2018 Vermont Report

A Perfect Landing

The U.S. Hang Gliding and Paragliding Association creates a captive in Vermont.
By: | April 9, 2018 • 7 min read

We live in a busy, hectic, noisy world. Many of us wish we could get away from the distractions and experience peace and tranquility. Some of us make it happen through meditation, running, art or camping. But for one group, shutting out the noise takes them to a whole new level — literally. They are members of the U.S. Hang Gliding and Paragliding Association.

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Hang gliding and paragliding have been called the purest form of flying. Enthusiasts say that without a motor — just the glider, one’s body and the wind — one experiences a thrill, a sense of peace and a oneness with nature.

“It’s a feeling like no other feeling in the world,” said Tim Herr, secretary and risk management officer, Recreation Risk Retention Group Inc., (RRRG).

“To take flight is a surreal experience, especially the first time you do it. It’s the purest form of flight. There’s no noise, no pollution and you feel like you are one with nature. I am up there with only the wind and sometimes a bird. To fly that close to a hawk or an eagle — they join you — it is incredible. When I am up there sometimes, I still can’t believe I am up there,” he said.

Herr started hang gliding in the 1980s and still recalls the early years when hang gliders were made from bamboo and plastic. Today, he runs the RRRG, which is the captive that allows the Association to be self-insured.

Back then, he said, “there were injuries due, at least in part, to subpar equipment and the lack of historical information on what works and what doesn’t when flying, landing and dealing with weather conditions.

“We realized we needed an association to help people stay safe.”

The U.S. Hang Gliding and Paragliding Association was born. The association developed best practices and standards that include location rating, education for members and instructor certification. They even worked with glider manufacturers to improve the safety and quality of gliders.

Another thing they realized they needed: liability insurance. They wanted coverage not only for their pilots, of course, but also coverage for spectators, vehicles on the ground and land and landowners. The landowners especially wanted to be named as insureds in the coverage. They were nice enough to let the gliders on their land, but understandably, they didn’t want the risk associated with the gliders should property damage or an injury (or worse) occur.

Becoming Self-Insured

Typically, the Federal Aviation Administration (FAA) regulates anything that flies. However, Herr said the FAA granted gliders an exemption from regulation with the caveat they were “on their own” in terms of safety and insurance. “Undertake at your own risk” became the unwritten regulation.

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Even though there was no regulation mandating liability coverage, the gliders knew it was in everyone’s best interest to secure it. Protecting people first, then property and lastly, the up-and-coming sport’s reputation was paramount.

Previously, the association was able to obtain coverage through a well-respected international insurer. But when that longtime carrier was no longer able to write coverage for the association, the group knew it would need to be creative and resourceful in obtaining coverage.

It wasn’t easy.

“It was hard to find someone to write for this small- to mid-market,” Herr said. “But that changed when we went to Vermont to investigate captives. We looked at Vermont and learned about options and risk retention groups. It was the best option, especially since we needed to cover members in many different states across the country.”

The Vermont Captive Experience

In 2016, the Association formed a captive, domiciled in Vermont, that fell into a category known as risk retention groups (RRG).

A typical captive is formed when a single company funds itself and insures itself, benefitting from any derived revenue. With a risk retention group, many people, companies or organizations pool their money and insure themselves collectively. The key requirement is that they are like entities — in this case hang gliders and paragliders — but it could be schools, members of the same profession or like organizations.

The Association’s RRG is specifically for recreational organizations. RRRG’s purpose is to insure its members and protect free flight everywhere. They were joined in their RRG by The Foundation for Free Flight, The Professional Air Sports Association and several hang gliding and paragliding flight schools across the nation.

“We looked at Vermont and learned about options and risk retention groups. It was the best option, especially since we needed to cover members in many different states across the country.” — Tim Herr, secretary and risk management officer, Recreation Risk Retention Group Inc.

Vermont was a good fit for the Association. The state is filled with recreational opportunities and outdoors enthusiasts, so people appreciate the desire for a sport such as gliding.

Tim Herr, secretary and risk management officer, Recreation Risk Retention Group Inc.

The state of Vermont is also a leading domicile for captives. They’ve been hosting captives for more than 35 years as a global leader in captive insurance.

According to Sandy A. Bigglestone, director of captive insurance, Vermont Department of Financial Regulation, “Vermont is number one in gross written premium, number one in assets under management, and third in active captive insurance companies in the world.

“Vermont is home to 48 of the Fortune 100, and 18 of the companies that make up the Dow 30 have Vermont captives.”

But it was the ease of working with Vermont, their expertise and their staff’s experience that helped to make it a natural choice.

“Working with Vermont was wonderful,” Herr said. “They understand the small niche insurance market. The first meeting is always filled with trepidation, but we showed them our plans and they understood what we needed and wanted to do.”

The Association needed to raise capital to the tune of $3 million in just nine months, which they were able to do through a fundraising campaign and surplus loans from members. With the funding secured, they moved on to reinsurance and other issues and were able to get RRRG off the ground by 2016.

RRRG now has 29 member groups covering the flights of more than 9,000 USHPA members, 83 USHPA chapters, and more than 30,000 hang gliding and paragliding students annually.

“In Vermont, we had the support we needed,” Herr said. “They have a deep history with captives. They’ve done this before, and it is not a drawn-out process.”

Expert Advice

During the process, the Vermont captive experts offered the Association some crucial advice that has since enhanced member safety as well as the Association’s ability to self-insure: Create an active risk management program.

The Association was diligent in putting a risk management program together.

Today, every chapter of the Association must write and submit with its membership application a plan detailing how it will manage risk.

This must be completed and reviewed before any organization is granted entrée to the Association or can obtain liability insurance through the RRRG.

“We have a laundry list of things they must do,” Herr said.

That list includes things such as: devise a plan to protect spectators, conduct pilot training on-site, note wind and geographic dangers and publish site guides that detail site conditions and how to safely fly at their locations.

Additionally, the Association developed safety features accessible on their website, including two pre-flight safety apps available as interactive PDFs or on iTunes.

Learning Opportunities

Leaders in captive organizations say education is an important part of the process. Understanding legislation and regulations in each domicile helps find the right fit.

Organizations such as the Vermont Captive Insurance Association (VCIA) offer online education and training for industry newcomers and seasoned professionals. Topics ranging from “the advantages of captives” to tax implications are covered, as well as accounting and auditing for captives.

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Additionally, they provide a “Captive Service Directory,” a list of VCIA members who provide services to the captive industry, such as consultants, attorneys, managers, brokers, underwriters and more.

The National Risk Retention Association, a nonprofit trade organization dedicated to protecting the rights of owner insureds, offers resources for their members, as well as an annual conference.

Its executive director, Joe Deems, said there are many good states that are domiciles and clearly Vermont is among them.

“Vermont built a good department. They were one of the first states to become a domicile. They are diligent, and they have a good staff with bright people. If Vermont approves you to be an RRG, then you have the necessary nuts and bolts to make it work,” he said. &

Mercedes Ott is managing editor of Risk & Insurance. She can be reached at [email protected]

More from Risk & Insurance

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The Profession

For This Pharmaceutical Risk Director, Managing Risk Means Being Part of the Mission to Save Lives

Meet Eric Dobkin, director, insurance and risk management, for Merck & Co. Inc.
By: | September 28, 2018 • 5 min read

R&I: What was your first job?
My first job out of undergrad was as an actuarial trainee at Chubb.I was a math major in school, and I think the options for a math major coming out are either a teacher or an actuary, right? Anyway, I was really happy when the opportunity at Chubb presented itself. Fantastic company. I learned a lot there.

R&I: How did you come to work in risk management?
After I went back to get my MBA, I decided I wanted to work in corporate finance. When I was interviewing, one of the opportunities was with Merck. I really liked their mission, and things worked out. Given my background, they thought a good starting job would be in Merck’s risk management group. I started there, rotated through other areas within Merck finance but ultimately came back to the Insurance & Risk Management group. I guess I’m just one of those people who enjoy this type of work.

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R&I: What is risk management doing right?
I think the community is doing a good job of promoting education, sharing ideas and advancing knowledge. Opportunities like this help make us all better business partners. We can take these ideas and translate them into actionable solutions to help our companies.

R&I: What could the risk management community be doing a better job of?
I think we have made good advancements in articulating the value proposition of investing in risk management, but much more can be done. Sometimes there is such a focus on delivering immediate value, such as cost savings, that risk management does not get appropriate attention (until something happens). We need to develop better tools that can reinforce that risk management is value-creating and good for operational efficiency, customers and shareholders.

R&I: What’s been the biggest change in the risk management and insurance industry since you’ve been in it?
I’d actually say there hasn’t been as much change as I would have hoped. I think the industry speaks about innovation more often than it does it. To be fair, at Merck we do have key partners that are innovators, but some in the industry are less enthusiastic to consider new approaches. I think there is a real need to find new and relevant solutions for large, complex risks.

R&I: What emerging commercial risk most concerns you?
Cyber risk. While it’s not emerging anymore, it’s evolving, dynamic and deserves the attention it gets. Merck was an early adopter of risk transfer solutions for cyber risk, and we continue to see insurance as an important component of the overall cyber risk management framework. From my perspective, this risk, more than any other, demands continuous forward-thinking to ensure we evolve solutions.

R&I: What’s the biggest challenge you’ve faced in your career?
Sticking with the cyber theme, I’d say navigating through a cyber incident is right up there. In June 2017, Merck experienced a network cyber attack that led to a disruption of its worldwide operations, including manufacturing, research and sales. It was a very challenging environment. And managing the insurance claim that resulted has been extremely complex. But at the same time, I have learned a tremendous amount in terms of how to think about the risk, enterprise resiliency and how to manage through a cyber incident.

R&I: What advice might you give to students or other aspiring risk managers?
Have strong intellectual curiosity. Always be willing to listen and learn. Ask “why?” We deal with a lot of ambiguity in our business, and the more you seek to understand, the better you will be able to apply those learnings toward developing solutions that meet the evolving risk landscape and needs of the business.

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R&I: What role does technology play in your company’s approach to risk management?
We’re continuing to look for ways to apply technology. For example, being able to extract and leverage data that resides in our systems to evaluate risk, drive efficiencies and make things like property-value reporting easier. We’re also looking to utilize data visualization tools to help gain insights into our risks.

R&I: What are your goals for the next five to 10 years of your career?
I think, at this time, I would like to continue to learn and grow in the type of work I do and broaden my scope of responsibilities. There are many opportunities to deliver value. I want to continue to focus on becoming a stronger business partner and help enable growth.

R&I: What is your favorite book or movie?
I’d say right now Star Wars is top on my list. It has been magical re-watching and re-living the series I watched as a kid through the eyes of my children.

R&I: What is the riskiest activity you ever engaged in? When I was about 15, I went to a New York Rangers versus Philadelphia Flyers game at the Philadelphia Spectrum. I wore my Rangers jersey. I would not do that again.

Eric Dobkin, director, insurance & risk management, Merck & Co. Inc

R&I: What is it about this work you find most fulfilling or rewarding?
I am passionate about Merck’s mission of saving and improving lives. “Inventing for Life” is Merck’s tagline. It’s funny, but most people don’t associate “inventing” with medicine. But Merck has been inventing medicines and vaccines for many of the world’s most challenging diseases for a long time. It’s amazing to think the products we make can help people fight terrible diseases like cancer. Whatever little bit I can do to help advance that mission is very fulfilling and rewarding.

R&I: What do your friends and family think you do?
Ha! My kids think I make medicine. I guess they think that because I work for Merck. I suppose if even in a small way I can contribute to Merck’s mission of saving and improving lives, I am good with that. &




Katie Dwyer is an associate editor at Risk & Insurance®. She can be reached at [email protected]