While reviewing our recent White Paper “Captive Insurers - The Risks and Opportunities in a Hardening Covid-19 Market”, I was struck by the dilemma that companies face. Even without the unprecedented challenges to the market in 2020, corporate risk managers may feel that there is little they can do to rescue themselves from coverage risks and rising costs. Does technology offer a new way to handle these problems?
Choosing to insure via a self-managed captive will always be a balancing act between the costs of operating the captive and the benefits. A self-managed captive will deliver the maximum flexibility and allow the corporate risk manager to tailor the coverage to the needs of their business, but can this be achieved without deep technology expertise and investment?
Currently, a large number of companies are still outsourcing the management of their captive to specialists. However, the charges are typically high and the service may not provide the benefit of tailored programs used by the corporate owners of a self-managed captive.
A solution to these challenges would be to deliver their self-managed captive as a service. Using technology, a captive management system can be securely delivered over the internet. Stored in the cloud, the responsibility for maintenance and performance of this service is removed from the day-to-day activities of the captive manager, while the capabilities usually reserved for captive managers are now at their fingertips.
Indeed, depending on their needs, additional services can be contracted directly such as actuarial functions, regulatory reporting, and even claims handling. Removing the need to hire specialist staff and long-term capital investment allows companies to experiment with the model and choose a blend of services to meet their needs without managing technology assets or incurring high consultancy costs.
In summary then, cloud-based captive platforms allow infrastructure-free access to captive management technologies. The internet now allows collaboration with service companies such as actuaries and claims managers who may also be service-providers or colleagues.
Expertise in the form of captive managers will always be needed to meet the gap between the commercial market and self-managed captives. However, with those costs narrowing, the question remains whether a more efficient risk portfolio is possible by utilising these new cloud-based captives. Only time will tell, but some companies are facing a bill in 2021 they could avoid.
