A HISTORY OF CICA
“The direct intervention of CICA and its captive allies helped to stave off potentially catastrophic new legislation from tax authorities eyeing captives’ revenues.”
that during the 1970s and 1980s “smoke-filled rooms and plots and plans were very much an attraction of CICA events” as coordinated efforts hatched at such meetings were central to efforts to fend off IRS attacks on the captive industry.
More recently the IRS sought again to attack captives, “by promulgating a proposed treasury regulation that would have wiped out all tax benefits for any domestic captive or any offshore captive that elected to be treated as a domestic captive”, said Tom Jones, a leading captive industry tax lawyer. The proposed regulation was a significant threat to what had by 2007 become a sizable industry, emerging as the “the biggest threat to the captive world that I have seen in the 25 years”, Jones said. In response, the “associations rose to the occasion under the flag of CICA and the Vermont Captive Insurance Association (VCIA). The two trade associations created a war chest and hired a couple of lawyers who ended up doing a good job and got the proposed regulation withdrawn”. Again, the direct intervention of CICA and its captive allies helped to stave off potentially catastrophic new regulation from tax authorities eyeing captives’ revenues with green-eyed interest.
Another significant milestone highlighted by Rosenbaum was the evolution of the CICA fronting survey, which examines key industry trends. Starting out as a simple fronting survey, it has in time evolved into a more detailed survey that encapsulates a range of questions affecting the industry. The survey helps to measure the pulse of CICA members and the industry and provides invaluable indications regarding likely future heading, challenges and opportunities.
Lusk said that CICA’s decision to open up its membership proved to be another significant development, taking the association from its beginnings as a closed members club, to its current position as an international voice for the industry. He said that alongside the expanding membership, CICA has also sought to strengthen captive education and training, “which has evolved and improved dramatically over the last 20 years”. Education has gone from the “possibilities of fronting and how to post collateral, to how to deploy and use your captive effectively and exploring the alternatives”. As Lusk indicated, “the industry is far more
14 CICA | Forty years of captive leadership
sophisticated in its use of captives and education reflects this change”, with CICA continuing to play an important role in strengthening best practice within the industry.
CICA has also played an invaluable role in promoting the credibility of captive insurance, particularly in the early years. As Rosenbaum detailed, “in the early years the credibility of captive insurance was a major challenge. Captives had been given a bad name by the brokers and by Lloyd’s, who were both talking them down. CICA helped to give the industry credibility, although preconceptions weren’t overcome with a big bang, but slowly”.
In more recent years, CICA’s efforts at promoting captive insurance have grown ever more global, with its focus shifting from its US roots to more of an international focus. This has led to strengthened relations with organisations such as the European Captive Insurance and Reinsurance Owners’ Association (ECIROA), as well as with individual domiciles such as Bermuda, Cayman and Vermont. Together with these partners, CICA has taken an increasingly active role in promoting the position of captive insurers. And as the only domicile-neutral captive association, CICA is uniquely positioned to present an international view “that does not espouse any particular geographic viewpoint”, said Jones.
CICA’s efforts have undoubtedly been spurred on by the appointment of a full-time president, in the person of its latest leader, Dennis Harwick. Boughner said that Harwick’s appointment in January of 2005 was a major milestone for the association. Since then Harwick has played a leading role in opening up the association to service providers as members, which has helped to double its membership, as well as taking an increasingly cooperative approach in its dealings with international associations such as ECIROA and domicile associations such as Vermont, South Carolina, Bermuda, Cayman, Hawaii and DC. Boughner said that Harwick’s cooperative approach had been key in recent efforts to head off the IRS’s attack on captive tax benefits, adding that had the initiative occurred before Harwick’s appointment, a united front against such attacks would have been less likely.
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