Getting Reinsurance Top Captive Concern: CICA

By Caroline McDonald

NU Online News Service, March 16, 4:12 p.m. EST, Scottsdale,Ariz.?Obtaining reinsurance is now the top concern for owners ofcaptive insurance operations according to an industry associationsurvey released today.[@@]

The Captive Insurance Companies Association research also foundthat the availability of fronting firms, formerly the number oneworry for captives, plummeted from the number one spot to thenumber three concern for captive owners. This is the first time inthe four years the survey has been conducted that fronting hasdropped from first place.

Number two on the list of concerns, after reinsuranceavailability, is obtaining security, such as letters of credit orcash. Fourth on the list was services by fronting companies, thesurvey found.

The survey was released at CICA's annual meeting being heldhere.

Michael R. Mead, former chairman of CICA and vice president anddirector of the Arizona Captive Insurance Association, said 133captive owners responded to the survey. He said there are roughly4,500 captives globally and about 1,600 in the United States.

"The survey would indicate that people are not as unhappy withthe situation as they have been in the past," Mr. Mead said. "Thatdoesn't mean they're happy, just not as unhappy as they havebeen."

Though there are no more fronting companies operating than lastyear, when fronting concerns were high, "those who are still doingit are apparently doing a pretty good job," he said.

Mr. Mead told National Underwriter that the resultswere surprising. He said, in part, that the results reflect thereality that fewer captives are using fronting companies. He saidwhether a captive is required to hire a fronting company isdependent on the line of coverage and the state of domicile.

For instance, he said, "you can write workers' comp direct inArizona." Captives in Arizona writing Arizona payrolls don't need afront, he explained.

As far as services, Mr. Mead said it's likely that frontingcompanies have taken complaints that were found in last year'ssurvey seriously and made appropriate changes that appeal to theirclients.