during the course of our consulting work. We will try to update this post fairly regularly. All stats and facts are linked to their original source, where appropriate and source dates are included.

Please note that some captive insurance stats are easier to dig up than others, so this is our best attempt to capture the most up to date information as possible using industry reports and research.

Captive Insurance Statistics

Number of captive insurers globally*:

6,939

Last checked 5/20/16


Percentage of Fortune 500 companies that have a captive:

Over 90%

Last checked 5/20/16


Number of global captive insurance domiciles:

More than 70

Last updated 3/29/16


Number of US states and territories that support captives:

35+

Last updated 2/19/15


Largest US captive domicile:

Vermont

Last checked 5/20/16


Percentage of the world’s captives that have an association with the US:

Over 75%

Last checked 5/20/16


Percentage of P&C premiums written that are written through captives:

Over 50%

Last checked 5/20/16


Percentage of global captives that are domiciled in the US:

44.6%

Last checked 5/20/16


Percentage of global captives that are domiciled in the North American offshore:

40.1%

Last checked 5/20/16


Percentage of global captives that are domiciled in Europe:

12.7%

Last checked 5/20/16


Percentage of global captives that are domiciled in the Asia-Pacific region:

2.3%

Last checked 5/20/16


Percentage of global captives that are domiciled in Canada:

0.3%

Last checked 5/20/16


10 most popular captive insurance domiciles:

Bermuda

Cayman Islands

Vermont

Utah

Anguilla

Delaware

Guernsey

Nevis

Barbados

Luxembourg

(source)

Source date: Year-end 2014


*Cell captives increase this number significantly if each cell is considered a separate captive.

11 Interesting FMLA Statistics and Facts (May 2016)

FMLA statisticsThough it has only been around for little more than two decades, the Family Medical Leave Act (FMLA) has made a very serious impact in the way employers view and administer absence management. The guidelines in which most employers have to operate within under the FMLA can be challenging, at times, as is compliance documentation, but all in all, employers do recognize that the law is an important one that does have a positive impact on the workforce.

So how much impact has the FMLA had over the years? Here are some helpful FMLA statistics and facts that we have been able to uncover during the course of our consulting work. We will try to update this post fairly regularly. All stats and facts are linked to their original source, where appropriate and source dates are included.

FMLA Statistics

Date FMLA was signed into law:

February 5, 1993


Number of times the FMLA has been used since enactment:

More than 100 million times

Last checked 5/20/16


Percentage of US private sector employees that have access to paid family leave:

12%

Last checked 5/20/16


Average percentage of the US workforce that is on FMLA leave at any point in time:

10.7%

Last checked 5/20/16


Average duration of an FMLA leave:

14.2 days

Last checked 5/20/16


Top reason for FMLA leaves:

Employee’s own health conditions

Last checked 5/20/16


Top medical condition employees take FMLA leave for:

Surgery

Last checked 5/20/16


Percentage of total FMLA leaves in the US that are due to pregnancy:

17%

Last checked 5/20/16


Top FMLA enforcement complaint to the US Department of Labor in 2015:

Termination


Number of FMLA enforcement complaints in 2015:

1,419


Percentage of employers that report complying with the FMLA has had a positive or no noticeable effect on employee absenteeism, turnover and morale:

91%

Source date: 2013


Employee Benefits and Captives: A Look Back at the Pioneers

employee benefit captiveBackground:

Back in 2000 and 2003, Columbia Energy (Columbia) and Archers Daniels Midland (ADM), respectively, became true risk pioneers as they became the first companies to gain a prohibited transaction exemption (PTE) from the US Department of Labor (DOL) to write employee benefits into their captives. Since then, a number of companies have followed suit and created captive-funded employee benefits programs.

Companies that followed Columbia and ADM on a similar funding path had the luxury of utilizing an expedited process (EXPRO) to gain their PTEs. The Columbia and ADM cases were used by the DOL as model cases by which future companies could mirror and qualify for EXPRO.

In 2014-15, EXPRO was re-instated with approvals being granted to Coca-Cola and Intel Corp. These companies’ PTE’s are the genesis of the new age EXPRO process, reinforcing the pathway for writing employee benefits in a captive.

Our Survey:

To date, more than 30 companies have successfully secured a PTE from the DOL. Our Spring research team recently set out to identify these companies and interview them to understand their experience and provide them a platform to share their story and experiences. We created a digital survey questionnaire that provided these pioneer companies a framework to collectively and objectively share their experiences and impressions of adding employee benefits to their captives. Our goal was to challenge the widely held assumption that adding employee benefits to captive is a good idea, by providing objective feedback from the pioneers as to what originally motivated them to consider heading down the path? Did they achieve the intended objectives? What has worked well…and not so well? What suggestions/advice could they offer to companies considering embarking on this path? And what does the future hold for adding new benefits to their captive? This report is a brief extrapolation of their responses.

To get your FREE copy of our survey results white paper, please fill out the form below:

Report: Cost of Long-Term Care Rises Significantly

long term careLong-term care may cost more than you think. A lot more.

A new report from Genworth Financial shows that private nursing home rooms now average $92,378 annually ($7,698 monthly). This is an increase of 1.2% from last year and close to 19% from 2011.

Semi-private nursing homes weren’t spared from cost increases either. Genworth pegged the average annual cost of a semi-private nursing home at $82,125 ($6,844 monthly), which is close to 17% more expensive than it was in 2011. Assisted living communities saw an increase of 0.8% from 2015 and now average $3,628 monthly.

So what does this all mean to you? Long-term care insurance is becoming a necessity for most Americans. It is becoming increasingly challenging for the average person to afford care as they grow older and the burden is often too much to handle for their children. There are a number of long-term care options available that will help insure you have the necessary funds available to you if you should require assistance in your golden years.

More information about Spring’s long-term care services can be found here.

New Resource: Personal Longevity Calculator

Have you ever wondered how long you might live? Longevity is a retirement planning factor often overlooked, presumably because it isn’t a topic many people enjoy thinking about, but a critical one in assuring you plan properly for your (and your spouse’s) life after work.

The average American female is now expected to live, on average, to age 81. American males are expected to reach 76. These averages are roughly 3-8 years longer than they were in 1980. Properly estimating where you match up against these benchmarks is a tough task, but thankfully, the Society of Actuaries has come up with a new resource that should help.

The new Actuaries Longevity Illustrator tool, recently launched by the Society of Actuaries, uses your health and demographic characteristics to determine the probabilities for how long you may live and the likelihood of you outliving your life expectancy.

A male currently age 65 has a 54% chance of surviving to age 85, and a female currently age 65 has a 65% chance of surviving to age 85.  Contact us to speak to our consultants and actuaries and receive more information on how to help your employees manage this longevity risk.

Your Captive is Riding High. Now What?

captive feasabilityYou’ve had your P&C captive for years and it has continued to perform well throughout. So what is next? How do you capitalize on this success and build on your captive or rebuild an underperforming aspect of it?

Enter refeasibility.

Much like your family car, a captive should have a check up on a periodic basis. Are you writing the right lines in your captive? Are you in the right domicile? Would a different structure be more profitable? Would other service providers make a difference? Have your claims changed significantly? Have regulations changed over the years? All this and more can be answered with a good review of your captive by a professional consultant.

Here are a few things to consider as you ponder a refeasability study:

Domicile:

The Dodd Frank Act changed the landscape for a lot of captives.  Rather than incur a self-procurement tax for risk out of state, some captive owners are redomesticating their captive back to their corporate home states or establishing a fronting captive in that domicile to lessen the premium taxes due.  An additional dimension in captive domicile selection is the enormous growth in U.S. domiciles. Countless states have recently set up new domiciles and there are still many quality offshore options. You’re pretty sure you are in the right spot, but a “refeasibilty” might show you otherwise.  For example, some states have created innovative cell legislation that might work for you or your clients. Some assets held in the captive maybe more liberal, so depending on what you are using for collateral, states need to be studied for the best match.

P&C Programs:

Ten years ago there were pretty much only large P&C captives writing pretty much only property, general liability and workers compensation and occasionally a rouge auto or warranty program. Captives stuck to high deductible programs and some small quota share coverages to fill out a line slip.

Today, you can write almost anything that is an insurable risk and makes good business sense.  You still can’t write lines of coverage that just don’t make sense (like tidal wave coverage in Kansas), but you have a great deal more flexibility and room to be creative in how you define and insure your risk.

Contingent business interruption is sometimes an uninsurable or underinsured risk, and a good candidate for the captive.  Some use their captive to front their global or international property program, selling off pieces out the back and taking a nice fronting commission for themselves: the market would have gotten this if they didn’t.   Others write business specific coverage like lost in hole drill coverage for oil companies.

Cyber Risk:

Cyber risk is another good candidate for a captive. Cyber insurance in a captive insulates an organization from the market becoming less competitive in the future. It also gives a captive owner a great opportunity to diversify their existing captive portfolio. The captive can also be used to provide coverage that might not be really available in the market, such as future lost revenue of first-party loss of inventory due to technology failure.

Benefit Programs:

Now we have benefit programs that are really taking off as captive programs.  Prefunding retiree medical, group term life, medical stop-loss coverage, foreign coverage are just a few of the programs that make sense to add to the captive portfolio. And with some of these programs, the premiums qualify as third-party business and may boost your captive returns with a positive tax affect.

Additionally, for U.S. employers, the regulatory hurdles to funding ERISA-covered benefits in a captive have never been lower with the renewal of the expedited process for securing a prohibited transaction exemption. Couple that with the growing costs (and concerns) surrounding the Affordable Care Act in the U.S. and now is clearly the time to at least be considering funding benefits in your captive.

Find out more about funding benefits in a captive here.

Conclusion:

Regardless of how old or new your captive is, there are a number of internal and external factors that have changed since it was created. Now is a great time to have a professional come in and not only take a snapshot of how your captive is currently performing, but also help you project and strategize where your captive should be in the future. Now is a great time for a captive refeasability study.

If you agree that it is time to re-evaluate your captive, Spring is poised to step in and help out. Our team of captive consultants, actuaries, underwriters, strategists, accountants and lawyers have decades of experience helping companies similar to yours not only set up their captives, but also conduct through and thoughtful refeasability studies, which have helped our clients realize continued success with their captive.

Please contact us using the form below if you’d like to chat with a member of our team about your captive’s current and future performance.

Recent Supreme Court Decision Holds ERISA Preempts State Law

erisa state law

Image credit: Matt Wade via flickr

Gobeille v. Liberty Mutual Insurance Co.

In 2005, Vermont enacted a law which required certain public and private entities including health insurers to release data regarding the amount paid for medical claims and various other related information for the Vermont healthcare database. The law was intended to apply to employer plans whether or not they were ERISA governed. The Vermont law required public and private entities including health insurers and providers to furnish information regarding health care costs, prices, utilization ratios etc. to a state governed agency. The law defined a health insurer to encompass a self-insured benefit plan and TPAs, thereby creating additional reporting requirements for ERISA-governed plans.

The Vermont law was challenged by Liberty Mutual Insurance Company (“Liberty”) contending that federal enactment of ERISA preempted such legislation and prohibited this enactment.

ERISA creates federal standards and guidelines for employer-sponsored benefit plans. Although states have the right to regulate insurers, ERISA preempts any state legislation attempting to regulate employer-sponsored plans. The court ruled that while ERISA did not address the issue of jurisdiction comprehensively, it does make its intentions clear regarding being the sole authority responsible for defining rules which would govern the administration and operation of employee benefit plans.

The Supreme Court on March 1, 2016 ruled in favor of Liberty and held that ERISA preempts Vermont’s healthcare database law. Vermont’s proposed law had the potential to complicate plan administration and could have led to additional cost and effort on part of employers – particularly multi-state employers.

More importantly this decision will dissuade other states from attempting to enact regulations which may infringe upon the uniform system of plan administration put into effect by ERISA. It was held that the Federal Law preempted the proposed state legislations as they “intruded upon a central matter of plan administrations”.  It was also noted varying state regulations could result in non-compliance and ultimately penalties and fines relating to those regulations. In the interest of maintaining parity and avoiding dissimilar compliance requirements, the Supreme Court bench ruled in favor of Liberty.

While the decision provides relief to multi-state employers, the imposed restrictions on the states are likely to limit the ability of the states to monitor the markets and lead to lesser transparency from the states’ perspective in the system.

Spring is a leader in employee benefit consultation. Please contact us with any questions you may have about ERISA-governed plans or anything related to employee benefits.

Spring Once Again Named Power Broker

top employee benefits brokerWe are pleased to announce that Risk & Insurance has honored two Spring Partners in their Power Broker award series for 2016.

Spring Managing Partner Karin Landry has been named a 2016 Power Broker and Spring Partner and Integrated Disability Management Team Lead Karen English, has been named a 2016 Finalist by the magazine. Landry’s award is in the Employee Benefit category and English was named in the Workers’ Compensation category.

The Power Broker designation recognizes “creative risk solutions, industry knowledge and superior customer service.”

“We couldn’t be prouder that two members of our team have received such distinction,” remarked John Cassell, Spring Senior Partner. “It is great to see that their hard work and dedication to developing innovative solutions for their clients has been recognized with high honor.”

Walpole Lyons 50th AnniversaryLandry has over 25 years of experience in the insurance, health care, risk financing, retirement and benefits industries. She is an internationally recognized leader in captive insurance strategy, benefits and financing. She is Past-Chairman of the Board of The Captive Insurance Company Association and a member of the ERISA Industry Committee and was recently appointed to the Board of Directors for Fallon Community Health Plan. She is also a Professor of Employee Benefits and member of the finance committee for the International Center of Captive Insurance Education part of the University of Vermont. Karin’s expertise around benefits allowed her to co-author a white paper for Business Insurance Magazine titled “Captives for Benefits: How to Use a Captive to Save Money and Enhance Benefits Coverage”, which is currently a top seller. Both Vermont and the US Virgin Islands asked Karin for input and guidance with their recent legislative changes. Prior to joining Spring, Karin was President of Watson Wyatt Insurance & Financial Services in the United States and Head of the Health & Welfare division for the eastern region.

Walpole Lyons 50th AnniversaryEnglish has over 20 years of experience in the P&C and health & welfare arenas with an emphasis on product development, risk financing, process improvement and project implementation. She provides strategic direction, quantitative & qualitative analysis and implementation expertise for workers’ compensation, disability, absence, health and productivity programs that allows her to routinely work with alternative risk financing vehicles such as captives. She is currently on the Executive Advisory Board for the Disability Management Employer Coalition (DMEC), where she recently was awarded the Partnership Award, the organization’s top annual honor. Prior to joining Spring, Karen was a Senior Consultant with Watson Wyatt’s US Insurance & Financial Services division, a risk manager with US Bancorp and a P&C broker for both Marsh and Aon.