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The Importance of Choosing the Right Captive Partners

02/28/2024 Written by: AP Captives

Captive Risk Sharing and Management

“An alternative risk program generally involves sharing risks with others, blending services and expenses, and building the best program not only for the entire group but also for each individual member,” says Lori Harris, AAI, CPIA, Captive Director at AssuredPartners and Captive Manager for CARE, a group captive domiciled in Bermuda. Harris understands that this makes the selection of risk-sharing partners and service and management teams of the utmost importance for any organization considering a captive strategy for their risk management program.

Commitment to Success

When sharing risk, all business partners must have the same goals for the program and be firmly committed to its success. Each owner’s financial stability and business principles need to be in alignment. The same can be said for the business partners selected to build and support the program.

Keeping this in mind, let’s discuss the responsibility of the person selected to keep the captive collaboration running smoothly: the captive manager.

The Captive Manager’s Role

One of the most crucial partners in an alternative insurance program is the captive manager, and here’s why:

  • It is the responsibility of the captive manager to be the liaison between the domicile authority and the captive owners/board members. For communication and efficiency, the domicile wants to have one responsible party as the point of contact who has all the necessary details regarding any third-party business partners engaged with the captive.
  • Similarly, the captive manager must ensure the captive owners adhere to statutory compliance with their domicile’s regulations. While the captive owners/board members are ultimately responsible, the captive manager oversees compliance on their behalf.
  • Proper financial reporting is also the concern of the captive manager. Whether it’s a large captive with in-house accounting and actuarial services or a smaller captive that contracts with outside business partners to provide information, the captive manager is the logical choice to ensure that all required accounting and financial reporting is handled correctly.
  • It is also customary for the captive manager to advise the owners/board members on issues regarding corporate governance. Again, the decisions are up to the owners/board members. However, having the captive manager navigate and coordinate the advice from the auditors, actuaries, accountants, carriers, and lawyers is invaluable to ensure adherence to industry regulators.
  • Specific operations regarding insurance carriers and underwriters are another area that a captive manager administers. The flow of communication among these parties is key to efficient captive management. Along with effective communication, the captive manager needs to make sure there are sufficient resources for the day-to-day servicing of the program.
  • "Another important but sometimes overlooked duty of the captive manager is to support the group of owners/board members without losing sight of each individual member,” Harris points out. “All members have equal weight and a say in the management of their captive program. Sharing risk should not diminish the insights and concerns of any one owner,” she adds. Her belief is that the group benefits from hearing every representative’s perspective.

It is clear that a successful captive requires a uniquely equipped captive manager who can: 1) handle the necessary complex financial reporting and regulatory compliance and 2) facilitate an environment of trust that encourages open communication and collaboration among all involved parties.

Captive Considerations

With so much to consider, how do you know if a captive is the right option for your business? We can help guide you through the decision-making process and the transition from conventional insurance to an alternative risk management strategy. If your organization is financially stable, committed to a strong safety culture, and has a long-term approach to its insurance program, contact us at captives@assuredpartners.com to learn about all the available options.

Need more insights? The AssuredPartners Captives team can help.

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