Is the Captive Industry Ready to Compete Tomorrow?


Is the Captive Industry Ready to Compete Tomorrow?

Capital preservation, one of the main financial objectives of captives, is also a critical element to a captive’s success.  Along with conservative investments, captives must be able to manage costs in a both a hard and soft market.

Consider that between 2014 and 2018, captives added $3.1 billion to their year-end surplus and paid $1.6 billion in stockholder dividends and $1.9 billion in policyholder dividends, reports AM Best.  This means that approximately $6.6 billion either remained with the captives or was paid back to stockholders and policyholders—rather than going to the commercial market.

This approach to the marketplace—along with expert program management, is fueling growth in the captive market.  This spring, Vince Gosz, chief captive analyst at Arizona’s State Department of Insurance—an unlikely example of a popular domicile—told Captive Insurance Times that “So far, 2019 looks to be another active year with several serious inquiries and pre-application discussions early in the new year, though we may also see a little attrition as some captive programs run their course. Overall, we’re seeing plenty of activity in the captive space and expect it to continue.”

But can the captive industry stay on track?  Can it support significant growth?

In today’s marketplace, successful program administration is tied to cost and time efficiencies, yet many captives are still trying to find a way to work with disparate, outdated systems.  Other challenges include seamless access to and integration of data, notably to foster improved communications between functions (claims/accounting/policy renewal/premium determination/certificates, etc.).

Curiously, today’s market activities point to tomorrow’s trends; for example, being able to pivot in the face of profitable program acquisition, the ebb and flow of new program development, and the growing trend around mergers and acquisitions.

Case in point:  Caitlin Morgan Captive Management, a CHSI Connections® customer, is participating in a new national U.S. captive program along with Cornerstone Insurance. The new program will provide primary admitted property and casualty policy and workers’ comp coverage to Kona Ice Franchise owners across the United States.  Caitlin Morgan is a prime example of a captive that treats tomorrow’s uncertainties as opportunities—and realized early on that competing with outdated technologies would impact the captive’s ability to succeed.

The technologies in Caitlin Morgan’s toolbox enable managers to achieve efficiency, transparency and compliance—all at once. This is only made possible via use of core cloud software, which operates as a valuable solution to what may be a host of disparate business applications that have previously operated in silo mode.

This cloud-based technology supports captive operations across the entire policy lifecycle, so that all data is controlled, available and safe from compromise–meaning data encryption (in transit and at rest) is employed to ensure comprehensive compliance and quality assurance.  Dashboarding and reporting tools are also required, which make it easier to respond to customer and auditor demands, and make light work out of creating policy documents, claims reports, financial reports and board packages—in other words, accommodate almost any business scenario.

To successfully compete tomorrow, many captives understand that the technologies described above will have to be enhanced by a powerful platform that delivers analytics, artificial intelligence, telematics, IoT and mobile technologies all working together to protect and preserve a captive’s capital.

Are you ready?