It’s not often that the self-insurance/ART industry successfully pushes back against the National Association of Insurance Commissioners (NAIC) on an important legislative/regulatory matter, but I am pleased to report one initial small victory.
For the past few years, I have been involved in lobbying for federal legislation that would modernize the Liability Risk Retention Act (LRRA). This legislative initiative has included three basic objectives: 1) allow risk retention groups to write commercial property coverage; 2) establish standardized corporate governance standards, and 3) create a new federal arbitration mechanism that RRGs can utilize in cases of disputes with non-domiciliary regulators.
This last objective has attracted predictable opposition from the NAIC and individual regulators warning that such federal oversight would compromise state-based regulation of insurance. This is a canard, of course, because our approach actually strengthens state regulation by allowing for the validation of decisions made by an RRG’s domiciliary regulator.
In spite of the this common sense analysis, the NAIC has demonstrated de facto veto power in Congress on getting LRRA legislation passed with an arbitration provision, blocking bill introduction last year in the Senate. Apparently, however, this veto power now has some limits.
It was recently confirmed that Senator Jon Tester (D-MT) will introduce LRRA legislation this session including the arbitration provision. This is notable because Senator Tester had resisted supporting this initiative during the last Congress in deference to home state insurance regulator Monica Lindeen who had been pressing the NAIC party line.
We are not sure why Senator Tester has chosen to change course on this, but the heavy lobbying by many of his constituents, including the Montana Captive Insurance Association (MCIA), has certainly contributed to this positive momentum.
Of course, this is just one development in a lengthy and difficult process to get the legislation passed and signed into law. But the fact that the NAIC has not been able to successfully exercise a veto at this early stage confirms that it is possible for our industry to make good things happen despite state regulator angst.
We fully expect to bump up against NAIC opposition as the congressional session continues. Stay tuned to see how the balance of power tilts.
Jumat, 25 Februari 2011
A Fresh Look at Mandating Health Insurance Coverage
Requiring individuals to maintain health insurance coverage is a good idea. There, I said it despite my libertarian leanings.
Yes, an individual mandate may be unconstitutional. And the prospect for more government control is not appealing but there is a strong case to be made that this is perhaps the one redeemable provision (in concept) within the 3,000-page health care law.
The obvious advantage is that by creating a health care system where everyone has insurance you dramatically expand the risk pool, which is a proven way to drive down costs especially when more younger and healthier individuals are covered.
On this latter note, high deductible plans should certainly be an option to fulfill a coverage requirement.
Proponents of an individual mandate cite the auto insurance analogy to support their position that there is precedent for compelling individuals to take responsibility for financial risk but they get caught flat-footed with the counterpoint that driving a car is voluntary activity and therefore it is appropriate for government to establish conditions unlike health insurance where there is no such activity.
But let’s take a closer look at this comparison.
If someone gets in an automobile accident and does not have insurance, their car will not be towed into an automotive emergency room and fixed without consideration to ability to pay. Rather, The car will remain damaged, or totaled until such time the owner can pay to repair or replace it. The financial liability is not shifted to anyone else.
Now if the driver gets admitted to the hospital as a result of this accident they will get “repaired” regardless of their ability to pay. And if they aren’t able to pay the cost will be shifted to other health care payers, including self-insured employers.
This fact should give even libertarians pause in opposing an individual mandate because a person’s decision not to maintain insurance has an adverse impact on the larger population and compromises the principal of self-reliance. After all, when is the last time you heard of someone refusing essential treatment because they knew they could not pay?
Requiring health insurance coverage would also benefit the self-insurance industry because more individuals would chose to enroll in their employers’ group plans, thereby expanding the risk pools for employers while increasing revenue potential for service providers.
To be sure, the way the individual mandate provision as incorporated in the PPACA is flawed, largely because the specific penalties and incentives will not likely achieve the desired results. But that is not to say that this approach should be rejected outright. Properly structured, an individual mandate could help put our health care system on the right track.
It’s unfortunate that President Obama and the Democratic Congress wrapped so much bad stuff around this targeted health care reform approach that we will likely never know how it may have worked.
Yes, an individual mandate may be unconstitutional. And the prospect for more government control is not appealing but there is a strong case to be made that this is perhaps the one redeemable provision (in concept) within the 3,000-page health care law.
The obvious advantage is that by creating a health care system where everyone has insurance you dramatically expand the risk pool, which is a proven way to drive down costs especially when more younger and healthier individuals are covered.
On this latter note, high deductible plans should certainly be an option to fulfill a coverage requirement.
Proponents of an individual mandate cite the auto insurance analogy to support their position that there is precedent for compelling individuals to take responsibility for financial risk but they get caught flat-footed with the counterpoint that driving a car is voluntary activity and therefore it is appropriate for government to establish conditions unlike health insurance where there is no such activity.
But let’s take a closer look at this comparison.
If someone gets in an automobile accident and does not have insurance, their car will not be towed into an automotive emergency room and fixed without consideration to ability to pay. Rather, The car will remain damaged, or totaled until such time the owner can pay to repair or replace it. The financial liability is not shifted to anyone else.
Now if the driver gets admitted to the hospital as a result of this accident they will get “repaired” regardless of their ability to pay. And if they aren’t able to pay the cost will be shifted to other health care payers, including self-insured employers.
This fact should give even libertarians pause in opposing an individual mandate because a person’s decision not to maintain insurance has an adverse impact on the larger population and compromises the principal of self-reliance. After all, when is the last time you heard of someone refusing essential treatment because they knew they could not pay?
Requiring health insurance coverage would also benefit the self-insurance industry because more individuals would chose to enroll in their employers’ group plans, thereby expanding the risk pools for employers while increasing revenue potential for service providers.
To be sure, the way the individual mandate provision as incorporated in the PPACA is flawed, largely because the specific penalties and incentives will not likely achieve the desired results. But that is not to say that this approach should be rejected outright. Properly structured, an individual mandate could help put our health care system on the right track.
It’s unfortunate that President Obama and the Democratic Congress wrapped so much bad stuff around this targeted health care reform approach that we will likely never know how it may have worked.
Rabu, 09 Februari 2011
Show Me The Money -- Politics and the Self-Insurance/ART Industry
The self-insurance/alternative industry is a major force in the U.S. economy, but it is largely invisible to most members of Congress. It is similarly cloaked at the state level.
So why the disconnect? Follow the money trail, or should I say the absence of such a trail.
While it’s rare these days that political contributions can explicitly “buy votes,” the reality is that financial support normally does get you access to politicians, which allows interest groups to deliver their messages in an unfiltered way.
Almost every major industry gets this concept. Sadly, our industry is one of the few notable exceptions.
This conclusion is easily quantified by looking at the political contributions made by the business community generally and the traditional insurance industry more specifically. They dwarf what has been contributed by those with an interest in protecting and promoting self-insurance.
As my role within our industry has evolved over the past few years, I have become what political operatives call a “money man,” which means I am responsible for passing the hat to collect contributions for politicians that we hope will support various legislative/regulatory priorities.
Obviously this role has provided me a unique perspective on our industry’s historic stinginess and naivety about how the political process really works.
Now of course there are exceptions. Many companies and individuals reach for their checkbooks immediately upon request and do this enthusiastically. But in my experience, soliciting political contributions is a tough sell in most cases.
Complicating matters is that political contributions at the federal level must be done through personal checks or credit cards. No corporate money is allowed.
Interestingly, there are countless individuals who have made a very nice living though their involvement in the self-insurance/ART industry, but hesitate when asked to financially support political initiatives that will help the industry. It’s difficult to square this reality.
Other individuals have the mindset that they are willing to write a check, but only when there’s a hot issue. That’s short sighted.
For those of us who clearly understand the concept of insurance, you know you can’t purchase property insurance when your house is burning down or health insurance when in an ambulance on the way to the hospital.
Making targeted political contributions is the equivalent of purchasing insurance to mitigate possible future legislative/regulatory risks.
One complication is that our industry is comprised of corporate buyers (employers) and service providers. These two segments have different motivations and capabilities for political involvement.
Service providers generally have a top-line interest in legislative/developments. In other words, they consider how such developments will affect revenue generation. In my experience this is the most powerful motivation to write a check.
Risk/benefit manager types, on the other hand, are focused on the expense line. They just want to be able to utilize self-insurance vehicles to control costs with minimal regulatory hassles. And while most view this as important, it’s uncommon that they will write a personal check in support of a corporate objective for which they do stand to directly benefit financially.
That’s not a criticism, it’s simply reality. And because of this reality, a large number of people in our industry will be confined to the sidelines of political involvement making it even more important that service providers pick up the slack.
Despite our industry’s historical underperformance in the money game, I am actually cautiously optimistic for the future. My sense is that the messaging just needs to be sharpened so that political contributions are viewed as both insurance and investments.
I will be directly involved in some targeted political fund-raising efforts over the next couple months and expect to have many one-on-one conversations as part of passing the hat. This will give me a new opportunity to test my assumptions.
Will people show me the money? I’ll circle back on this topic in the near future and let you know.
So why the disconnect? Follow the money trail, or should I say the absence of such a trail.
While it’s rare these days that political contributions can explicitly “buy votes,” the reality is that financial support normally does get you access to politicians, which allows interest groups to deliver their messages in an unfiltered way.
Almost every major industry gets this concept. Sadly, our industry is one of the few notable exceptions.
This conclusion is easily quantified by looking at the political contributions made by the business community generally and the traditional insurance industry more specifically. They dwarf what has been contributed by those with an interest in protecting and promoting self-insurance.
As my role within our industry has evolved over the past few years, I have become what political operatives call a “money man,” which means I am responsible for passing the hat to collect contributions for politicians that we hope will support various legislative/regulatory priorities.
Obviously this role has provided me a unique perspective on our industry’s historic stinginess and naivety about how the political process really works.
Now of course there are exceptions. Many companies and individuals reach for their checkbooks immediately upon request and do this enthusiastically. But in my experience, soliciting political contributions is a tough sell in most cases.
Complicating matters is that political contributions at the federal level must be done through personal checks or credit cards. No corporate money is allowed.
Interestingly, there are countless individuals who have made a very nice living though their involvement in the self-insurance/ART industry, but hesitate when asked to financially support political initiatives that will help the industry. It’s difficult to square this reality.
Other individuals have the mindset that they are willing to write a check, but only when there’s a hot issue. That’s short sighted.
For those of us who clearly understand the concept of insurance, you know you can’t purchase property insurance when your house is burning down or health insurance when in an ambulance on the way to the hospital.
Making targeted political contributions is the equivalent of purchasing insurance to mitigate possible future legislative/regulatory risks.
One complication is that our industry is comprised of corporate buyers (employers) and service providers. These two segments have different motivations and capabilities for political involvement.
Service providers generally have a top-line interest in legislative/developments. In other words, they consider how such developments will affect revenue generation. In my experience this is the most powerful motivation to write a check.
Risk/benefit manager types, on the other hand, are focused on the expense line. They just want to be able to utilize self-insurance vehicles to control costs with minimal regulatory hassles. And while most view this as important, it’s uncommon that they will write a personal check in support of a corporate objective for which they do stand to directly benefit financially.
That’s not a criticism, it’s simply reality. And because of this reality, a large number of people in our industry will be confined to the sidelines of political involvement making it even more important that service providers pick up the slack.
Despite our industry’s historical underperformance in the money game, I am actually cautiously optimistic for the future. My sense is that the messaging just needs to be sharpened so that political contributions are viewed as both insurance and investments.
I will be directly involved in some targeted political fund-raising efforts over the next couple months and expect to have many one-on-one conversations as part of passing the hat. This will give me a new opportunity to test my assumptions.
Will people show me the money? I’ll circle back on this topic in the near future and let you know.
Rabu, 02 Februari 2011
ADA 2.0 Packs a Sharper Edge for Workers' Comp. Self-Insurers
The landmark Americans with Disabilities Act (ADA) of 1990 substantively changed workplace rules in ways that required employers to adapt a variety of hiring and return-to-work practices in order to maintain compliance.
Now 20 years later, the ADA has been amended and the implications for workers’ compensation self-insurers are significant. At issue is that ADA 2.0 will impose several new restrictions on how return-to-work programs can be structured.
The new final regulations are expected to be released this spring, but in anticipation of this expanded regulatory reach some self-insured employers have already felt the sting.
Over the past the year, the Equal Employment Opportunity Commission (EEOC) has been quietly adding nearly 300 investigators to enforce ADA requirements. Most recently, they have been targeting larger companies (generally self-insured) to determine if their return-to-work programs are ADA 2.0 compliant.
This is a fundamental change in EEOC’s historical approach of investigating claims made by specific employees. In other words, the EEOC is now essentially conducting on-site “audits” to determine possible ADA 2.0 violations.
Companies are already starting to pay big fines as part of negotiated settlements as the EEOC flexes its muscles in advance of the release of final regulations – proactive enforcement, indeed.
For example, late last year Sears settled an EEOC complaint for $6 million in connection with its employee absence policy that was deemed to improperty accommodate disabled workers. United Airlines recently paid more than $600,000 for a policy that refused the allow returning workers with disabilities to work reduced hour shifts.
With the EEOC investigative staffing ramp up, it’s clear that audit and enforcement efforts will pick up significantly this year and likely entangle many workers’ compensation self-insurers with carefully structured return-to-work programs.
The good news is that there are ways that employers can make sure they are ADA 2.0 compliant and we’ll report on that in the coming months.
In the meantime, the march of big government continues.
Now 20 years later, the ADA has been amended and the implications for workers’ compensation self-insurers are significant. At issue is that ADA 2.0 will impose several new restrictions on how return-to-work programs can be structured.
The new final regulations are expected to be released this spring, but in anticipation of this expanded regulatory reach some self-insured employers have already felt the sting.
Over the past the year, the Equal Employment Opportunity Commission (EEOC) has been quietly adding nearly 300 investigators to enforce ADA requirements. Most recently, they have been targeting larger companies (generally self-insured) to determine if their return-to-work programs are ADA 2.0 compliant.
This is a fundamental change in EEOC’s historical approach of investigating claims made by specific employees. In other words, the EEOC is now essentially conducting on-site “audits” to determine possible ADA 2.0 violations.
Companies are already starting to pay big fines as part of negotiated settlements as the EEOC flexes its muscles in advance of the release of final regulations – proactive enforcement, indeed.
For example, late last year Sears settled an EEOC complaint for $6 million in connection with its employee absence policy that was deemed to improperty accommodate disabled workers. United Airlines recently paid more than $600,000 for a policy that refused the allow returning workers with disabilities to work reduced hour shifts.
With the EEOC investigative staffing ramp up, it’s clear that audit and enforcement efforts will pick up significantly this year and likely entangle many workers’ compensation self-insurers with carefully structured return-to-work programs.
The good news is that there are ways that employers can make sure they are ADA 2.0 compliant and we’ll report on that in the coming months.
In the meantime, the march of big government continues.
Senin, 31 Januari 2011
Judge Heard What Healh Care Law Did Not Say
It’s ironic that the ultimate fate of the nearly 3,000 page Patient Protection and Affordable Act (PPACA) may hinge on what was not included in the legislation.
Today’s ruling by a federal appellate court judge in Florida that the law’s individual mandate provision is unconstitutional is certainly important, but even more significant is that the judge also ruled that entire law must be struck down on the basis on non-severability. In other words, if a single provision does not pass constitutional muster, then it all gets thrown out.
This is particularly interesting because shortly after the passage of PPACA, it came to light that the law did not include a severability provision, which is a pretty standard clause for most comprehensive legislation. To this day no one really knows for sure the reason for this important omission, although the most likely theory is that it was drafting error made in the rush to pass the legislation.
Then-Speaker Nancy Pelosi famously said that we needed to pass the bill to know what’s in it. Apparently we also needed to pass the bill to know what was not in it.
I have written and commented about this small but important legislative detail frequently over the past year. On more than one occasion someone has challenged me that it is not realistic to think that the entre law could be thrown out even if specific provision were voided by the courts. Conventional wisdom misses the mark once again.
So it’s off to the Supreme Court we go and we’ll see if at least five justices hear what the health care law did not say.
Today’s ruling by a federal appellate court judge in Florida that the law’s individual mandate provision is unconstitutional is certainly important, but even more significant is that the judge also ruled that entire law must be struck down on the basis on non-severability. In other words, if a single provision does not pass constitutional muster, then it all gets thrown out.
This is particularly interesting because shortly after the passage of PPACA, it came to light that the law did not include a severability provision, which is a pretty standard clause for most comprehensive legislation. To this day no one really knows for sure the reason for this important omission, although the most likely theory is that it was drafting error made in the rush to pass the legislation.
Then-Speaker Nancy Pelosi famously said that we needed to pass the bill to know what’s in it. Apparently we also needed to pass the bill to know what was not in it.
I have written and commented about this small but important legislative detail frequently over the past year. On more than one occasion someone has challenged me that it is not realistic to think that the entre law could be thrown out even if specific provision were voided by the courts. Conventional wisdom misses the mark once again.
So it’s off to the Supreme Court we go and we’ll see if at least five justices hear what the health care law did not say.
Kamis, 27 Januari 2011
Self-Insurance Faces a Triple Regulatory Threat
SIIA has reported recently on a series of the meetings with DOL and HHS officials to discuss PPACA-mandated studies on self-insurance. Our assumption is that at a minimum there is ignorance among regulators, but more likely a negative bias pervades.
We are working to head off a DOL report that concludes smaller employers should not self-insure due to solvency concerns and a separate HHS report suggesting that self-insured health plans will negatively impact health insurance exchanges due to adverse selection concerns.
While the policy battle rages on these two fronts, self-insurance is now being targeted by a third team of regulators. The Treasury Department has recently developed a keen interest in stop-loss insurance of all things.
The hook for the IRS folks is that the new health care law limits the tax deduction companies that sell fully-insured health insurance products may take for the compensation they pay to their employees. In other words, if a company sells “health insurance,” the company is subject to this tax deduction limitation. And guess what, it looks like the IRS and Treasury officials are confusing stop-loss insurance with health insurance.
Consider the following excerpt from an IRS publication regarding this tax deduction limitation, requesting comments from the public on:
"the application of the deduction limitation for services performed for insurers who are captive or who provide reinsurance or stop loss insurance, and specifically with respect to stop loss insurance arrangements that effectively constitute a direct health insurance arrangement because the attachment point is so low." (See IRS Notice 2011-2).
So, not only are the Treasury officials asking insurance practitioners how they should treat, for example, stop-loss policies, Treasury is explicitly asking for comments on how they should treat these policies, especially policies with a low attachment point.
Interestingly, this was reported to be a hot subject of discussion at an American Bar Association meeting for tax practitioners last week in Florida. Can you picture a bunch of tax lawyers with no background in self-insurance trying to figure out stop-loss insurance? Yep, that’s a scary thought.
But back to the IRS. Should it conclude that stop-loss insurance can be defined as health insurance for even its limited tax treatment purposes, a troublesome precedent will be established. For more than two decades, SIIA has been largely successful in pushing back on state efforts to regulate stop-loss insurance like health insurance.
A contrary interpretation by the feds will likely embolden those who seek to impose new regulations on self-insured plans via their stop-loss insurers. That’s the last thing the industry needs.
So, with stop-loss insurance under a Treasury Department microscope, self-insurance now faces a true regulatory triple threat. Watch for additional updates on this important developing story.
We are working to head off a DOL report that concludes smaller employers should not self-insure due to solvency concerns and a separate HHS report suggesting that self-insured health plans will negatively impact health insurance exchanges due to adverse selection concerns.
While the policy battle rages on these two fronts, self-insurance is now being targeted by a third team of regulators. The Treasury Department has recently developed a keen interest in stop-loss insurance of all things.
The hook for the IRS folks is that the new health care law limits the tax deduction companies that sell fully-insured health insurance products may take for the compensation they pay to their employees. In other words, if a company sells “health insurance,” the company is subject to this tax deduction limitation. And guess what, it looks like the IRS and Treasury officials are confusing stop-loss insurance with health insurance.
Consider the following excerpt from an IRS publication regarding this tax deduction limitation, requesting comments from the public on:
"the application of the deduction limitation for services performed for insurers who are captive or who provide reinsurance or stop loss insurance, and specifically with respect to stop loss insurance arrangements that effectively constitute a direct health insurance arrangement because the attachment point is so low." (See IRS Notice 2011-2).
So, not only are the Treasury officials asking insurance practitioners how they should treat, for example, stop-loss policies, Treasury is explicitly asking for comments on how they should treat these policies, especially policies with a low attachment point.
Interestingly, this was reported to be a hot subject of discussion at an American Bar Association meeting for tax practitioners last week in Florida. Can you picture a bunch of tax lawyers with no background in self-insurance trying to figure out stop-loss insurance? Yep, that’s a scary thought.
But back to the IRS. Should it conclude that stop-loss insurance can be defined as health insurance for even its limited tax treatment purposes, a troublesome precedent will be established. For more than two decades, SIIA has been largely successful in pushing back on state efforts to regulate stop-loss insurance like health insurance.
A contrary interpretation by the feds will likely embolden those who seek to impose new regulations on self-insured plans via their stop-loss insurers. That’s the last thing the industry needs.
So, with stop-loss insurance under a Treasury Department microscope, self-insurance now faces a true regulatory triple threat. Watch for additional updates on this important developing story.
Senin, 24 Januari 2011
A Tale of Two Domiciles
This month brought interesting news from two neighboring captive domiciles that portend two different paths in the years ahead.
In Tennessee, Governor Bill Haslam appointed Julie McPeak as the new commerce and insurance commissioner. This is big news for the self-insurance world because not only does McPeak understand alternative risk transfer, she has been an advocate for self-insureds and captives in her capacity as an attorney over the past few years.
Before that, she was the chief insurance regulator for the state of Kentucky and directly contributed to the captive insurance industry taking hold in that state.
Several months ago, then candidate Haslam approached Ms. McPeak to solicit her opinion on how the insurance industry could contribute to economic development in that state. She talked-up captives among other initiatives and apparently her input made a positive impression on the soon-to-be governor.
Tennessee can best be described today as a “dormant” captive domicile because it has a captive insurance statute, but no energy or resources have been committed by either the private or public sector to encourage captive formations in that state.
Ms. McPeak’s appointment has the real potential to change this. Work is already underway to update the state’s captive law to make it one of the most progressive and competitive in the country,
With a favorable law (assuming it can be passed through the Legislature) combined with a regulator who is willing to champion alternative risk transfer solutions, the key ingredients are in place to transform this domicile from dormancy to vibrancy.
Now let’s compare and contrast Tennessee with the nearby domicile South Carolina.
As most industry observers know, South Carolina has seen a reversal of fortune over the last several years as a captive insurance domicile. Its rapid growth and success in the early years has been stalled for some time, largely due to the state’s insurance department, which has increasingly been at odds with the captive insurance industry.
Industry leaders pleaded with newly-elected Governor Nikki Haley to appoint a new insurance commissioner who could restore the state’s status as one of the world’s premiere captive domiciles.
Interestingly, Ms. McPeak’s name had been floated last year as a possible candidate who could rescue captives in South Carolina, but it was obviously not to be.
Instead, Government Haley last week named David Black, CEO of Liberty Life Insurance Company to the post.
Now, Mr. Black does have solid business credentials but he is clearly not an altenative market guy, which means there will be a learning curve about captives at a minimum and no guarantee that he will be an advocate.
This latter point is important because it’s not good enough to be just luke warm about captives. The reason for this is that in order for any captive insurance domicile to grow the bureaucracy must be constantly tamed and that takes top-down leadership imposing a vision of true public-private partnership and demanding results.
The bureaucracy inside the South Carolina Department of Insurance is particularly challenging with regard to the captive application and review process, so the leadership demands are particularly acute.
We will soon see if Mr. Black is up to his challenge. Ms. McPeak is certainly up to hers.
This tale of these two domiciles will continue.
In Tennessee, Governor Bill Haslam appointed Julie McPeak as the new commerce and insurance commissioner. This is big news for the self-insurance world because not only does McPeak understand alternative risk transfer, she has been an advocate for self-insureds and captives in her capacity as an attorney over the past few years.
Before that, she was the chief insurance regulator for the state of Kentucky and directly contributed to the captive insurance industry taking hold in that state.
Several months ago, then candidate Haslam approached Ms. McPeak to solicit her opinion on how the insurance industry could contribute to economic development in that state. She talked-up captives among other initiatives and apparently her input made a positive impression on the soon-to-be governor.
Tennessee can best be described today as a “dormant” captive domicile because it has a captive insurance statute, but no energy or resources have been committed by either the private or public sector to encourage captive formations in that state.
Ms. McPeak’s appointment has the real potential to change this. Work is already underway to update the state’s captive law to make it one of the most progressive and competitive in the country,
With a favorable law (assuming it can be passed through the Legislature) combined with a regulator who is willing to champion alternative risk transfer solutions, the key ingredients are in place to transform this domicile from dormancy to vibrancy.
Now let’s compare and contrast Tennessee with the nearby domicile South Carolina.
As most industry observers know, South Carolina has seen a reversal of fortune over the last several years as a captive insurance domicile. Its rapid growth and success in the early years has been stalled for some time, largely due to the state’s insurance department, which has increasingly been at odds with the captive insurance industry.
Industry leaders pleaded with newly-elected Governor Nikki Haley to appoint a new insurance commissioner who could restore the state’s status as one of the world’s premiere captive domiciles.
Interestingly, Ms. McPeak’s name had been floated last year as a possible candidate who could rescue captives in South Carolina, but it was obviously not to be.
Instead, Government Haley last week named David Black, CEO of Liberty Life Insurance Company to the post.
Now, Mr. Black does have solid business credentials but he is clearly not an altenative market guy, which means there will be a learning curve about captives at a minimum and no guarantee that he will be an advocate.
This latter point is important because it’s not good enough to be just luke warm about captives. The reason for this is that in order for any captive insurance domicile to grow the bureaucracy must be constantly tamed and that takes top-down leadership imposing a vision of true public-private partnership and demanding results.
The bureaucracy inside the South Carolina Department of Insurance is particularly challenging with regard to the captive application and review process, so the leadership demands are particularly acute.
We will soon see if Mr. Black is up to his challenge. Ms. McPeak is certainly up to hers.
This tale of these two domiciles will continue.
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