NU Online News Service, March 15, 3:06 p.m.CDT

TUCSON, Ariz.—Captive owners identified their biggest concernsas policyholder retention and growth, followed by expandedutilization and collateral, a survey by the Captive InsuranceCompanies Association has found.

This was a change from last year, when for the second straightyear captive owners said securing collateral from banks to satisfytheir fronting companies was their top concern.

The preliminary findings were presented here at CICA's 39thAnnual International Conference. The entire report will be releasedin 90 days, CICA said.

The survey—consisting of 67 percent single-parent captives, 15percent risk retention groups, 9 percent segregated-cell captivesand 9 percent association captives—found that 20 percent ofrespondents listed policyholder retention as their top concern.Fifteen percent said expanded utilization, and 12 percent saidcollateral.

Michael Mead, president of M.R. Mead Company, Inc., pointedout that in previous surveys fronting was a big concern.

“The industry is evolving,” he told NU Online NewsService. “The soft market has a lot to do with it, also anevolution that many carriers are accepting captives as a realbusiness.”

He pointed out that Tillinghast has said captives comprise morethan half of the insurance market.

Patricia Villarreal, director-risk management, Starwood Hotels& Resorts Worldwide, Inc., a member of a panel discussion,agreed the soft commercial market plays a role, “Every year[captive members] are weighing the benefits of a captiveversus risk transfer,” she said.

The survey looked at captives’ use of frontingcarriers. Eighty-four percent of respondents listed admitted paperas one of their primary reasons for using a fronting carrier. Thenext highest reason was regulatory compliance at 49 percent.

A captive often must secure a licensed primary insurance companyto serve as its "front" in a certain state, which issues a policyand then reinsures the vast majority of that exposure with thecaptive.

Respondents reported using the following fronting carriers forproperty and casualty coverage:

• Chartis/Lexington (27 percent)
• ACE (18 percent).
• Zurich (16 percent).
• Liberty Mutual and Old Republic (10 percent)

Other findings:

• 63 percent said the price of fronting is “reasonable,” with 20percent characterizing the price as “expensive.”
• 55 percent said the value of their fronting relationship is“excellent,” while the other 45 percent listed it as “moderate.”Zero-percent rated the relationship as low.
• 63 percent of respondents reported no change in the cost offronting from the prior year, while 25 percent reported an increasein costs of less than 5 percent and 6 percent reported a decreasein costs.
• 84 percent of respondents reported that collateral wasrequired, compared to 93 percent the previous year

When asked what kind of collateral was required, letters ofcredit were named by 63 percent of respondents, trust accounts by42 percent of respondents, cash by 27 percent of respondents, andparental guarantee by 5 percent.