Last month’s Captive Insurance Companies Association (CICA) 2024 International Conference was an opportunity for industry leaders to reflect on the past year in captive insurance and share thoughts on its future. For the latest on the group captive industry, Richard Cutcher of Captive Intelligence caught up with Captive Resources’ CEO and CICA Board Chair Nick Hentges during the event. Below are highlights from their conversation during a recent episode of the Global Captive Podcast.
Hentges started by quantifying the impressive growth experienced by Captive Resources and our captive clients in 2023. Last year, Captive Resources’ group captive clients combined to add more than 600 member-companies, pushing the total number of members to well over 6,000. Driven by a combination of new members and increased exposures, the captives also grew their combined premiums by $500 million, pushing the total past the $4 billion threshold. Based on these trends and the ongoing hard market, Cutcher asked Hentges how commercial insurance cycles impact group captive growth.
“We’ve started captives in soft and hard markets, and we’re successful either way,” Hentges said. “We look for a need in the marketplace and if we can fill that need with a product that speaks to a broker network or an industry.”
When Cutcher asked about the market potential for Medical Stop Loss (MSL) group captives, Hentges said he sees “a wide-open marketplace.” He recalled that in 2011, when Captive Resources started its first MSL group captive, the company’s No. 1 priority was casualty insurance captives. He indicated that, while that hasn’t changed, company growth has enabled Captive Resources to increasingly devote more resources to supporting its growing MSL efforts.
“I am extremely passionate about this,” Hentges said. “We have gotten very serious about it. The growth potential we see is unlimited.”
“Over the past few years, we’ve looked at limits,” Hentges said when Cutcher asked him about improvements Captive Resources is exploring for the group captives it supports. “The insurance industry has been stuck at a million-dollar limit for years. With social inflation and [economic] inflation, we’re seeing increases in claims payouts. We feel that a $2 million primary limit is probably the right way to go, and we recommend that our captives definitely consider a $2 million limit.
“Being very respectful of our brokers and working with them, we want to make sure that they’re comfortable with what we’re doing.”
Cutcher also asked Hentges how recent financial market activity and interest rates have affected the performance of the Captive Investors Fund (CIF), which Captive Resources established in 1994 as a preferred investment vehicle for group captive clients.
“The CIF takes a long-term view — we don’t try to time the market,” Hentges said, noting that it recently surpassed $8 billion in assets under management. He noted that the CIF’s investment objective is to preserve funds while delivering a competitive, risk-adjusted return. He added that the fund has met that objective with an average annual return of around 5.75% throughout its nearly 30-year existence.
Looking at the big picture as his term as CICA Board Chair draws to a close, Hentges reflected on the accomplishments of CICA and the industry over the past year. He said he’s passionate about two CICA initiatives and one Captive Resources initiative in particular.
“We needed to bring more women into the arena and give them great opportunities,” Hentges told Cutcher. “One of the things CICA has done is to start the Amplify Women Initiative. That has been extremely well accepted.” He added that Captive Resources has embodied this initiative with merit-based appointments of women to its senior management team.
Hentges said interactions between industry veterans and newcomers spawn numerous ideas and innovations. “There are so many talented young professionals,” he said. Hentges added that, in the spirit of its NEXTGen program, CICA has aided these young professionals’ leadership development by including them on panels during its events.
Reiterating his contention that the insurance industry needs to maintain a young talent pipeline, Hentges urged other companies to follow Captive Resources’ example and start internship programs.
“It’s one of the best things you can do,” he said. “It’s truly giving back and helping young people understand what it’s like to be in a professional situation. I’m so bullish on the future of our industry because of the young folks I see coming in.”
You can listen to the entire episode here for more of Hentges’ thoughts on these topics.
