ISSUES & ANSWERS: Captive Domiciles Services · PREDICTIVE ANALYTICS PRICING AND PRODUCT MANAGEMENT REINSURANCE Bloomington I Atlanta I Chicago I Des Moines I Indianapolis I San Francisco

Steve KinionDelaware Insurance

Department

Rob WallingPinnacle Actuarial

Resources, Inc.

ISSUES & ANSWERS:

CaptiveDomicilesand Services

Interviewed Inside:

Captive professionals explain how to simplify setting up specialized insurance organizations.

View past Issues & Answers sections atwww.bestreview.com/issuesanswersarchive.asp

Rob WallingPinnacle Actuarial

Resources Inc.

At Pinnacle, we believe in building relationships, not just

delivering results. We judge ourselves on the quality of

our services, responsiveness to your needs, consistent

professionalism and ability to develop a deeper understanding

of your business.

We are an independent property/casualty actuarial consulting

firm that’s large enough to provide a wealth of expertise and

world-class solutions, yet small enough to be flexible, timely

and cost-effective. We serve a wide range of captive managers,

auditors, regulators, traditional insurers, self-insured employers

and groups.

Pinnacle’s Commitment Beyond Numbers philosophy is built

on four foundational pillars: expertise, superior communication,

empathetic customer service and better business decisions.

Discover more at www.pinnacleactuaries.com

ALTERNATIVE MARKETS

ENTERPRISE RISK MANAGEMENT

LEGISLATIVE COSTING

LITIGATION SUPPORT

LOSS RESERVING

PREDICTIVE ANALYTICS

PRICING AND PRODUCT MANAGEMENT

REINSURANCE

Bloomington I Atlanta I Chicago I Des Moines I Indianapolis I San Francisco

pinnacleactuaries.comCommitment Beyond Numbers

Our handshake means more than an engagement. It means commitment.

INDESIGN_AD_TEMPLATE.indd 1 7/14/2016 2:28:55 PM

Issues & Answers

BEST’S REVIEW • AUGUST 2016

Pinnacle Actuarial Resources Inc.Headquarters: Bloomington, Illinois

Provides independent actuarial consulting

Known for ‘Commitment Beyond Numbers’

www.pinnacleactuaries.com

Rob WallingPrincipal and Consulting Actuary, Pinnacle Actuarial Resources Inc.

“The captive space is changing faster than ever. Our experience with hundreds of different captive coverages, a wide array of structures and all major domiciles allows us to serve a diverse range of captive owners.”

Significant forces driving oversight of the captive industry:The changes to Internal Revenue Code 831(b) are resulting in reviews and changes to some enterprise risk captives making this election. In addition, the IRS’ private letter ruling on business versus insurance risk and progress on numerous cases against captives making 831(b) elections are also at the forefront of many captive managers’ minds. Both new and innovative domiciles are also driving changes. For example, Puerto Rico’s unique combination of U.S. and offshore regulatory approaches is proving an interesting alternative. Finally, there are always regulatory changes on the horizon. For example, in Bermuda the introduction of Own Risk Solvency Assessments (ORSA) for smaller classes of captives, and Economic Balance Sheets (EBS) and related actuarial opinions for classes 3A and 3B, could potentially signal future regulatory trends around the globe.

Coverages that are seeing the most activity in captives: There are a large number of specialty commercial auto programs under development—trucking, taxis, tow trucks, shared transportation providers, etc. Higher mileage per vehicle and deteriorating market conditions are increasing captive formations. Some of these structures are also more efficient collateralization mechanisms. Emerging markets, such as the shared economy, cyber liability and other technology, and the legal cannabis industry continue to present challenges in developing captive funding studies. State disruptions in the workers’ compensation market and legal challenges to specific WC insurance products are providing opportunities for captive formations. We also see continued strong activity associated with health care industry consolidation and group medical insurance.

Captive designs and structures that are attracting more interest: Innovation in captive structures continues. Variations of series captives, cell structures and portfolio insurance companies (PICs) continue to emerge. Renewed growth in agency, association and group captives has recently generated interest. Finally, hybrid structures, such as so-called “hub-and-spoke” group captives, which have series or cell features allowing individual member tax elections, are also being developed.

How big data and predictive analytics are game changers:There’s no let-up in the pressure on captives to apply big data and predictive analytics. Large, single-parent group captives and risk retention groups (RRGs) are utilizing analytics in a broad range of applications, such as providing safety and performance benchmarks, claims diagnostics for fraud and problem claims, enhanced loss development benchmarks and validation of the value added by service providers.

Pinnacle Actuarial Resources Inc. Principal and Consulting Actuary Rob Walling said actuaries are uniquely prepared to assist new and existing captive owners and their service providers in navigating today’s dynamic market changes. Actuaries are well-qualified to offer insights on captive regulatory and judicial issues, evolving captive structures, trending coverages and applications of data analytics.

Captive Expertise

Share this edition at www.bestreview.com/issuesanswersarchive.asp.