At its outset, Energi assumed risk through a group-captive mechanism, purchasing two segregated cells in a Bermuda-based rent-a-captive, Hurst Home Insurance Co.

But in September 2010, Energi capitalized a series captive in Delaware to create an industrial reinsurer that maintained the company's risk-bearing capabilities but provided clients guaranteed-cost coverage through the facility's fronting insurer.

Rather than move the Hurst cell business onshore, Energi conceded to Delaware regulators' request to run off the Bermuda business and start afresh onshore to avoid any accounting problems, explains Tim Kolojay, Energi's senior vice president of underwriting operations.

Kolojay and Energi President/CEO Brian K. McCarthy explain that Energi moved its risk-bearing facility onshore for several reasons.

Moving out of the Hurst facility would have been necessary in any case, Kolojay says, because Energi's risk-bearing operation was growing too large for a rent-a-captive: From 2009 through 2012, Energi nearly quintupled its written premiums from $20.7 million to $97 million.

In addition, a prime reason for having a Bermuda-domiciled captive—favorable tax treatment—likely would be regulated away, McCarthy adds.

Plus, as Energi was expanding, McCarthy saw no reason for it to cover U.S. risks in an offshore facility. “We should be made in America,” he says.

Because Energi Re is housed in a series captive, the facility can be divided into additional cells, each of which would be capitalized separately from the other cells.

McCarthy envisions eventually establishing additional cells for large clients that want their own captive insurance mechanism but prefer to initially avoid the higher costs associated with establishing a traditional, single-parent facility.

Special Reports /

&lsquo;Made in America&rsquo;: Energi Embraces Onshore-Captive Opportunity

Related Stories

Recommended For You

‘Made in America’: Energi Embraces Onshore-Captive Opportunity