Recap: Hentges Talks Captive Growth with Global Captive Podcast

By Don Talend February 21st, 2023

Nick Hentges, CEO of Captive Resources, recently looked back at the past year and at future trends in the group captive insurance industry with Richard Cutcher, host of the Global Captive Podcast from Captive Intelligence. Also in this episode, Erin Brosnihan, President of Kensington Management Group, and Donna Dreuth, CFO at Captive Resources, told Captive Intelligence Senior Reporter Luke Harrison about their respective roles in facilitating the successful operation of group captives.

Here are a few highlights from these conversations. You can listen to the full episode here.

Captive Resources’ CEO Talks Prudent Group Captive Growth

When Properly Managed, Group Captive Growth Benefits Members

Hentges reported that Captive Resources enjoyed a successful 2022 and specifically highlighted strong growth in the casualty and medical stop loss group captives that Captive Resources supports. He noted that most of the growth came from existing group captives.

Hentges added that Captive Resources has added support resources to accommodate the growing captives. “We’re a consultant hyper-focused on making the experience of the members that come into [the captives we support] a great one,” he said. “We’ve built an infrastructure at Captive Resources that I think is second to none. We have close to 400 people now and all we focus on is group captives and making the group captive experience a great one…We hired 60 new people in 2022 and we plan to hire another 70 in 2023 to make sure onboarding, customer service, claims, loss control, and the underwriting process are as good or better than when [the captives] had a billion dollars in premiums.”

When Cutcher asked him why group captive growth is in members’ best interest, Hentges pointed out that it gives members greater control over their insurance programs. “In a big program, you really do have leverage in the marketplace and that gives the members of that captive control to get consistency and predictability in their insurance programs as they move forward,” he said.

When a group captive reaches a membership of about 200 companies and its board decides to limit further growth, Captive Resources forms a new similar captive using a “parent-child relationship model,” Hentges said. In those cases, Captive Resources creates a “child” captive that is neither owned by nor tied to the parent captive other than using the same broker network. From that point forward, the captive raises the minimum premium in the parent captive to narrow the pool of new member prospects to larger companies. Later in the episode, Hentges reported that Captive Resources has started a new captive for members that pay annual premiums of $5 million or more.

Looking Ahead to 2023 and Beyond

Hentges shared the following insights about Captive Resources’ growth in 2023 and beyond:

  • “[The captives] wrote about $55 million in new premiums in January…we think [they’ll] grow by $550 million to $600 million in 2023” in casualty and medical stop loss combined.
  • “On the casualty side, we think there are 55,000 to 60,000 [U.S. companies] that would fit a casualty group captive.” Compared with a current total of 6,000 members in the captives we advise, “there is tremendous headroom for us to grow dramatically over the next 10 years.”
  • “We think medical stop loss will be a huge growth area. [Captive Resources] went from having three employees to 35 employees on the medical stop-loss side.” Later in the episode, he added, “We think there are 175,000 potential clients for a medical stop-loss program.”

Hentges said he is excited about the future of group captive insurance overall. Noting that Captive Resources currently advises members with about $3.6 billion in total annual premiums, he projects that number to increase significantly over the next few years. “I’m pretty bullish on this marketplace and where we sit.”

How a Captive Consultant and a Captive Manager Work Together

Captive Resources lends its consulting expertise to make captive insurance work for member companies. For its part, Kensington Management Group oversees day-to-day captive management. Both companies serve different but equally indispensable roles in ensuring that members gain the benefits group captive insurance offers. Captive Resources’ Donna Dreuth and Kensington’s Erin Brosnihan spoke with Luke Harrison, senior reporter for Captive Intelligence, at the Cayman Captive Forum in late 2022 about their respective companies’ distinct but complementary roles in serving captive members.

Consulting Versus Day-to-Day Management

Harrison asked Dreuth how Captive Resources works with brokers and clients to build and support group captives.

“Our broker network is amazing—they’ve been very supportive of captives over the nearly 40 years we’ve been doing this,” Dreuth noted. “They bring us best-in-class members and if we don’t have a captive that fits their needs, we will start a new captive. Our client base is a mixed group: manufacturing, trucking, all kinds of industries. We help them find a captive and become better companies through risk control services such as risk control workshops. Their premiums become lower because they learn to become safer companies.”

When asked how Captive Resources continues to advise captives once they are established, Dreuth described our hands-on approach. Onboarding new members involves connecting them with the captive’s various service providers, such as the policy issuance companies and third-party claims administrators. “We work to make sure clients are getting the top-notch service that they need and deserve,” she said.

Brosnihan summarized the many tasks Kensington handles in large member-owned group captive management.

“Our day-to-day role as a captive manager encompasses everything from incorporating and licensing new captives to financial statement preparation and cash management activities for existing captives,” Brosnihan said. “We spend considerable time ensuring regulatory compliance and working on all the different due diligence aspects that go along with having so many shareholders and directors.”

A Collaborative Relationship

With Dreuth and Brosnihan having established their distinct roles, Harrison then asked them how those roles complement each other in helping enable captives to serve members’ insurance interests.

“We have a very collaborative relationship,” Dreuth said while recalling their time working together when she was an insurance manager for Kensington. “Besides myself, we have two other employees at Captive Resources who have the same experience that I did…I think bringing that type of expertise from Kensington up to our company has been really invaluable as we continue to make improvements and really streamline things. Erin and I both have made a very concentrated effort to make sure we’re hiring people from accounting firms or insurance companies who have a lot of skills and provide a lot of captive expertise.”

“I think the fact that our two companies are very in tune and very focused on the member-owned group captive space, as well as the collaborative approach between our two companies Donna spoke about…is giving a really unique advantage to our captive clients and [the] members,” Brosnihan said. “Both of our companies are really focused on providing best-in-class service and trying to improve our captive clients’ businesses.”

The full Global Captive Podcast episode is available here.

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