Jargon getting in the way of captive understanding, says Meehan

24-09-2021

Jargon getting in the way of captive understanding, says Meehan

Mike Meehan, Milliman

Captive insurance remains poorly understood outside – and even within – the insurance industry, Milliman principal Mike Meehan has said. Jargon often prevents better understanding, he writes in an article on the company’s website.

“Captive insurance is a narrow niche within the insurance industry that is often not all that well understood, even by insurance professionals,” it reads.

“Sometimes it seems like the insurance industry, including the captive insurance segment, has a language all its own. As insurance professionals, we are used to using this language and jargon in our day-to-day jobs.”

Instead, Meehan suggests using examples to explain the concept: ”Examples and analogies can go a long way toward bridging the knowledge gap between insurance professionals and the general public for captives.”. 

In his article, he uses health insurance to explain the concept. 

“Even though most captive insurance is for other types of risk, health insurance provides a great window into understanding how captives work,” he writes. 

“[H]ealth insurance, both at the employee level and the employer level provides a good way to think about how captives work.”

Outlining the benefits of captives in reducing the cost of risk or improving the efficiency of managing it, Meehan also considers their role in uninsured risk. 

“For some types of risk, there is no insurance available, or the insurance is prohibitively expensive. For example, risks related to asbestos or pollution are excluded from most liability policies. Until recently, cyber risk fell into this category as well,” he writes. 

“For risks that are essentially not insurable in the commercial market, organisations may choose to evaluate other available risk-financing options, such as a captive. Deciding to do nothing simply means that the risk is retained by the parent company on its balance sheet,” he warns.

Meehan has been with actuarial and consulting firm Milliman for 28 years and is a frequent speaker and author on captive insurance.

Milliman, Captive Insurance, Health, Cyber Risk, Insurance, Reinsurance, Mike Meehan, North America

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