Cloud technology makes it easier for small businesses to spread their influence across state lines, but non-digital traditional insurance has failed to provide the coverage, flexibility and customization such inter-state businesses require. Bound by regulations and low-tech solutions, businesses have turned to risk retention groups to resolve jurisdiction-based regulatory differences. Other organizations choose to form captive liability insurance companies to better manage members’ overall risk and coverage. These alternative risk transfer solutions have met some needs, but not all. The rise of cloud-based captive insurance technology and risk management systems allow insurers to use the same innovative tech that facilitates client business growth to help cover clients efficiently and effectively.
Creative insurers have discovered that matching certain features of risk retention groups against certain characteristics of captive insurers is a means to bridge difficulties. Here are a few ways captive insurance technology is poised to assist carriers and captive managers as they extract the best of both alternative risk solutions to create strong solutions for self-insured clients.
Limits and Benefits of Risk Retention Groups
RRGs are only able to offer their clients liability coverage. Some organizations accept this limitation because the benefits of RRGs, faster time to market and rate and form freedom, are a greater priority. In terms of management structure, RRGs are flexible and capable of creating products that are specific to their members. Captive insurance software solutions cater to this flexibility by offering managers a la carte features that integrate with existing systems.
Limits and Benefits of Captive Insurance
Captive insurers provide coverage for cargo, buildings, collision, cyber and more. This is enticing to organizations looking to expand their services and products in the future. Captive insurers are also able to operate overseas, making them a good choice for growing businesses. The downside to captive insurance structures is the amount of management required to partner with reinsurers who provide most of the additional coverage. The result can be limited profit and increased fees.
The Bridge Solution
Building the bridge isn’t the simplest process, but powerful risk management systems are capable of compiling historical data, untangling jurisdictional regulations and remaining secure and compliant. With these software tools, organizations can create risk retention groups that are in full compliance with their domicile. Once established, RRGs have the potential to write business in other states and locations. The RRG can then establish a captive in a location in which they operate. This captive, which also adheres to regulatory guidelines, can then act as a front to the RRG.
Creating an end-to-end bridge model such as that suggested above requires ingenuity and attention to detail. Fortunately, insurance management platforms and software make this structure easier to construct and maintain.