9 Questions for Jeff Kenneson of Davies Captive Management

At the Vermont Captive Insurance Association meeting in Burlington, Vermont, last August, Dan Reynolds, the editor-in-chief of Risk & Insurance, got the chance to sit down with Jeff Kenneson, the Vermont-based president of Davies Captive Management. What follows is a transcript of that interview, edited for length and clarity.

Risk & Insurance: Thanks for meeting with us, Jeff. One of the first questions we like to ask executives is what business opportunities they are excited about in the coming months.

Jeff Kenneson: We always have a lot of physicians’ groups and hospital groups looking for risk management solutions. But the big thing now — we’ve done a bunch of these recently, and we’ll continue to — is the property management area. Real estate holdings, tenants’ exposures etc.

Just before COVID hit, the market was hardening on the property side, and property traditionally hasn’t been a big coverage for captives; all of a sudden, it is. So, we’re doing a lot of property management business.

And another thing on the prospective business front, just specifically to captives for Davies, is that we’re always out looking for other independents to buy.

R&I: In terms of exposures and struggling to get coverage, it seems like rental property owners have had a tough time, haven’t they?

JK: Yes, they have. And the property managers with just their property coverages, the rates have gone through the roof. So they’re taking that risk on and paying a captive for those coverages.

R&I: Back to your comment about acquisitions: Do you want to say how active you are there?

JK: We are very active in the Davies’ group on the TPA side. On the captive management side, we try to be active, but we’re finding it hard to find independents that fit into our mold to purchase. Some of the independents may not be big enough for us to acquire. Even given that, we’re always looking. But there’s a lot of TPAs available to buy, and that’s what our TPA side has been doing.

R&I: Would you care to disclose the minimum size of a captive management entity that you would want to buy?

JK: We would want to have several million of revenue coming in. There’s several out there that are $1 million, $2 million. Those are a little bit small, but there may be an opportunity where we would buy them.

R&I: We talked a little bit about property markets hardening. What other market conditions, from what you’re seeing, are affecting captive formation or pushing an interest in captives?

JK: Excess coverage is hard to come by, and that comes in any form. That could be property, that could be a general liability, that could be a workers’ comp, but I think it’s all part of this hardening of the market. Property started it, but then it went into other things on the excess layers. So we are seeing more captives looking to take on that excess layer. Because the rates, again, are just going through the roof on the traditional side.

R&I: We talked about some opportunities you’re looking at. What are the biggest challenges you face in trying to run a business, doing what you do?

JK: Staffing. Dot, dot, dot. It’s very difficult trying to find the people that can do the work, qualified people. We found it very difficult to find people in Vermont, particularly. So the last 15 people we’ve hired have been in Nashville, Tennessee, and Cleveland, Ohio, and we haven’t found anybody in the Vermont area that is interested in doing this work.

R&I: If a young person was graduating with a finance degree, would it be smart for them to look for opportunities in Vermont?

JK: Very much so.

R&I: When you think about how you go about your business, Jeff, if I was an insured and you were pitching yourself to me, how would you differentiate yourself in describing what Davies Captive Management brings to the table?

JK: I think our corporate structure is quite a bit different than anybody else. We are a relatively small captive unit. We might have 50 people in the captive space in Bermuda, the UK and in the U.S. So we’re relatively small there, and nimble.

We’re also a flat organization. Somebody can call me as president of the U.S. captive operations and talk to a decision-maker without going through a bunch of layers. We’re owned by an insurance services company out of the UK, and we have 6,000 employees. So we’re a big company and can offer a wide range of services.

We can offer legal services, TPA services, claims services, underwriting, reinsurance intermediary. We can offer all of those services if you want it. One of the draws for us is the second tier of the brokerage houses.

The big guys at the top, they may have their own captive management. Well, the next guys down don’t have that, and they want somebody that’s not going to deal with their brokerage side, so we’re an independent to be able to help them with that side.

R&I: Is it your view that risk managers and insureds are getting much better educated over time about the capabilities of captives?

JK: Absolutely. Because people know that it’s out there. It’s been around for a long time. Here in Vermont, it’s been around for almost 45 years. People know what it is, versus when it was around for 25 years and people still didn’t know what it was.

R&I: Thanks for your time, Jeff.

JK: Thank you. &