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Member, Beacon International Group, Ltd.
Middle-market companies are behind much of growth of cell captives, as those particular structures offer greater flexibility and lower operating costs, panelists said during a session at the 22nd annual World Captive Forum in Aventura, Fla., Jan. 28-30.
Protected cell captives provide for the assets and liabilities of one cell to be very separate and distinct from another, said Justin Mead, Chicago-based senior vice president of R&Q Quest Management Services USA L.L.C., during the session.
“Companies may set up their own cell captive and then put different types of business into different cells,” he said, such as separate subsidiaries, lines of business and risks by geographic region.
The middle market's use of cell captives is the major driver of their growth in the U.S., Mr. Mead said.
Lower operating costs coupled with an accepted view that cell captive structures are mainstream “makes it a little bit easier for middle-market companies to get into it,” he said.
John Hernick, Minneapolis-based insurance administrator for Xcel Energy Inc., said cell captives allow knowledge sharing among industry groups.
“Utilities don't necessarily compete with one another. So in an industry group captive, we have the advantage of being able to work together, share ideas and help each other out,” he said during the session. “We learn from one another.”
Xcel runs its primary casualty program through the cell captive, at $2 million per occurrence and property insurance at $5 million per occurrence, among other coverages.
The session was moderated by Business Insurance Senior Editor Rodd Zolkos.