Welcome to RIMScast. Your host is Justin Smulison, Business Content Manager at RIMS, the Risk and Insurance Management Society.

In this episode, Justin interviews Deyna Feng, Director of Captive Programs at Cummins, about her role at the company. They discuss the reality of climate change risks and how Cummins uses captives to address them in the short- and long-term in the U.S. and 36 countries globally. They talk about the various facets of the company, from property to supply chain, to business continuity, to human resources, at risk from climate events. They discuss the variety of regulatory sustainability reporting requirements around the globe.

Listen for steps to take to use captives for your climate risk planning and strategy.

Key Takeaways:

[:01] About RIMS and RIMScast.

[:17] About this episode of RIMScast. Our topic today is the interconnection between captives and climate risk. To help me delve deeper into this connection, I've asked Deyna Feng of Cummins to rejoin us. It will be great to catch up with her!

[:49] You're going to walk away from this episode with a lot of great ideas for your captive programs. But first…

[:55] RIMS-CRMP and Some Prep Courses. The next virtual prep course will be held on March 110th and 11th and again on April 21st and 22nd. Links to these courses can be found through the Certification page of RIMS.org and through this episode's show notes.

[1:12] RIMS Virtual Workshops are coming up. On January 21st and 22nd, Chris Hansen returns to deliver the course, "Managing Worker Compensation, Employer's Liability and Employment Practices in the US".

[1:26] On February 4th and 5th, Ken Baker will return to deliver the course, "Applying and Integrating ERM".

[1:36] The full schedule of virtual workshops can be found on the RIMS.org/education and RIMS.org/education/online-learning pages. A link is also in this episode's notes.

[1:47] RIMS members always enjoy deep discounts on the virtual workshops.

[1:57] The RIMS-CRO Certificate Program in Advanced Enterprise Risk Management is hosted by the famous James Lam. This is a live virtual program that helps elevate your expertise and career in ERM.

[2:10] You can enroll now for the next cohort, which will be held over 12 weeks from April 14th through June 23rd. Links to registration and enrollment are in this episode's show notes.

[2:24] On with the show! Deyna Feng is rejoining us for the first time since 2021. She is the Director of Captive Programs at Cummins.

[2:38] Cummins designs, manufactures, distributes, and services a broad range of power solutions, from traditional diesel and natural gas engines to advanced electric, hybrid, and hydrogen fuel cell technologies.

[2:50] Deyna is here to discuss how climate change has had a huge influence on how she manages captives for Cummins. We're also going to speak a little more broadly about the ways you might think about climate risk as you launch or alter your captive program. Let's get to it…

[3:06] Interview! Deyna Feng, welcome back to RIMScast!

[3:21] Deyna Feng has been working for Cummins for the past 15 years. She was always with the risk insurance team and, since 2015, she's managed the captive operations, the insurance programming inside it, and the whole insurance company.

[3:52] Deyna started with Cummins as Regional Risk Manager for Asia Pacific. Then she joined the company to manage its captive. Deyna has been really passionate about this career path because captive is such a wonderful risk management and risk insurance tool.

[4:08] Deyna says Cummins has been using its captive constantly and actively managing different types of risk and profiles.

[4:34] A captive is an insurance company. Cummins's captive is a pure captive, or a single-parent captive, so it purely insures the parent company's risks and business.

[4:44] The benefit of a captive insurance company is that, instead of buying insurance from the commercial market, you can really tailor your insurance program within a captive.

[4:55] They also provide financial benefits like tax benefits and some other things you can manage through the captive.

[5:03] For the past few years, it's been hard on the insurance market on the property and the liability side. Cummins uses its captive, proactively, managing the whole program in a really unique way. Everything is tailor-made to your own program, your own risk.

[5:21] If you are a good risk management account, you will receive benefits by doing such a self-insurance arrangement.

[5:38] Justin recalls from reporting that in 2025, there are hundreds more captives among medium and small businesses than there were 20 years ago. Feng agrees. It's a booming market for the whole captive industry. It's growing for all captive domiciles around the world.

[6:01] Deyna and Justin believe that captives are a big part of the future of risk management.

[6:09] Justin reconnected with Deyna because of her unique philosophy that climate change can greatly impact a captive and, therefore, a company.

[6:38] Deyna thinks everyone is feeling the effects of climate change in the current environment. They see more things happening, more frequently, with more severity; events like wildfires, floods, and hurricanes.

[6:53] Deyna says, Before, it's rarely showing anywhere, or a 500-year event, then suddenly, something happens. We experience such dramatic events in different facilities globally. So, we are thinking such events can escalate super quickly and become catastrophic.

[7:17] Deyna asks how we can manage such events, especially when you are dealing with a large insurance program, and it involves a big business interruption to your global company.

[7:29] Deyna thinks there is a growing concern for global companies like Cummins for a few important reasons. First, frequency and severity are rising. Also, it's less predictable in certain areas, and there will be increasing exposure for large, global facilities.

[8:08] Deyna speaks of supply chains. For a large manufacturing company with a global footprint, it's important to manage supply chain risk in a better way. The climate risk is changing globally, so it will impact Cummins's supply chain risk to a large extent.

[8:30] Deyna says it also increased the complexity of managing claims, like a hurricane claim. Hurricane Helena is our recent example. It happened over a year ago, but it impacted multiple locations in that area and also impacted Cummins's warehouses and logistics centers.

[8:50] It impacted the whole business revenue and the whole area. So, it becomes a much more complex claim to manage and handle. Even now, Cummins is still dealing with the whole impact of that Hurricane Helena flood claim.

[9:11] Justin asks about polycrisis and how one event triggers others that the captive manager has to oversee and try to resolve.

[9:31] Deyna says, Cummins has suppliers in that area. If those suppliers don't have good insurance coverage, then Cummins helps them out, so they can help Cummins's local business. That impacts a lot. Cummins is still dealing with a business interruption claim from that event.

[10:06] Deyna says one important area for climate risk management is dealing with government regulatory requirement reporting changes, not just in the U.S, but worldwide, with international reporting.

[10:25] Certain countries are more advanced in regulation development. So, for those countries, Cummins has to make sure to do a proper evaluation and prepare for those government reporting requirements.

[10:44] That involves a whole set of reviews from different lenses. To manage the risk more effectively and efficiently, Cummins needs to consider a few options. One is about data.

[10:59] The whole risk management and risk insurance program is data-driven, so Cummins makes sure to gather important climate risk-related data and then models it globally in CAD. This way, Cummins can anticipate future risk and business impact.

[11:24] The second is the partners Cummins works with. Those are insurance, reinsurance, and brokers. They offer different types of climate risk-related data analysis.

[11:38] From there, certain captives can use such data-driven arrangements and cat modelling to plan their parametric solution. That's a unique type of risk, tailor-made.

[12:00] Deyna says Cummins's global insurance program has broad coverage, already covering such climate risks. That's useful for specific risks in certain areas. You have the trend, you see the need, and then you use this to pay claims quickly without complex claim procedures.

[12:28] The other area Cummins has been doing is leveraging the data it receives and then utilizing the captive to do the strategic planning. That is how Cummins u...

Captives As A Rainy-Day Fund For Climate Losses with Deyna Feng