DENVER—Only 37% of the 664 captive insurers formed in the U.

S. are done so for federal income tax advantages, according to a survey by Marsh. The findings suggest that captives are predominately formed for their operational and risk management value to organizations.

The report, “The Evolution of Captives: 50 Years Later” also found that onshore versus offshore single parent captives remained flat in 2013 with 56% of captives onshore and 44% located in offshore domiciles.

While it was believed that the Dodd-Frank Act would drive captives to redomicile to their home state, that has not been the case, Arthur G. Koritzinsky, managing director, captive solutions for Marsh explained during a press conference here. Only 11 out of 1,200 captives were redomiciled  in 2013, down from 16 in 2012. The only state that has responded with enforcement measures is Texas.

General liability tops the list of most popular risks in captives, with 30.8% of captives writing this line of coverage. Second is property risk—included in 29.4% of captives. The study found that more captive insurers are being used for non-traditional coverage, such as crime insurance/crime deductibles and cyber liability and 40 captives are being used for crime coverage. While captive use for this risk is growing, so far only 3.5% underwrite crime. Thirty-four captives are used for medical stop loss, 32 for trade credit and 17 for cyber liability. Third party risks, including employee benefits, customer risks and pooling arrangements, account for 18% of captives and voluntary employee benefits such as ID theft, critical illness, pet insurance, group home, group auto and group umbrella are becoming more common.

The favored structure is still single parent captives—66% of those were formed—which give companies more autonomy over claims processes and service providers. Use of special purpose vehicles increased to 9% of captives in 2013.

The largest three domiciles — Bermuda, the Cayman Islands, and Vermont — represent 36% of all captives. There is also a trend toward emerging domiciles, as more global and U.S. domiciles are created. Of parent companies that own captives, 58% are based in the United States, 28% in Europe and 14% in Latin America, Asia and Africa, the study found.

DENVER—Interest in risk management is now firmly established within organizations, with strategic risk is becoming more central to senior leaders and boards, but there is still uncertainty about where primary responsibilities for executing risk management reside, according to a study released here by Marsh and the Risk and Insurance Management Society.

The Excellence in Risk Management XI study, “Risk Management and Organizational Alignment: A Strategic Focus,” found that regarding risk management’s influence on setting an organization’s business strategy, 93% of executives agreed it carries some or significant influence.

Discussing the standouts of the study, Brian Elowe, a managing director at Marsh said, “In the past I had seen incremental improvements in risk management to meet the demands of the C-suite and the boards. This year we’re seeing a much greater alignment around strategic planning.

Strategic is very strong and the alignment between risk professionals and the C-suite is very strong. We saw that this is the higher need and the need to take risk management to the next level as well.”

Elowe added that risk professionals are finding they need to become versed in finance, as finance officers learn more about risk. Financial or business institutions generally require more financial knowledge, whereas technical or legal businesses look for expertise in their specific areas. But overall, he said, organizations are expecting risk managers to have a basic business background.

According to the survey, senior leadership has a heightened interest in emerging risks—”black swans” and the uncertainties that come with them. With this interest comes the expectation that risk professionals should provide higher levels of insight and education on these issues—in addition to their current responsibilities managing traditional insurance, claims, and mitigation functions.

“The conversation has moved from a focus on the insurance program itself, to taking those insurance buying decisions to part of the overall risk capacity of the organization,” said Carol Fox, director of the strategic and enterprise risk practice at RIMS.

“It’s not just about deductibles anymore, it’s not just about premiums or conditions, it’s looking at it from a broader risk perspective.”

Asked whether organizations treat risk management as a key strategic function, more than half of both the C-suite and risk professionals said their companies view it as such. They were close in agreement (69% of C-suite and 75% of risk professionals) that their organizations are managing risk effectively. They also agreed that their risk functions were not being used to their greatest ability—20% of executives and 25% of risk professionals.

When asked what types of knowledge, abilities and skills will be most important to meeting the organizations’ risk management needs over the next three to five years, more than half the respondents chose an aptitude for strategy and business acumen. Both are areas closely connected to an organization’s finances and operations.

Looking at risk management needs over the next five years, risk professionals and executives closely agreed—63% for C-suite and 65% for risk managers—that a strategic view of risks is most important to the role of risk management.

Graph: What impact does risk management have on setting the business strategy of your organization?

Source: 2014 Excellence in Risk Management Survey

 Captive legislation signed into law late last week, among other provisions, creates a “dormant” status for captives, allowing a captive that has ceased insurance operations to cost-effectively retain its license so that it can eventually resume operations.

The new legislation, which takes effect immediately, offers a feasible option to closing a captive, said David Provost, deputy commissioner of Vermont’s captive division, who worked with the Legislature on the new changes.

He told Risk Management that the state currently has about 10 captives that fall into this category. “There are a number of situations that could prompt a company to close its captive,” he said. For example, the captive’s parent company could be in a net-loss situation for an extended period of time and “any tax benefit they had with the captive disappears and so they close the captive.”

Another example is a merger, “where the acquiring company says, ‘We’re not in the insurance business.'” The new law allows management to keep the captive “until it realizes the benefits it provides,” he said. “This is an option to very inexpensively keep their license active. They can pay the license fee, skip the taxes, and then if they are ready to resume the captive, it’s already here.”

Holding onto the captive’s license means the parent company can avoid reincorporating or going through the application process again. What’s more, the captive managers and other business relationships are already in place. Controls are also built into the legislation, so that even though the captive is an “empty shell,” the company still provides regular reports to the domicile, Provost said.

The legislation was crafted with input from the Vermont Captive Insurance Association. A complete copy of the bill will be posted on the Vermont Legislature’s website, a copy of the bill as passed with amendments is available at: http://www.leg.state.vt.us/docs/2014/bills/Passed/H-563C.pdf.