27 February 2023ArticleAnalysis

Providing captive solutions through teamwork

As the commercial insurance market continues to harden, Management Services International (MSI) will continue to strive to build programmes that will alleviate the burden of insurance on these companies so businesses can continue to focus on the growth of their business.

Over the next 12 months MSI will improve its product offering increasing the number of opportunities we have to offer our clients. Using MSI programmes and strategic relationships the firm will continue to bring more solutions to middle-market companies who are looking to reduce their overall total cost of risk and take control of the business insurance programme.

Captives can play an integral role in smoothing out the balance sheet and having better control of your risk. As MSI has seen with the most recent Black Swan event brought on by the COVID-19 pandemic, having a well-funded captive in place can benefit businesses by helping keep the doors open and the business’ operations running smoothly. On the heels of a recovering economy in a hardening insurance market MSI will look to provide beneficial solutions to businesses of all sizes.

Growth potential

There’s plenty of growth potential in the captive world for those managers who continue to offer outstanding customer service and are continually adapting to the changes and being inventive. Business needs continually change with the growth of a company and with the changes in the economy.

With constant growth and change comes the opportunity to create customised risk management programmes for insureds that can change with them over time. Properly structuring a captive insurance company from the beginning allows for growth and flexibility as the business insurance needs change overtime. When a business decides to take control of its risk management programme whether the market is hardening or softening the business can continue to see the benefits of a well-structured insurance programme.

Growth in this sector is dependent upon groups working together to provide the best insurance solutions possible rather than working against each other for their own benefit. Having the right team of advisors who understand insurance, and risk management, can create growth in this sector by working together for the benefit of the insureds.

MSI offerings are attractive and unique because of the flexibility that MSI provides to clients. MSI has created strategic partnerships within this industry that allow MSI to provide multiple solutions for an insured to accomplish their risk management goals. During MSI’s initial consultation with a client MSI is able to understand where the client’s pain points are and what the client’s objectives are for three five or 10 years down the road.

MSI has a structure that allow clients to take as little or as much risk as they choose and that fits within both the client’s budget and comfort level. Often times MSI has multiple opportunities for a client to choose the right strategy for the client’s needs and MSI is not looking to figure out how the client fits within our risk management programme but rather what risk management programme can MSI build for the client.

MSI programmes offer the client a financially feasible way to dip the client’s toe in the water to see whether creating a captive insurance company is right for the client. Often MSI discusses the crawl, walk, run method with many of our clients which allows the client to take a bit of risk early on and as the client see success in the programme and the client continues to take on more risk and better utilise the captive insurance company.

Client service

Our team is constantly striving to improve our processes and our offerings to this sector. Taking care of our clients is our number one priority and that is something each member of our team understands with every interaction.

While we continue to learn from each other we also connect with those within this sector to better understand how we can better serve our clients. Our leadership empowers all employees to share thoughts and ideas about how to better serve our clients or new programme ideas that our insureds can benefit from. Every day we work to create our own success within this sector, and we do that by constantly evolving and growing to meet the needs of an ever-changing industry.

We are already starting to see some easing of rising premiums due to rate increases. However, on the back of a global pandemic which may go down as one of the largest ever loss events in insurance history, record high level of economic inflation and talk of a recession, I would expect the market not to soften any time soon.

We are starting to see an increase in the frequency and severity of natural catastrophic losses. I think underwriters and insurance companies will continue to price policies accordingly to stay solvent and have the availability to pay claims. We are seeing court cases go through the legal system and appear to be in a more plaintiff-friendly environment. This is resulting in skyrocketing judgments and an increase in third party costs to adjust and litigate these claims.

While underwriters are working hard to compensate for losses, new markets are opening up and capacity is increasing, and this may drive down rates in certain markets. Building towers may become more expensive and require more carriers to be involved as some may be willing to take smaller chunks of risk where they are comfortable.