Risk Insider: Martin Eveleigh

Captives and Risk Pooling: An Overview

By: | January 13, 2017 • 2 min read
Martin Eveleigh is Chairman of Atlas Insurance Management, which he formed in 2002. He specializes in designing alternative risk transfer programs – particularly risk pools – and captive structures. He can be reached at [email protected]

Increased interest in captive insurance across a spectrum of industries has led to recent growth in captive insurance company formation. Leading the surge are middle-market organizations who see captives as an attractive option that can complement their existing commercial insurance programs.

Sharing Third-Party Risk

Setting up a captive can be an option for managing risks, particularly those not addressed by commercial insurance, but organizations must understand the requirements necessary for a company to be recognized as a bona-fide insurance company.

One requirement is the need for risk distribution. Enough independent risks of unrelated parties must be pooled to invoke the actuarial law of large numbers. Distribution of disparate risks is one requirement by the IRS for the captive to be considered an insurance company for federal tax purposes.

For small to middle-market companies, it can be difficult to satisfy this requirement within their own insured programs. However, there are options available to the captive owner. One popular method is to participate in a risk pool which provides a reinsurance structure where risks of a number of captives are blended and shared.

Participants pay a portion of their direct written premium to the pool to buy reinsurance. They then assume an equivalent amount of risks from fellow participants. This concept has been underscored in IRS Revenue Ruling 2002-89, a safe harbor rule stating that captives with at least 50 percent of premiums from third parties satisfies the requirement for risk distribution.

Risk Pool Governance and Control

In addition to risk distribution at the individual level, best practices dictate that risk pools employ governance and control protocols to ensure structural stability and financial integrity. These include: providing timely and accurate reporting, demonstrating underwriting control with new and renewing participants, and maintaining the overall financial strength of the pool.

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The risk pool must be independent, or run separately from the members, including separate books and records. The focus of pool managers is to protect all participating members; no single member’s needs are to take precedence.

Risk pools also must demonstrate risk distribution. This requirement does not just fall on the individual member captive; the pool itself must meet the same distribution requirement by having a sufficient number of members and an even spread of risk among those members.

Guidance: The Key to Understanding

Risk diversification can mean that individual participants may assume risks they are not familiar with or do not fully understand. Furthermore, it is likely that participants may be unable to control assumed risks.

Strategies to mitigate this include creating a pool of low frequency risks where loss activity is low, or conversely, a pool of high frequency risks in which the exposure is more easily identified and less volatile. The potential for misunderstanding the downside of risk pooling underscores the need for an experienced adviser.

Members should understand benefits and obligations of participation, as well as how transactions within the pool are handled.

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Risk Management

The Profession

Maila Aganon is the personification of the American dream. The vice president of treasury and risk for Caesars Entertainment Corp. immigrated from the Philippines and worked her way to the top.
By: | October 12, 2017 • 4 min read


R&I: What was your first job?

I actually had three first jobs at the same time at the age of 16. I worked as a cashier in a fast-food restaurant, a bank teller and a debt collector for an immigration law firm.

R&I: Who is your mentor and why?

I have a few. The first one would be the first risk manager I reported to. He taught me the technical part of the job, risk financing, captives and insurance. I am also privileged to be mentored by Lori Goltermann (CEO of U.S. Retail for Aon Risk Solutions).  From her I learned to be resilient and optimize life/work balance. Then of course I also have a circle of ladies at work who I lean in to!

R&I: How did you come to work in this industry?

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I was once a bank teller and had a client who was an insurance agent. He would come in every day to make deposits. One day, he offered me a job. He said, “How would you like to have your own desk, your own phone and your own computer?” And I said, “When do I start?” I worked for this personal lines insurance company for six years.

R&I: Did you take to it immediately?

Yes, I did sales, claims and insurance accounting. I left for a couple years and that is when AAA came calling, which was my first introduction to risk management. I didn’t know there was such a thing as commercial insurance. They called me and the pitch was “how would you like to run a captive insurance company?”

R&I: What have you accomplished that you are proudest of?

It is not so much the job but I say that I am the true product of the American Dream. I came to the U.S. when I was 16. I worked three jobs because I didn’t want to go to high school (She’d already graduated high school in the Philippines.) I spoke very little English, and due to hard work, grit and a great smile I’m now here working with all of you!

R&I: What is your favorite book or movie?

In movies, it is a toss-up between Gone with the Wind and Big Daddy.

R&I: What is your favorite drink?

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I like anything sweet. If you liquify a dessert that’s my perfect drink.

R&I: What is the most unusual/interesting place you have ever visited?

This is easy because I just got back from Barcelona on a side trip. I visited the Montserrat Monastery, which is a thousand-year old monastery. It was raining and foggy. I hiked for three hours and I didn’t see a single soul. It was a very peaceful place.

R&I: What is the riskiest activity you ever engaged in?

This is going back to working at a fast food chain when I was young. I worked in a very undesirable location in San Francisco. At 16 I used to negotiate with gang members so they wouldn’t rob me during my shift. I had to give them chicken so they wouldn’t rob me.

Maila Aganon, VP, Treasury and Risk, Caesars Entertainment Corp.

R&I: If the world has a modern hero, who is it and why? 

I can’t say me. They have to be my kids Kyle and Hailey. They can make me laugh and cry within a half-minute of each other. Kyle is 10, a perfect Mama’s boy. Hailey is seven going on 18.

R&I: What about this work do you find the most fulfilling or rewarding?

I think the most fulfilling part is how you build relationships with people and then after a while they become your friends.

R&I: What is the risk management community doing right?

Risk managers do a great job of networking. They are number one. Which is not a surprise because the pillar of our work is building a relationship with underwriters, clients and brokers.

R&I: What could the risk management community be doing a better job of? 

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I am experiencing that right now; talent.  We need to a better job in attracting and retaining talent. Nobody knows about what we do. You tell someone ‘I’m as risk manager’ and they give you a blank look. What does that mean?

We’re great marketers and we should use this skill set in attracting talent. We should engage our universities, our communities, even our yoga groups and talk to them about the exciting world of risk. It is an exciting career because there is nothing like it.

R&I: What emerging commercial risk most concerns you? 

It would have to be the increasing cyber risk and the interdependency of systems.

R&I: What does your family think you do? 

I took my seven year old daughter once to an insurance event that had live music, dancing and drinks. She thinks that whenever I go to an insurance meeting, I’m heading to a party.




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