On 30 July 2009, the Delaware Insurance Commissioner’s office sent out a Press Release announcing their “new” initiative for “the formation of a new revenue generating division within the Department of Insurance entitled the Bureau of Captive and Financial Insurance Products”. There was a subsequent Press Release, this time working hard at making the case that this is an economic development task for the state.
A bit of small print at the end of the first Press Release caught my attention:
The positions of director, director of business development, and director of strategic development are independent contractor positions subject to Delaware’s procurement law and open bidding process.
So that’s interesting, right? I mean, here we have a “new” department for Captive Insurance products touted as a way to get new revenue to the state, but that work is being outsourced? Managed by outside contractors? This leads me to wonder if this is the result of that really bad RFP that was put out by the ICs office earlier this year — the one we spent some time trying to get better details on and that the ICs office refused to provide. (In part saying that we had no standing to ask — not exactly an open bidding process.)
- The previous Administrator of the Captive Insurance program was William White, who looks like a contract employee too — the DE checkbook shows his firm, Prism Strategies, received a total of $187,619.65 in FY 2009 — including what looks like monthly fees of 15K plus various travel reimbursements. He began there in August 2006 with a charge to grow this program here, and according to the Delaware Captive Insurance Association, the number of captive agencies domiciled here grow to 40 in 2008, with others in process. Mr. White returned to his consulting firm as of 31 July 2009. He was involved with the Delaware Captive Insurance Association, and provided an interview here and found himself in many pictures with the Association’s members.
- The new admin, who is Steve Kinion, works for an Illinois law firm — Zack Stamp. A look at KWS’ campaign finance reports shows that Mr. Kinion provided her with an in-kind contribution of $900.00 for a breakfast fundraiser on 9/23/2008 and a $1200.00 (the maximum individual contribution) campaign contribution on 5/24/2008. He was also on that remarkably long and out-of-town list of people on her Transition Committee.
- Zack Stamp is mostly a practice focusing on lobbying and insurance regulatory affairs issues. The link shows a list of some of their lobbying and regulatory clients. One of the things that Mr. Kinion’s bio over at Zack Stamp highlights is:
As a regular attendee at National Association of Insurance Commissioners meetings, Mr. Kinion has developed relationships with insurance regulators in many states. He makes it a priority to be at the forefront of regulatory issues in the insurance industry.
An insurance lobbyist? In charge of creating new business? Mr White’s background was directly in Alternative Risk Transfer strategies and “over thirty years of experience as an underwriter, consultant and regulator”. Putting an industry lobbyist in charge does seem to promise optimization of state revenues — it is usually a sign of a government getting ready to open the cupboards to industry.
- I can’t find contracts for any of the new firms or consultants up on the OMB list of vendors. Interestingly, there appear to be NO consulting contracts or personnel contracts available for view there.
- A search of the state checkbook shows that for FY2009, Zack Stamp Consulting got 5 checks for $16K each, for a total of $80K on June 19. There are no entries in the checkbook for Kinion. The checkbook also shows 2 payments for E M Ianni for a total of $31,086.03 on 6/23/2009. Anne Pruett shows a total of $63,211.99 since last August; no entries for the others.
So what is going on here? Did this contract change hands as a result of that horrific RFP that we spent time trying to get data on this past spring? A campaign fundraiser and contributor getting this pretty lucrative contract raises alot of questions. Then count in the claim that this was done in accordance with Delaware’s “open bidding process” — which if this was a result of the RFP that we wanted more data on certainly wasn’t open at all. And in the process of changing hands, we went from one consultant to three.
Both of the Press Releases emphasize that captive insurance agency creation generates revenue. Which is true — Vermont is the current US leader in domiciling captive companies and their revenues are upwards of $25M per year on more than 800 firms. In comparison, Montana claims to have 38 companies (about the number of DE companies) who are projected to contribute $350K this year to their coffers. I am presuming that DE’s tax on Captive’s is fairly competitive and the $350K is in the neighborhood of what we collect. But to get to that we paid almost 200K with Mr White and seem on track to pay alot more with this new team of contractors.
Developing new revenue sources are great, but you have to pay attention to ROI — the ICs office should not just say they are generating revenue with this move to hire more contractors, they should tell us what they are paid AND what their revenue generation expectations are. At the end of the year, the ICs office should tell us what revenue they actually generated so we can all see how effective this hire was — real openness, especially since a major campaign crony seems to have gotten this assignment. One again, I am reminded of the lockdown on spending that is supposed to be the new regime all over State government — and the ICs office does not seem to have to abide by this philosophy. Or at least does not have to provide detail that would show that this hire would translate into $XX of revenue.
Just like that really bad RFP that came out of the ICs office procuring something so secret that you couldn’t ask questions about it, this round of expensive hiring — including an election crony — does not line up with what is supposed to be much more careful spending and more openness. It also raises ethical questions.
I’m interested in your take on what is going on here, and why they would make the claim of openness when this has been anything but. There’s lots of unanswered questions. And if you need to comment very anonymously, you can hit us up via out tip line at the top of the page.