Comerica Bank: Captives and Collateral Grew in 2018

Editor's Note: Martin Ellis, senior vice president, Global and Captive Insurance Group at Comerica Bank , talks about captive growth and related collateral activity in 2018.

In 2018, many of our captive clients experienced growth in their captives from a combination of higher premiums being charged, the addition of new members in group captives, and additional third-party business. Also, a few captives expanded their offerings to include other lines of coverage such as cyber risk and employee benefits. 

To support this growth, approximately 20 percent of our clients who use letters of credit to secure their obligations with their fronting insurance companies requested increases to their letter of credit facilities. Similarly, most of our clients using reinsurance trusts increased their trust balances as well. 

The newer captive clients we added were from both onshore and offshore domiciles with a good mix of group captives, segregated account captives, and single parent captives. We opened fewer accounts for 831(b) captives compared to prior years. This is probably due to the extra scrutiny micro-captives are getting from the Internal Revenue Service. 

Fortunately, those captives with equities in their investment portfolio had relatively small exposures, so the downturn in the equity markets did not have a material impact on their portfolios. 

We have seen a few more captives go into runoff due to mergers or tax law changes, and we are seeing more specialty companies out there looking to buy runoff portfolios.