Connecticut Aims to Lure Captives
Stamford hosts a major conference on Wednesday on what's known as the "captive" insurance industry, a business Connecticut wants a bigger piece of.
All businesses need insurance, and for most it's a major concern and a major expense. While traditionally businesses have hired in expertise from a commercial insurer, increasingly some are choosing to form their own, in-house insurance companies, to customize what they need. That's a captive insurance company.
John Thomson runs the captives unit of the state's insurance department. "The captive insurance company allows an insurance and risk program to be structured on the risks and exposures and claim history of that specific owner," he said, "rather than a pool of owners, that may have different experiences. And that allows a more efficient pricing mechanism."
That more efficient pricing, he said, allows companies to put more of their cash into growth and jobs. In the past, there's been concern about the potential difficulties of states overseeing and properly regulating captives, but in 2011, Connecticut enacted a law that allows captives to be registered in the state.
Thomas Hodson, President of the Connecticut Captive Insurance Association, said, "Connecticut historically has been known as the capital of insurance in the United States. It's had a very strong traditional insurance market. And captives was once thought of as the alternative market. Captives now represents somewhere between 30 and 40 percent of the commercial insurance market, so it really isn't the alternative any more."
So far, Connecticut has registered two captives: companies formed by Connecticut giants Stanley Black and Decker and Thomson Reuters, but previously based in other states. Today's Stamford symposium aims to bring together the major players in the captives industry, both to demonstrate the possibilities of the corporations based here, and also to showcase the state as a potential home for new captives.