Improving Risk Across the Enterprise

By Tom Wiseman, CEO, Ohio Valley Bank, Gallipolis, Ohio

In the world of commercial insurance, forming a captive insurance company is the ultimate risk management tool typically reserved for the only the largest and most sophisticated companies. By taking advantage of long standing legislation, and our bank forming a 100% holding company owned captive insurance company, this has become an integral part of our overall enterprise risk management efforts. It has also provided Ohio Valley Banc Corp with a number of options that previously weren’t available to community banks. This specific type of captive is a “wrap-a-round”, affording our holding company and its subsidiaries with a number of advantages which complement our corporate insurance program.

When designed properly a captive insurance company is nothing more than a limited purpose property and casualty insurance company operating for the sole benefit of the parent company and its subsidiaries. The captive’s policies are 1 year, with no-tail coverage’s, and wrap around or enhance existing commercial coverage’s to provide a source of reimbursement for deductibles/retentions, filling gaps in coverage, and providing additional limits of liability. Our captive has also improved our overall organizational view of risk management.

Typically a captive is designed to initially overlay the current commercial insurance program, without changing or disrupting the current commercial coverage’s and improving the enterprise risk management plan. This particular type of captive (Section 831 (b) small captive) affords our holding company and its subsidiaries a number of advantages which complement our corporate insurance program. This has enhanced our ability to pre-fund for catastrophic events, focused our risk management approach, along with improvement of our financial position.

My background prior to becoming CEO at Ohio Valley Bank in 2010, includes serving as President of The Wiseman Agency, Inc., a multi-line, independent insurance agency. During my thirty years in the insurance industry my efforts were focused primarily on commercial insurance working with commercial customers like Ohio Valley Bank. The opportunity to improve our overall risk management position was clear very early in discussion and consideration of forming a captive insurance company.

As a part of this process, an outside risk management firm conducted a thorough review of our existing commercial coverage’s and provided detailed analysis and benchmarked our insurance coverage’s with peers. In addition to helping us decide whether a captive was feasible for our company, the analysis and benchmarking helped us identify the initial risks for our captive to insure. Our board found this benchmark study to be extremely valuable and this has now become a yearly event and process. An outside actuary specializing in bank insurance risk, determined captive insurance premiums, and KeyState serves as our captive manager providing captive management services. We are continually focused on improving risk management across our enterprise and this has been a significant step forward for Ohio Valley Banc Corp.

For more information on captive insurance, you can reach Josh Miller at [email protected] or 702.598.3738.