Created by the U.S. Land Trust Alliance to address the need to ensure conservation permanence, Terrafirma was licensed as a captive insurance risk retention group by the State of Vermont on July 11, 2012. It was designed by and for land trusts, being member-owned and managed, in consultation with insurance specialists and attorneys, and supported by US$5 million in foundation funding.
The need for this service is in response to the challenges facing land trusts across the United States due to rising population and development pressures that are increasing the value of conservation properties. All land trusts must have the capacity to protect themselves from litigation and safeguard the land, plus the billions of dollars that have been invested in them through taxes, tax incentives and credits as well as public and private donations. The value of the service is in minimizing risk and uncertainty for land trusts and offering expert legal support through a national team of experts when the day comes that they face litigation. As part of a national strategy to ensure that land trusts have the capacity to protect their properties in perpetuity, Terrafirma also provides a suite of training opportunities that focus on risk management, negotiation and conflict resolution, best practices and more. Membership in Terrafirma sends the message that the land trust can defend its conservation lands and easements, but it doesn’t replace the need for the land trust to build sufficient financial reserves and develop sound business practices.
Group captives insurance programs ‘’insure the risks of a heterogeneous or homogeneous group of unrelated insureds, providing them with benefits such as:
- Combined purchasing power
- Share in underwriting profits and related investment income
- Flexibility with respect to coverage forms and claims handling
- Incentive for risk management and loss control
- Access to reinsurance markets”(42)
A risk retention group (RRG), or insurance reciprocal, is a subset of a group captives program and is an “entity owned by their insureds and authorized to underwrite the liability insurance risks of their owners. RRG owners must be from a homogenous industry group and based on a single state license are able to operate in all 50 states and the District of Columbia.”(43)
Terrafirma’s 2020 Audited Financial Statements states that “Terrafirma has no employees and is managed by Alliance Risk Management Services LLC (ARMS or the Manager), a wholly-owned subsidiary of Land Trust Alliance. ARMS has authority to take all actions on behalf of the Company that the Manager deems necessary or appropriate for the continuation and conduct of Terrafirma, and responsibilities include claims handling and policy issuance. Terrafirma is solely responsible for meeting its obligations to its members and others. Land Trust Alliance, ARMS, or any member are not liable for the claims, debts or other liabilities of the Company.”(44)
“Land trusts could think of Terrafirma as standing behind them to protect their resources from catastrophic legal expenses and to help them avoid unnecessary litigation through solid practices, early dispute resolution and smart risk management.”
42. Risk Services, Group Captives
43. Risk Services, Learn About Risk Retention Groups
44. Johnson Lambert LLP (2020), Terrafirma Risk Retention Group LLP Audited Financial Statements Years ended December 31, 2020 and 2019