The captive industry’s brain drain

When you attend the next captive insurance conference, look around the audience and count the number of people who have 20 or more years of experience working in captives. They will probably outnumber those with fewer years of experience.

To the casual observer, it would not be unreasonable to assume that this represents a significant amount of brainpower, knowledge, experience, and skill, and that would be true.

The problem is when you count the number of people in the room with less than 20 years of experience. That much smaller number is the heart of the issue.

Many of us in the captive insurance industry have been around for so long that retirement is staring us in the face. As we exit the industry, the institutional knowledge we have accumulated over the years leaves with us.

In many industries, this is not a big problem: there are understudies, assistants and junior associates who have been trained to step into the shoes of the departing principal experts. The insurance industry in general, and the captives industry in particular, however, no longer work that way.

Years ago, there were many teaching companies in the insurance industry. They hired bright, young people, often recent graduates, and put them into training programmes that lasted anywhere from six months to a couple of years. They developed talent, found the right fit in the organisation, and promoted a trained workforce into the field.

Those days are gone. In today’s world, no-one wants to spend the money to develop the talent. It is generally viewed as more cost-effective to hire talented individuals from other firms or acquire them through mergers and acquisitions. This may produce short-term gains, but it produces long-term shortfalls.

Consider the fact that the US Bureau of Labor Statistics states there are 2.8 million people working in the insurance industry in the US (59.7 percent of them, incidentally, are women.)

How many people work in the captive insurance industry? The attendance at the Vermont Captive Insurance Association Conference, one of the largest captive conferences in the US, is usually fewer than 2,000 attendees in a year. If we assume there are captives industry associates who do not normally attend these conferences, let’s double the number to 4,000. Since there is so little confidence that this number is accurate, let’s add a 50 percent margin to that number, giving us about 6,000 people employed in the captive insurance industry in the US, give or take a margin of error of 50 percent. In other words, 0.21 percent of the people employed in the insurance industry in the US work in the captives industry.

This means that while the captive insurance industry is an important component of the overall insurance industry, playing an important role in most major companies’ risk management programmes, the industry has little overall exposure.

Ask any graduate with a major in insurance and risk management what they know about the captives industry. The likely answer you will receive is: “I have heard of them, but I do not know much about captives”. The same is probably true for actuarial and accounting students.

This scenario of limited insurance industry exposure and the departure of long-tenured captive insurance professionals creates an intellectual gap as wide as the Grand Canyon. It poses a threat to the captives industry that is real, palpable, and imminent.

Today’s captives professionals have industry knowledge, education, and practical experience. Due to their long tenure, they have seen it all—the good, the bad, and the ugly.

The way forward
The challenge we face is to pass these experiences, education, and skills to those who are attracted to the captive insurance industry, to elevate the visibility of the captives industry, and to do it before those who have this intellectual capital depart the field.

There is one thing every person in the captives industry can do: advocate.

If you belong to a society associated with your job or education, write, represent, and speak about our exciting, creative, and innovative industry.

In truth, the traditional insurance industry can be pretty dull and copycat in nature. The captives industry is the polar opposite: it is a dynamic industry that presents challenges throughout a career.

Challenge others who may feel limited in their career development to learn about the captive insurance industry and to move into the field.

Get active with your alma mater and encourage the development of captive insurance industry curriculum. Become a guest lecturer to champion the industry and the opportunities for all the different disciplines involved in the industry.

Support the industry through sponsorship programmes, internships or co-op work. These efforts all pay off. Many programmes have started in the past few years to bring new blood into the captives world. A number of captive management firms have sponsored students to learn about the industry. Associations such as CICA, VCIA, and SCCIA have all contributed resources to the development of new talent. Organisations such as ICCIE, RIMS, and IRMI have educational programmes to elevate the knowledge level and facilitate entry into the field.

Last, do not be shy to hire a newbie. Many in the captive insurance world prefer to hire someone who is already trained and has the work experience to hit the ground running. That may be cost-effective but does not grow the talent base.

There are two major benefits to hiring someone new to the captives industry: it challenges why and how you do things and fosters creativity.

Consider the fact that millenials assimilate information four times faster than baby-boomers. That translates into quick learners who pick up concepts at high speed and can turn them into practical applications immediately. It also means they have the ability to challenge the how and why things operate the way they do.

This provides fresh insight, fosters creativity and innovation, and produces efficiency and effectiveness that may have eluded you. Overall, it moves the entire industry forward with fresh ideas.

There is much to be gained by facilitating the exchange of experience of the wise old captive insurance players and there is much to be gained by introducing new players into the world of captives.

The foresight of many organisations which are working to educate, promote, and facilitate newcomers into our industry will pay huge dividends in the future.

The question is, will you be one of them?

Jeff Kehler is director of captive consulting services at Somers Risk Consulting. He can be contacted at: jkehler@somersriskconsulting.com