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Forward-Thinking Governance Leads Captive to Independence

By any measure, the Farm Credit Captive Insurance Company is a success: savings of more than $37 million a year over what member organizations would pay in commercial insurance marketplace; a minimal 2.2% increase for the System’s 2023 coverage renewals; an enviable 52% 20-year loss ratio; and annual patronage payments totaling $143 million, or 38%, of the total premiums paid since the Captive’s inception in 1988.

These results are thanks in large part to the attention and guidance of the Captive’s Board of Governors, which serves a similar purpose as a cooperative’s Board of Directors: setting the strategic direction for the Captive and overseeing management to ensure the business objectives are being met, while ensuring that the work of the Captive is aligned with the broader needs and interests of Farm Credit.

“In addition to strong oversight and forward looking strategic planning, because our Directors are drawn from within Farm Credit, they’re able to provide a customer-level viewpoint into the needs and the challenges being faced throughout the System,” says Barbara Stille, Captive Board Chair and Chief Administrative Officer and General Counsel at AgriBank. “This insight helps inform our thinking and planning as we lead the board on behalf of its Farm Credit members.”

Recognizing that Farm Credit is diverse, the Captive’s Board is careful to include representatives from banks and both large and small associations. The Governance Committee actively recruits new Directors selected to ensure geographic and size diversity, as well as a breadth of business functions and skills.

“The Captive is charged to meet the needs of all Farm Credit institutions, so it’s important to the Board that we recognize and appreciate the business needs and risks of small associations as well as large banks,” says Paul Kohls, the Captive’s Vice Chair as well as Compeer Financial’s Chief Administrative Officer and General Counsel.

The Captive’s board meets quarterly, with each of its three standing committees – Governance and Nominating, Audit, and Investment – meeting beforehand and then delivering a read-out to the full group. As with Farm Credit boards, Directors on the Captive’s Board have other full-time roles so care is taken to plan and execute efficient, effective meetings that cover the agenda and allow time for sufficient strategic discussion. The February meeting includes a deep-dive into financials, with auditors and investment advisors joining the discussion; May is a general update and check-in; September’s meeting is a strategic planning session where the Board considers initiatives for the following year; and the December meeting includes budget and business plan approval for the following operating year.

“Our Directors are experts on Farm Credit and its mission, and they make sure our insurance company is running in alignment with the collective mission of Farm Credit,” says Brian Clanton, President of the Farm Credit Captive Insurance Company. “Our coverages are tailored to Farm Credit’s needs, and our Board provides continuous feedback and insight so we can make sure we have the broadest possible coverages at the best terms for our members.”

In December of 2022, the Captive’s Board approved a long-term strategy to shift toward a becoming a significantly self-insured entity, taking on more and more of Farm Credit’s insurance risk by providing insurance coverage directly rather than buying it from commercial providers.

“We’ve been fortunate to accumulate a meaningful capital surplus that we’ll be able to increase over time to enable us to bring additional risk into the Captive rather than relying on the open commercial insurance market,” says Barbara. “The Board believes this will provide even greater savings and benefits to Farm Credit.”

For more information on the Farm Credit Captive Insurance Company or to schedule a Board presentation on insurance and risk management, contact Lisa Parrinello, Vice President, Risk Management and Insurance Services, at 303-721-3214 or via email.

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