Alabama Captive Association Presentation by Captive Insurance Companies

Alabama Captive Association – Presentation by Captive Insurance Companies Association (CICA) Steve Mc. Elhiney – CICA Board Chair

Captives and CICA – Moving Forward Adopt a watching strategy on Regulatory risks Broad based networking & Student Initiatives Captive Innovation

CICA Today: Building on partnerships Going more global - ECIROA Offering more education Networking Focusing on next generation Advocating on many fronts

Captive Insurance Companies Association · Domicile-neutral trade association for captive industry · 400 members, representing 27 countries · Early objectives still drive CICA today Networking Advocacy Best Practices Education Professional Development

CICA – Amplify Women · Foster education, influence and networking among women in the captive industry · Focus on more speaking and publishing opportunities for women · Focus on opportunities to serve on Boards · Focused networking opportunities

CICA – Student and Industry Initiatives · CICA Meeting – Student Essay Contest · 2019 was first year – excellent feedback · 2020 – increase RMI programs · Mentorship Program – foster leadership and development of young Captive professionals

CICA – CALC · CICA has formed the Captive Association Leadership Council (“CALC”) with various State and international captive association leaders · Meetings 2 to 3 times per year to discuss emerging and advocacy issues that affect all domiciles · States are looking into economic impact studies of captive industry’s impact · Discussions of a Washington DC trip to meet with state delegations

CICA – Regulatory Challenges · Regulatory overreach · National Association of Insurance Commissioners (NAIC) · Organization for Economic Cooperation and Development (OECD) · Base Erosion and Profit Shifting (BEPS) · State overreach · States seeking tax revenue – Washington State · Home state

Tall Pines Insurance Company (Vermont Single Parent Captive) AM Best: “B++”, Stable, IV 9

Contran Controlled Units § § § 10 Contran Corp (Private Corporation) NL Industries (NYSE & NL) Valhi, Inc. (NYSE: VHI) Holding Co Kronos (NYSE: KRO) Chemicals Comp. X (NASDAQ: CIX) Security Products, Marine Basic Management, Inc. Utilities and Land Development

Why Form the Captive, Tall Pines Insurance Company? • Risk management evolution • Insures only the risks of affiliated companies • Premiums are based on the loss experience, not overall industry rates • Eliminates insurance company overhead • Offers potential for lower, more stable premiums • Captures investment income on premium and capital contributions • Manuscripted policies—useful in energy niche • Economic value accretion—tax neutral sinception • Set deductibles—drives risk management culture at business units • Some insurance outside of captive • Allows direct access to international reinsurance markets, which normally have lower costs and a greater willingness to underwrite risk

TPIC—Business Strategy • • Independent profit center Fundamental premise—managed in manner consistent with external P&C companies Managed on an ROE basis—capital management Preservation of Capital Business model is exclusively focused on internal risks at this point Experience with third party assumed business was poor (early 80’s) Placement strategy (reinsurance or primary insurance) is based on market conditions Periodically examine potential to retain more risk within the captive Embedded loss control, claims, legal and insurance Differentiators All risk management activities for disparate business units are centralized into one cost center Cost of Risk metric

TPIC—Captive Business Model Risk into Captive Reinsurance Overview � Global Property � CAT Modeling/DFA � Global Casualty � Balanced Program (US/UK/Bermuda) � VT approved RI � Risk Transfer Analysis � Strategic Partners EWI Re (UK) � Avoid WC � No third-party business (legacy) � Property/Casualty Opportunistic (Bond Story) Reinsurance Process � Foreign Risks—locally admitted � Reinsurance Placement � Claim recoveries— cash call process � TPA’s � Claims intake � RSG Claim database � Forensic accountants (BI–Rita)

TPIC—Our Success Factors • A long-term focus • Insurance Operators involved with captive Run like an insurance company. Tax neutral—not a consideration—Risk Management tool/platform. Active involvement in our state of domicile. Cultivate long-term partnerships with our carrier supporters. Alignment of interests. Risk Management & Safety are in our DNA.

• WHAT CAN CAPTIVE PROFESSIONALS DO? · Tell a better story about captives · Get involved with your local association and CICA · Increased scrutiny is not going away · Need to be part of a discussion · Together we have a stronger voice