In response to A Case for Captive Insurance, by John Foehl, Captive.com (Nov. 30, 2020).
I founded the Centers for Better Insurance (CBI) to guide, push, or drag the insurance industry to do better. After more than two decades of compensated service including four as the Group Compliance Officer for one of the world’s largest property and casualty insurers, it has become my turn to give back. I do so by devoting the bulk of my time to providing policymakers, regulators, insurers, and consumers unbiased analysis and insights about the industry to which I have devoted my professional career.
Mr. Foel has bristled at the concerns I have raised that single parent captives have devoured the capacity of the Terrorism Risk Insurance Act (TRIA) like a swarm of locusts over a ripened field. According to U.S. Treasury, the program’s administrator, captives stand to reap up to 95 cents out of every dollar paid out under the program. Under TRIA’s byzantine recoupment rules, each of these dollars produces a $1.40 of policyholder surcharge to be levied on small businesses, churches, school districts and other commercial policyholders. TRIA is little more than a conveyor belt removing risk from the balance sheets of the Fortune 500 and depositing it onto the backs of entrepreneurs, nonprofits, and local governments.
The Terrorism Risk Insurance Act can shift “only” 80% of losses up to a $100 billion industry cap. The Pandemic Risk Insurance Act (PRIA) invites these same corporate shenanigans but would allow the shifting of 95% of losses up to a $750 billion industry cap! Have we learned nothing from the corporate overreach into the Paycheck Protection Program intended for small businesses?
Perhaps we have. While U.S. Treasury agreed to finally identify recipients of Paycheck Protection Program loans of $150,000 or more, TRIA and PRIA prohibit Treasury from even asking for the name of a participating captive or its corporate parent. That’s right. If you borrow $150,000 under a federal disaster program your name gets posted to the world. If you structure a personalized $4 billion terrorism or pandemic bailout program, that stays between you and your board of directors.
If Mr. Foehl is right that large corporations use captives to tap into these programs for the good of America, you would think they would be tripping over each other to tell us all about it. Instead, I have found only one of the more than 500 participating captives (Treasury does not know how many captives participate in TRIA — because that is supposed to be secret) proudly claimed by its parent in SEC filings.
I am ready to learn all about the good deeds these captives have done under TRIA and seem so eager to do 7.5 times larger under PRIA. Let’s agree to a public registry of captives participating in TRIA and PRIA (along with the names of their beneficial owners and how much risk they each transfer into the program) so those who will foot the bill can appropriately thank them.
Jason Schupp can be reached at email@example.com.