Willis Towers Watson

Transforming for the future

Willis Towers Watson has invested heavily in people and technology to position itself for an increasing number of captive formations in 2021, says the firm’s Peter Carter.

“Our captive consultants have seen an influx of new projects in healthcare and life sciences.”

Peter Carter, Willis Towers Watson

2020 has been a year of transformation for our business as a captive insurance manager and for the Cayman captives industry generally, which has seen a resurgence of activity. On top of this, the entire world has had to battle the COVID-19 pandemic. Willis Towers Watson embraces change but dearly hopes 2020’s turmoil around COVID-19 will be swiftly resolved through the introduction of vaccines and enhanced therapeutics in early 2021.

During 2020, we were delighted to welcome Lesley Thompson as our new managing director, with a mission to further build our business in the Cayman Islands. We have recruited new team members who, together with our market-leading existing team, have enhanced our service offering in a way that positions us for future growth in captive and related insurance management areas.

Thompson has brought real energy and enthusiasm to the captives practice and has been heavily involved in promoting our Cayman services already.

Thompson is a 20-year multijurisdictional veteran of the offshore insurance industry and has hit the ground running—bolstering our office’s staffing bench strength and rationalising our service offering. Paul Bailie, head of offshore Americas insurance management, and I, as head of the global captive practice, have marshalled our global resources to support Thompson in her new role.

Despite the pandemic and the associated economic dislocation in many areas, it is no surprise that the continued hardening of the insurance market has led to new captive insurance opportunities. Our captive consultants have seen an influx of new projects in healthcare and life sciences. Captive feasibility studies have been commissioned at an increased rate, and this has already led to the formation of several new captives. This work is continuing apace, and we expect to see more companies incorporating well into 2021.

“We look forward to celebrating our clients’ successes at the Cayman Captive Forum in December 2021.”

More data and analytics

A key feature of current captive insurance development is the greater use of data and analytics to direct and inform decision-making for captive owners and potential owners. Our actuaries remain fully occupied with work on loss cost projections and reserving studies relating to increased retentions for our clients.

Additionally, however, we now have access to a comprehensive suite of ‘core analytics’ models to help us and our clients better understand risk and its cost. We can use these models to analyse individual risk areas such as cyber, casualty, or property, and to help design a better risk financing programme for any of those. These models look beyond the probabilistic analysis of an actuarial study and model the potential for loss, allowing us to determine not just premium funding, but also capital requirements.

Overlaying our individual risk models, we can deploy models to consider total cost of risk and risk tolerance that take an enterprise-wide holistic view of risk, including the diversification impact of bringing multiple risk lines together.

This work can inform a truly strategic approach to risk financing, including the role of a captive in this. In addition to this, our proprietary Captive Quantified tool allows us to show projected captive performance, including the ability to test scenarios and stress test the captive.

Doubtless, in some, there is an element of captives utilisation that remains more art than science, but the science is now highly evolved and at a minimum can be used to test our assumptions about captive efficacy. Ideally, however, there are tangible opportunities to more efficiently deploy capital for purposes of financing risk, and we are best placed in the market to deliver for our clients.

On the operational side, Thompson and her team have taken the opportunity to “health check” every existing captive under management and reinforce our robust systems and professional approach to captive management. Where this also identifies opportunities to refine the captive’s strategy, we will raise that with our clients for further consideration and discussion.

Despite some economic headwinds, Willis Towers Watson’s Cayman captive management practice has emerged from 2020 looking forward to a bright future and well positioned to deliver a level of value and service to our clients that we believe is unmatched in the industry.

And of course, we look forward to celebrating our clients’ successes at the Cayman Captive Forum in December 2021.

Willis Towers Watson brokerage and reinsurance solutions

While the possibility of a global pandemic was never in question, the probability of one caught most of the industry off-guard. Possibility with low probability is often what makes commercial insurance work. However, after years of soft market pricing and the far reaches of this particular pandemic, commercial markets struggled to find a balance between coverage and pricing.

With the acceleration of market hardening in most lines of coverage in 2020, businesses turned to alternative risk financing methods, including the utilisation of captives and reinsurance markets.

As part of Willis Towers Watson, Willis Re is well positioned to assist clients around the world in dealing with alternative risk options by providing risk analysis, consultancy, and reinsurance placement services. The Willis Re team combines the reputation and professionalism associated with being one of the largest international reinsurance intermediary businesses for over a century.

With a consistent and specialised approach to creativity and innovation, captive and reinsurance clients can re-structure their risk and insurance programmes to maximise efficiency and mitigate market hardening. Many businesses are turning to captives to provide coverage where commercial carriers are amending coverage contracts to provide more clarity, and in some cases, less coverage.

The ability to analyse and advise on all lines of business, and all aspects of underwriting, coverage, and associated capital solutions, including statutory and regulatory frameworks within which captives operate, is one way in which Willis Re is assisting captive clients to assess the amount and type of risk to include in their captives.

In addition, a strong actuarial team assists in the analysis and development of optimal programme structures, which reflects the appetite of today’s captive clients, most of which are seeking expanded captive utilisation.

As the conversation around pandemic risks continues to evolve, Willis Re is proud to partner with our clients in seeking non-traditional solutions, and we look forward to seeing all of you again in 2021.

Peter Carter is head of the global captive insurance practice at Willis Towers Watson. He can be contacted at: peter.carter@willistowerswatson.com

Paul Bailie is head of offshore Americas insurance management at Willis Towers Watson. He can be contacted at: paul.bailie@willistowerswatson.com

Lesley Thompson is managing director, Cayman Islands, at Willis Towers Watson. She can be contacted at: lesley.thompson@willistowerswatson.com

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