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 of captive insurance operations according to an industry association survey released today.[@@]

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

Number two on the list of concerns, after reinsurance availability, is obtaining security, such as letters of credit or cash. Fourth on the list was services by fronting companies, the survey found.

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

Michael R. Mead, former chairman of CICA and vice president and director of the Arizona Captive Insurance Association, said 133 captive owners responded to the survey. He said there are roughly 4,500 captives globally and about 1,600 in the United States.

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

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

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

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

As far as services, Mr. Mead said it's likely that fronting companies have taken complaints that were found in last year's survey seriously and made appropriate changes that appeal to their clients.

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Getting Reinsurance Top Captive Concern: CICA

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