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U.S. university students launch Bermuda captive insurer

2nd May 2017 - Author: Luke Gallin

In what’s believed to be a world first, a U.S. university has launched a Bermuda domiciled student-run captive insurer that will self-insure a number of risks for the university, underlining just how cost-effective the establishment of a captive in Bermuda is and supporting the drive for re/insurance industry talent.

The captive insurer, MJ Student-Run Insurance Company Ltd., was launched by students enrolled in the Davey Risk Management & Insurance Program at Butler University’s Lacy School of Business in Indianapolis, U.S. and, the Bermuda Monetary Authority (BMA) granted licensing approval for the launch of the captive in April, 2017.

“We’re the first university I know of to have a student-run captive. Other universities have told us we’ve now disrupted the market—that we are basically akin to the first finance programme to have students manage an endowment. Many believe that in the next 20 years, this will be the standard for insurance and risk education,” said Zach Finn, Clinical Professor and Director of the programme that he helped launch in 2012.

The captive will self-insure a range of the university’s risks, including the school’s mascot (Butler Blue III), the mascot’s “bomb-sniffing” dog, it’s fine art collection, and also all student-run start-ups at the university.

Previously a risk manager and risk analyst, Professor Finn assigned students the task of comparing insurance domiciles in the U.S. and abroad. Then, students were asked to contact the regulators of the domiciles to assess responsiveness. Only Bermuda and Vermont replied, and owing to its “regulatory environment…and the access to professional infrastructure,” students selected Bermuda as the domicile of choice.

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“The opportunity to have our students come down here and interface with a large swath of the global reinsurance market is unbelievably powerful. We identified risks we might want to write and underwrote those. We identified loss-control recommendations and specimen policies and talked about rating and audit, and just everything.

“I’m a big believer that all business education should be a mix of academic and experiential,” said Finn.

The establishment of the captive by a university is thought to be a world first, and shows how cost-effective and efficient it is to launch a captive in Bermuda, as even a university can do this now. Furthermore, the educational element of the captive launch could go some to supporting the need for talent in the global insurance and reinsurance industry, which some have described as a crisis in more recent times.

Brad Weber, a student at Butler that worked on the project, commented; “This was the coolest project I have been a part of in my four years at Butler. This captive was formed to change the way insurance is taught in schools and help alleviate the current talent crisis in the insurance industry. It’s already serving that purpose.”

Students met with the BMA, the Bermuda Business Development Agency (BDA) and a number of service providers, including Aon, KPMG, and law firm Conyers, which they had chosen to assist with the creation, launch and management of the captive insurer.

“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.

Managing Director, KPMG Bermuda, Eric Heinrichs, said; “Butler’s student-run captive concept is an extremely innovative idea. 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.”

Conyers Associate, Jacqueline King, said; “Conyers is very excited to work alongside the students and staff of Butler University. The Butler team is both knowledgeable and energetic, which has made it a pleasure to work with them on this very hands-on initiative. We look forward to continuing to work with them.”

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