Greg Cobb: Hello, everyone, and welcome to the second episode of “Insuring Tomorrow,” a series of podcasts where we focus on evolving trends in the world of insurance. I'm Greg Cobb, Director of Insurance Solutions here at Sage Advisory Services. Sage is an investment management organization based in Austin, Texas, with over $24 billion in assets under management. Today's episode leads us to the world of alterNative risk transfer, more commonly known as the Captive Insurance space, and its unique intersection with the Native American community in the form of tribal or sovereign nations. Our guest today is Mr. JD Colbert, Director of the Sovereign Insurance Association of Native Nations, an organization dedicated to the education and management of captive insurance companies across the wide community of Native Nations. Alright, JD Colbert, how are you, man? More importantly, where are you? Because you never know with you.
JD Colbert: I'm doing well, my friend. Appreciate you asking. And yes, I am quite the peripatetic professional. But today finds me relaxed at home in Tulsa, Oklahoma.
Greg Cobb: We never know where the wind is blowing you, but it's blowing you home today. And we're glad you're here. And we're looking very forward to our conversation today on all things sovereign nations and captive insurance. But we need to step back a moment for our listeners. I'm Greg Cobb, Director of Insurance Solutions here at Sage. And my role is to coordinate all the activities and services related to our insurance clients, from portfolio management to accounting, regulatory reporting. Essentially the overall relationship management. And at Sage, our insurance line of business incorporates 57 relationships across 22 domiciles. Thirty of those relationships are actually in the captive space. So, a lot of moving parts and never a dull moment in the insurance space. And speaking of never a dull moment, let's talk a moment about the life and times of one JD Colbert. Honestly, everybody, I've known JD for a while, and this could be a podcast in and of itself. But JD, let's talk about you.
02:13
JD Colbert: I appreciate it, Greg. So, I start as usual by relaying my heritage. I am Muscogee Creek and Chickasaw, also part Cherokee and Citizen Potawatomi. Born and raised in Okie, I was very fortunate and blessed to have grown up in a traditional Native environment. Grew up around a lot of full bloods, particularly Muscogee Creek, who spoke the language. I grew up in what's called the Indian Methodist Church here in Oklahoma. And when I was a young buck, the entire service was in the Muskogee Creek language.
03:01
My mom was a nurse's aide at the Claremore Indian Hospital, which for us when that time I grew up coming of age and the say the early the mid-60s, certainly was more than a place of employment for the Native tribal members. It really was kind of the core of the Native community in Claremore, Oklahoma, which is roughly 20 miles north and east of Tulsa.
03:33
And so, I mentioned that just to convey to the listeners that I was very blessed to have grown up in a very rich, Native community environment, learning the language, the culture, the history, and just feel very blessed looking back now, after all these years, on that experience. I will say the course, like anything in life, not all was roses and wine. In particular, as I got a little bit older, but still say by junior high, definitely by high school, for some reason, or maybe some compelling reasons, I noticed the very large disparity in the economic circumstances of my Native community, vis-à-vis that of the dominant society. And that gave me pause to wander and to question. And one of the things I discerned was the disparity was largely due to high obstacles to credit and access to financial services within the Native community.
04:53
And so, in many, many ways I've rather made that my mission if not my ministry in life was to be able to learn the ways of banking and finance. And to bring that knowledge to bear on Indian country in a way that would facilitate access to capital and financial services, with the end goal, of course, being to improve the quality of life, not just for my tribe, but nationally. And I've been very fortunate that to at least
05:29
cause a, I think, at least a ripple effect across Indian country as a result of my work to improve the quality of life for people on reservations, and other Native communities around the country. A couple of quick examples of that is, I have started banks for tribes. I've started non-bank financial institutions, generally these days known as CDFIs, community development financial institutions. I've had opportunity to be bank president three times and in my career as a board member of five. And I also did a stent, a very significant part of my career as a Deputy Assistant Secretary for Economic Development at the Bureau of Indian Affairs, in roughly the mid-80s.
06:21
All of which those experiences combined, has taken me – we've talked about my traveling ways earlier, Greg – that, while I lost count, many years ago, I would conservatively estimate that I've been on some 200 reservations in America – everywhere from far north Alaska, Maine, Florida, California, and many points in between. And so, I certainly would like to believe as I am now entering what many and typically might consider the twilight of their career, that as a result of my own personal experiences growing up and manifesting a vision for my life professionally, that my efforts have yielded some degree of improvement of economic conditions in Indian country as a result of my work.
07:25
Greg Cobb: Well, my friend, I know there's a lot more behind that. But that just gives us the opportunity down the road to spend some more time together, share a few good whiskies and tell a few more stories.
JD Colbert: Yes, indeed.
Greg Cobb: Because we're probably going to have a broad range of listeners here, we really need to take a step back right now and ask ourselves, what exactly is a captive insurance company? Now, I've been involved in the captive space for over 32 years now, but I'm always a little wary of winging it. So, I'm going to take the moment now to go Mr. Rogers on you, and read a passage from my favorite little storybook about captive insurance. What is a captive?
08:10
A captive insurer or captive is a special purpose insurance company formed primarily to underwrite the risk of its parent or affiliated groups. It is quite similar to a traditional commercial insurance company in that it is licensed as an insurance company. And it sets premium rates for the risks it chooses to underwrite. It writes policies for the risk, it ensures it collects premiums and pays out claims made against those policies. The biggest difference between a captive insurer and a traditional commercial insurance company, such as Chubb, Pru, or Liberty Mutual, is that a captive cannot sell insurance to the general public. It can only underwrite the risks of its parent organization or related entities. Another key difference is that the regulations governing captive insurance companies are typically less onerous than those regulations governing traditional commercial carriers. And as an investment manager, that makes it a lot of fun.
09:16
So, in the end, the captive is essentially a closely held insurance company. The captive is an alternative means for transferring risk and financing risk away from the traditional commercial insurance market. So welcome to the world of alternative risk transfer, A-R-T. ART. This is the other world of art. Now, wasn't that interesting boys and girls? I think so. So, it begs the question, if you will, why would a sovereign nation want to set up a captive? What are the advantages of a sovereign nation setting up a captive?
9:56
JD Colbert: Yeah, and many of those advantages are mirrored in the Indian country, which are enjoyed by corporations, companies and organizations that have today formed a captive insurance company. One notable difference with the tribes has to do with the domicile and the notion of self-regulation. And hence, now we talk about expanding tribal sovereignty. So, the tribes are able to essentially one might say, regulate themselves, and/or regulate entities that do business in Indian country.
10:49
There is a well-defined and long practice sense of self-regulation in the gaming arena across Indian country, where every tribe has an independent gaming commission that regulates, enforces and audits the gaming operation. And that model is proven to be quite successful. And so, what we're talking about with regard to a captive is essentially replicating that notion of self-regulation, where the tribe would establish, for lack of a better term, an Office of the Tribal Insurance Commissioner, which would then license the captive or captives as the case may be, and then on an ongoing basis to examine and audit the operations of the licensed captive. And that captive may actually, and typically would, be owned by the tribe itself. So, a very pronounced form of self-regulation. And for that reason, this notion of self-regulation, we tend to refer to captives in Indian country as sovereign insurance companies. Because of this notion of self-regulation, the notion of tribe now is extending and enlarging that sovereignty, by way of establishing its own domicile.
12:25
So that that's a very big one, I would say. Most of the other benefits are very similar to that which is enjoyed by captives around the globe. But again, this notion of self-regulation is, and it's one that's very important to the tribes. The tribes for many, many good reasons are hesitant to put themselves under the authority of a state government. The relationships between state governments and tribes, historically, has been very bad, and acrimonious. And the tribes then would much prefer this idea of creating their own domicile and engaging in self-regulation.
13:20
Greg Cobb: So essentially, all the advantages of a captive, as well as strengthening tribal sovereignty and self-regulation. So, it's pretty much all that in a bag of chips, right?
JD Colbert: Absolutely. Well said.
Greg Cobb: All right. So now we've talked about captives, sovereign nations, and the real importance of domicile. If we put all that together: captive, sovereign, nation domicile, we end up at the intersection of you JD, and the Sovereign Insurance Association of Native Nations, S-I-A-N-N, or SIANN. And for those of you keeping score at home, that's www.siann.org. If you want some more information beyond this particular podcast. So JD, let's talk about that association, your motivation, which you've already touched on to a degree, and also the historical timeline behind this association.
14:14
JD Colbert: Absolutely, try to address that, Greg. So, SIANN was formed with essentially the singular purpose to educate, inform, and motivate tribal nations to form captive insurance companies, or again, as we would call them in Indian Country, sovereign insurance companies. For the many benefits that we've talked about, the many benefits that current owners of captives have enjoyed for a long time. Tribes have grown in size and complexity to where, frankly, it's a no brainer from the outside looking in, to have a very strong intuitive feel that many, many tribes will likely benefit from forming a sovereign insurance company. Me and my folks who have been instrumental in forming SIANN believe that out of some nearly 600 federally recognized Indian tribes, that probably a third of those, or 200, would be good candidates for this concept.
15:27
And so, this, the mission of SIANN very much fits with what I described earlier as kind of my personal ministry, my professional work, and helping to improve Indian country economically. If we can save the tribes money, and allow them to even earn a profit on these activities, then that's only going to enhance tribal revenues, which in turn enhances programs and services, and very paramount programs and services, such as health care and education. So that's our mission at the Sovereign Insurance Association for Native Nations: to inform, educate and motivate. As part and parcel of that, as you know, we are planning conferences to bring the tribes together to do just that. That such that it's our fondest hope, that even at the conclusion of these conferences, we will effectively be signing tribes up to work with them, to determine through a feasibility study and actuarial analysis, that they are indeed good candidates, and that the captive, the sovereign insurance company, given the specified lines of coverage, will be financially viable and equitable for the tribe. And that so that's our mission. Again, we think the time is perfect to do this.
17:16
And that's our shared motivation. There are folks who are instrumental in SIANN, and then strategic partnerships with groups such as Sage and others, who have many, many years of experience and expertise to bring to bear. They help us help the tribes and disseminate, deploy this concept across Indian country.
Greg Cobb: Alright, JD I think with that we are well past our suggested time allotment. Thank you so much for taking the time today.
JD Colbert: . . .
Greg Cobb: Thank you for that, my friend. Be well. And for everybody, just a reminder, if you want to learn more about SIANN, go to the website at www.siann.org.
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