Bur Bureau of eau of Ca Captiv ptive and e and Financial - - PowerPoint PPT Presentation

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Bur Bureau of eau of Ca Captiv ptive and e and Financial - - PowerPoint PPT Presentation

Nov 10, 2022 368 likes •596 views

Bur Bureau of eau of Ca Captiv ptive and e and Financial Financial Insur Insurance Pr ance Products oducts Delaware Captive Insurance Association Fall Forum October 28, 2014 Steve Kinion, Director of Captive Bureau of Captive and

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Bur Bureau of eau of Ca Captiv ptive and e and Financial Financial Insur Insurance Pr ance Products

  • ducts

Delaware Captive Insurance Association Fall Forum October 28, 2014

Steve Kinion, Director of Captive Bureau of Captive and Financial Insurance Products

DELAWARE DEPARTMENT OF INSURANCE INSURANCE COMMISSIONER KAREN WELDIN STEWART Bureau of Captive and Financial Insurance Products Delaware is the 3rd Largest U.S. Captive Domicile and the World’s 6th Largest Captive Domicile

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Outline of Outline of Presen Presentation tation -

  • Changes since last DCIA fall forum and upcoming changes.
  • Domicile numbers update.
  • Regulatory guidance for applications and business plan changes.
  • Pools and other regulatory issues.
  • Federal Housing Finance Agency proposed rule for captives
  • Q &A.

DELAWARE DEPARTMENT OF INSURANCE INSURANCE COMMISSIONER KAREN WELDIN STEWART Bureau of Captive and Financial Insurance Products

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Chang Changes es Sinc Since e Las Last t DCIA DCIA Forum in Forum in May 2014 May 2014

  • Last forum we introduced three new analysts: Sean Brown, Willie Marshall,

and Sam Marzar.

  • We are now interviewing for one additional analyst.
  • Addition of Mark Murowany to focus on “in Delaware.”
  • Moved RRGs to BERG.
  • SBUs now pay the $3,200 application fee. Effective September 1.

DELAWARE DEPARTMENT OF INSURANCE INSURANCE COMMISSIONER KAREN WELDIN STEWART Bureau of Captive and Financial Insurance Products

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Upc Upcoming Regula

  • ming Regulatory

tory Changes Changes

  • New annual statement forms and instructions on website no later than

November 15.

  • Balance sheet and income statements are the same, but we are asking for
  • ther assets explanation and explanation and listing of all coverages.
  • Instructions for filing actuarial opinions. NAIC format for opinions.

DELAWARE DEPARTMENT OF INSURANCE INSURANCE COMMISSIONER KAREN WELDIN STEWART Bureau of Captive and Financial Insurance Products

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Size of the Delaware’s Captive Insurance Captive Insurance Market Market

Pr Prem emium ium Gr Growt

  • wth
  • Delaware ranks as the third largest U.S. captive domicile in terms of

premium.

  • 2013 Captive Insurance Premium Ranking
  • 1. Vermont had $25.5 billion of premium
  • 2. Arizona had $12.4 billion of premium
  • 3. Delaware had $6.6 billion of premium
  • For comparison, in 2012 Delaware’s captive premium was $2.4 billion and it

was ranked 7th in the U.S.

DELAWARE DEPARTMENT OF INSURANCE INSURANCE COMMISSIONER KAREN WELDIN STEWART Bureau of Captive and Financial Insurance Products

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  • As of November 7, 2013 Delaware had licensed 237 captive insurers, 13

protected cells, and 413 series business units.

  • As of October 27, 2014 Delaware had licensed 319 captive insurers, 13

protected cells, and 641 series business units.

  • As of November 7, 2013 there were 215 active captives, 12 active

protected cells, and 392 active series business units.

  • As of October 27, 2014 there are 285 active captives, 12 active protected

cells, and 558 active series business units.

Ca Captiv ptive Number e Numbers s

A A Comp Compar arison ison fr from F

  • m For
  • rum

um to to For

  • rum

um

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DELAWARE DEPARTMENT OF INSURANCE INSURANCE COMMISSIONER KAREN WELDIN STEWART Bureau of Captive and Financial Insurance Products

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Regula Regulatory G tory Guideline uidelines

  • Maximum premium to surplus ratios. For series captives the maximum is

3:1 while other forms of captives can be as high as 5:1 if actuarially feasible.

  • After the initial five years pro forma, then submit a three year expected

scenario every three years.

  • Investment plans. Pure captives are unlimited per the law. All series

investment plans will be reviewed.

DELAWARE DEPARTMENT OF INSURANCE INSURANCE COMMISSIONER KAREN WELDIN STEWART Bureau of Captive and Financial Insurance Products

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Regula Regulatory G tory Guideline uidelines

  • Maximum premium to surplus ratios. For series captives the maximum is

3:1 while other forms of captives can be as high as 5:1 if actuarially feasible.

  • List of restricted lines of business for series captives. No third party

coverage and no pollution.

  • Series captives formed as association captives will be regulated like

association captives.

  • May I convert a series to a pure or other form of captive? Yes. There will

be no regulatory fees assessed for such a conversion.

DELAWARE DEPARTMENT OF INSURANCE INSURANCE COMMISSIONER KAREN WELDIN STEWART Bureau of Captive and Financial Insurance Products

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Applica Application Pro tion Proces cess

  • Year end 2014 applications – what is the cut-off date and time?

Answer: December 31, 2014 at 11:59:59 P.M. EST.

  • Money and genuine signature portion of biographical affidavits must be

received no later than 5:00 P.M. EST on January 12, 2015.

  • The Captive Bureau only needs hard copies with pen and ink signature of

the application and first page of biographical affidavits. The remainder of the application is filed electronically.

  • File electronically at captive@state.de.us

DELAWARE DEPARTMENT OF INSURANCE INSURANCE COMMISSIONER KAREN WELDIN STEWART Bureau of Captive and Financial Insurance Products

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Applica Application Pro tion Proces cess

  • If changes must be made to the application, then all changed documents

must be dated with the new date clearly noted on the document.

  • Policies need to state the risk being covered and the conditions under

which a claim occurs.

  • All policies must be submitted with the application.
  • Asking for a waiver of actuarial and audit reports for December 31

licensees? Please send this request separate from the application.

DELAWARE DEPARTMENT OF INSURANCE INSURANCE COMMISSIONER KAREN WELDIN STEWART Bureau of Captive and Financial Insurance Products

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Applica Application Pro tion Proces cess

  • Send business plan and pro-forma in both pdf, word processing and

spreadsheet, i.e. MS Word and Excel, formats.

  • Only completed applications will be reviewed.
  • Be patient. On January 1, 2013 the Captive Bureau had 114 applications

ready for processing and on January 1, 2014 the number exceeded 150. Reviewing applications takes time.

  • Submitting an application is not a guarantee of approval.

DELAWARE DEPARTMENT OF INSURANCE INSURANCE COMMISSIONER KAREN WELDIN STEWART Bureau of Captive and Financial Insurance Products

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Busines Business Plan s Plan Changes Changes

  • What level of materiality requires prior regulatory approval?

Answer: If the change is such that it necessitate a business plan change, then it mandates prior regulatory approval.

  • What are examples of changes necessitating prior approval?

Answer: New lines of coverage, ownership changes, and changes affecting 10% or more of the capital and surplus. Each time a business plan change is submitted, the Captive Bureau needs a NEW BUSINESS PLAN and a red line version submitted with the request.

  • If the business plan change impacts financial statements then new pro-

forma financial statements for a five year period must be filed.

  • DELAWARE DEPARTMENT OF INSURANCE

INSURANCE COMMISSIONER KAREN WELDIN STEWART Bureau of Captive and Financial Insurance Products

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Busines Business Plan s Plan Changes Changes

  • Effective as of January 1, 2014, business plan changes must be submitted in

the following format:  Redline showing changes. Simple addendums will no longer be accepted. In word processing format, i.e. MS Word, WordPerfect, etc. Spreadsheets in Excel, Quatro Pro, etc., format.

  • No dividend and loan requests nor coverage changes allowed for series

captives during first-year of operations. Ownership changes are allowed.

DELAWARE DEPARTMENT OF INSURANCE INSURANCE COMMISSIONER KAREN WELDIN STEWART Bureau of Captive and Financial Insurance Products

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Other Regulatory Issues Other Regulatory Issues

  • NAIC definition of Multi-State Insurer.
  • Some pools are domiciled in other jurisdictions. Developing better

communications with other captive domiciles.

  • Captive Managers – greater oversight. Example is effort within NAIC to

apply holding company requirements to managers of RRGs.

  • Controlled unaffiliated business – new NAIC inquiry.

DELAWARE DEPARTMENT OF INSURANCE INSURANCE COMMISSIONER KAREN WELDIN STEWART Bureau of Captive and Financial Insurance Products

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Feder ederal al Hou Housing sing Financ Finance e Agenc Agency Pr y Proposed

  • posed Rule

ule

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DELAWARE DEPARTMENT OF INSURANCE INSURANCE COMMISSIONER KAREN WELDIN STEWART Bureau of Captive and Financial Insurance Products

  • Federal Housing Finance Agency is a regulator that regulates

Government Sponsored Enterprises (GSE).

  • Fannie Mae
  • Freddie Mac
  • Federal Farm Credit Banks
  • Federal Home Loan Banks (FHLB)
  • Federal Home Loan Bank membership is limited to
  • Insurance companies
  • Banks
  • Credit Unions
  • Savings & Loan Associations
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Impact of Impact of FHF FHFA A Rule on ule on Ca Captiv ptive e Regula gulation tion

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DELAWARE DEPARTMENT OF INSURANCE INSURANCE COMMISSIONER KAREN WELDIN STEWART Bureau of Captive and Financial Insurance Products

  • Proposal does not include captive insurers in the definition of

“insurance company” to mean a company that has as its primary business the underwriting of insurance for nonaffiliated persons.

  • Proposal would exclude captive insurers from Federal Home Loan Bank

membership.

  • Membership of existing captive insurers would be “sunset” over five

years with defined limits on advances.

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Fe Fede dera ral Hous l Housing ing Fin Finan ance ce Ag Agen ency cy – Fe Fede dera ral l Home Home Lo Loan an Ban Bank k Distr Districts icts

DELAWARE DEPARTMENT OF INSURANCE INSURANCE COMMISSIONER KAREN WELDIN STEWART Bureau of Captive and Financial Insurance Products

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Impact of Impact of FHF FHFA A Rule on ule on Ca Captiv ptive e Regula gulation tion

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DELAWARE DEPARTMENT OF INSURANCE INSURANCE COMMISSIONER KAREN WELDIN STEWART Bureau of Captive and Financial Insurance Products

  • In 2014 the Delaware General Assembly passed SB 154 and Governor

Markell signed it. The bill became law in July.

  • SB 154 gives FHLBanks equal treatment in state insurance receivership

proceedings as the FHLBanks receive when a bank fails under federal law.

  • SB 154 makes Delaware an attractive domicile for captives considering

FHLBank membership.

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Impact of Impact of FHF FHFA A Rule on ule on Ca Captiv ptive e Regula gulation tion

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DELAWARE DEPARTMENT OF INSURANCE INSURANCE COMMISSIONER KAREN WELDIN STEWART Bureau of Captive and Financial Insurance Products

  • FHLBank membership helps states by promoting affordable housing

because 10% of each FHLBank’s annual earnings must be set aside to finance the development of affordable housing.

  • Commissioner Stewart actively promotes FHLBank membership

because doing so promotes affordable housing in Delaware.

  • By denying captive membership, the FHFA is denying
  • FHLBanks the opportunity for greater earnings and
  • Affordable housing opportunities in Delaware.
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Ne Nega gativ tive e Ef Effects ects on

  • n

Delaw Delawar are e of

  • f FHF

FHFA A Rule ule

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DELAWARE DEPARTMENT OF INSURANCE INSURANCE COMMISSIONER KAREN WELDIN STEWART Bureau of Captive and Financial Insurance Products

  • Less money for affordable housing grants to be used in Delaware.
  • Fewer captives in Delaware.
  • Less client opportunity for Delaware service providers such as law and

accounting firms to offer their clients captive insurance related

  • services. Many REITs are Delaware corporations and have existing

relationships with these service providers. Many REITs are interested in forming captives.

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Commissioner Stewart’s Better A Better Appr pproac

  • ach

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DELAWARE DEPARTMENT OF INSURANCE INSURANCE COMMISSIONER KAREN WELDIN STEWART Bureau of Captive and Financial Insurance Products

  • Instead of simply prohibiting captive insurers from FHLBank

membership, Commissioner Stewart proposes a joint Delaware and FHFA effort to address any of the FHFA’s concerns with captives.

  • Commissioner Stewart proposed this idea in 2011, but never received

a reply from the FHFA.

  • Commissioner Stewart’s approach benefits the FHFA by promoting the

sharing of knowledge about captives.

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Questions Questions and Answers and Answers

Steve Kinion, Director, Bureau of Captive and Financial Insurance Products Delaware Department of Insurance 302-674-7300 Dover Office 302-577-5280 Wilmington Office steve.kinion@state.de.us Please copy our office manager, Jamie Bafundo, jamie.bafundo@state.de.us on all correspondence

DELAWARE DEPARTMENT OF INSURANCE INSURANCE COMMISSIONER KAREN WELDIN STEWART Bureau of Captive and Financial Insurance Products Delaware is the 3rd Largest U.S. Captive Domicile and the World’s 6th Largest Captive Domicile