30 November 2022Cayman analysis

Captive fundamentals lead to captive success

Getting the basics right can be the foundation that a successful captive can be built on, a panel agreed at the 2022 Cayman Captive Forum.

The fundamentals that lead to the formation and running of a captive insurance entity must be respected if it’s to be a success, according to the panel discussion.

Ian Bridges, SVP, global captive management, Tim Mosier, Pinnacle Actuarial Resources and Nicole Klug, SVP, Enterprise Risk, Summit Health looked at the fundamentals that make up the formation of as captive.

Captive is a long-term play, not a short-term one, the panel said, stressing that a captive has to be a long-term project for a parent company. Looking at Cayman, CIMA’s regulatory measures must also be adhered to, the panel agreed.

The important contribution of actuaries was also underlined, with the fact that their job of determining appropriate risk levels and reinsurance agreements, as well as carrying out captive feasibility studies being highlighted.

Loss data and exposure data is always required to paint correct picture for an actuary, said Mosier, adding that the Projection of ultimate losses is key for any captive and must be reforecast every year as the overall picture changes, as ultimate loss projections are uncertain and a moving target.

Klug underlined that communication and management are both vitally important for a captive. She said that the success of a captive is predicated on time and staffing investment in the management of the risks insured through the captive. Strong internal partnerships are required between legal/risk, finance and quality, and it’s important to build trust between teams.

She also said that it’s important to read the pulse of the commercial market and have a good idea of the regulatory changes, legal updates and anything else that affects a captive.