First Student-Run Captive Insurance Company Launched in Bermuda

An American university has chosen Bermuda as its domicile for the first known student-run captive insurance company.

Students enrolled in the Davey Risk Management and Insurance Program at Butler University's Lacy School of Business in Indianapolis, Indiana, were granted licensing approval from the Bermuda Monetary Authority (BMA) this month to launch the captive, which will self-insure a variety of risks for the university, including its celebrity mascot, a bulldog, and its fine art collection. MJ Student-Run Insurance Company Ltd, to formally open for business this August, is believed to be the first of its kind in the world.

"We're the first university I know of to have a student-run captive," said Zach Finn, clinical professor and director of the 4-year program he helped launch in 2012. "Other universities have told us we've now disrupted the market—that we are basically akin to the first finance program to have students manage an endowment. Many believe that in the next 20 years, this will be the standard for insurance and risk education."

Butler students and faculty received the news from the BMA this month during a 5-day visit to the island, where they also met with members of industry and the Bermuda Business Development Agency (BDA).

Students also met with service providers Aon, KPMG, and Conyers law firm—companies they had selected to work with to create, launch, and manage the captive.

"It has been a privilege to partner with Butler University and assist with the formation and management of what is believed to be the first US student-led insurance company," said Anup Seth, managing director of Aon Insurance Managers Bermuda.

The project took shape at Butler last year when Professor Finn, who previously worked as a risk manager and risk analyst, assigned students an objective comparison of insurance domiciles both in the United States and overseas. Two groups of students each were assigned five competing markets for which they conducted analyses on capitalization, premium and excise taxes, and other standard comparisons. Professor Finn then asked them to contact the regulators of each domicile to check responsiveness. "Bermuda and Vermont were the only two domiciles that got back to us—within 4 hours," he said.

Students ultimately made Bermuda their top choice because of its mature market and sophisticated infrastructure. In a captive feasibility study, they noted, "Bermuda is the oldest and most established captive domicile in the world" and "one of the largest international markets for insurance."

Bermuda is the top global captive jurisdiction, home to close to 800 captive insurance companies, supporting primarily Fortune 500 corporations in the United States and generating over $55 billion in annual gross written premiums.

"Butler's student-run captive concept is an extremely innovative idea," noted Eric Heinrichs, managing director, KPMG Bermuda. "It's no surprise they've identified Bermuda as the best domicile for their captive, and I'm very excited to be working with this great group of students."

The Bermuda captive will insure the school's mascot, celebrity English bulldog Butler Blue III, nicknamed Trip, which has 20,000 Twitter followers, as well as Butler's bomb-sniffing dog, Marcus. It will also cover all other student-run start-ups at the university and Butler's fine art collection.

Pictured above are Butler University students at the Bermuda Business Development Agency (BDA) offices, with BDA Business Development Coordinator Mark Darko and Professor Zach Finn (fifth and sixth from left, front row). (Photo courtesy of Bermuda Business Development Agency.)