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Addressing The Pain Points Of Captive Insurers

Captive insurance firms have become increasingly common over the past few years. Perhaps it is a sign of the changing times or the wider spread need for personalized and more comprehensive insurance coverage. For whatever reason, captive insurance has become a familiar fixture in the modern-day insurance landscape.

There are many reasons for the increase in the number of captive insurers doing business nowadays. They provide many advantages to their parent firms, including:

  • more control
  • lower costs
  • more personalized insurance solutions

For companies that need more specific or more comprehensive coverage than standard policies can provide, captive insurance is the ideal solution.

That being said, the complexities and more stringent regulations in the business sector pose new challenges for captive insurers and the parent firms they protect. Foremost of these is the need to gain access, consolidate, and validate a constantly growing mass of data. Given this pressure, it is worth considering some of the common pain points faced by the captive insurance industry.

New challenges for captive insurance

Here are some of the new challenges that captive insurance professionals can expect this year:

Tighter regulations and more stringent reporting requirements

Tight regulations and more critical governance reporting scrutiny have always been major pain points for insurance firms. Captive insurers face increased pressure to deliver on these aspects, which is why they need near-instantaneous access to reliable data to be used for generating reports, auditing, and analyzing information. Given these new demands, the traditional tools used for data gathering and consolidation should be discarded in favor of more advanced data management solutions.

Increased financial reporting expectations from parent firms

Parent companies expect even more accurate and timely financial reports from captive insurance firms. Apart from the strict reporting regulations mandated by government agencies, captive insurance organizations now have to deal with similarly stringent requirements from the companies they service. Now, more than ever, it is crucial to provide more accurate and detailed financial reports.

Supplying data to auditors and outside carriers

The need to provide quality data extends beyond just the parent firms serviced by the captive insurers. Nowadays, captive insurance companies are also expected to supply more accurate and higher quality figures to auditors and third-party carriers.

This applies to internal actuaries as well as external reinsurance organizations, which are ramping up the demand for quality data at much higher volumes than previously required. By meeting the increased demand from auditors and outside carriers, captive insurance firms help ensure more sound insurance decisions and better coverage.

Broader risk management responsibilities

Captive insurance companies are now expected to provide more effective risk management services across the board. Nowadays, it isn’t enough just to provide parent firms with the requisite insurance policies. Captive insurance organizations are also increasingly required to handle a wide range of risk-management responsibilities, just like third-party insurance firms and brokers. This is why it is essential for these companies to have an efficient system for inputting, managing, and reporting data.

Value expectations

More and more parent firms are expecting their captive insurers to show their value to the organization. In particular, more companies now require their insurers to provide data and figures demonstrating their cost and coverage benefits. Consequently, the management teams of these captive insurance providers will need more efficient solutions to help justify their value to the parent firms that they service.

New challenges call for innovative solutions

Many of the tools traditionally used for data management in the insurance agency have worked well in the past. For standard insurance purposes, some of these technological solutions are still useful for collecting, consolidating, and validating risk information.

But the new challenges faced by captive insurance firms require a more powerful and fine-tuned set of data management tools. Given the unique requirements of the captive insurance sector and the staggering volume of data that needs to be processed, many of the traditional tools are woefully inadequate.

For these reasons, more progressive captive insurance firms are seeking more robust risk management information systems. More specifically, there is an increased demand for data solutions that provide more consistent inputting, management, and reporting workflows. Insurers are also looking for more efficient ways to manage data across expansive networks.

The ability to manage data across larger organizations is especially useful for captive insurers. By encompassing captive insurance companies as well as their parent firms, these systems make it easier to manage data. Consequently, data quality improves significantly.

About Caitlin Morgan Captive Services

Caitlin Morgan Captive Services provides clients with captive insurance solutions supported by years of experience in establishing the successful formation and implementation of a wide range of captives. To learn more about how we can help you, please contact us at (855) 975-4949.