“We all have a role in setting the record straight about the proper utilisation of captive insurance.”
Dan Towle, CICA

During the COVID-19 pandemic, captive insurance companies continued to prove a valuable means of providing coverage for pandemic-related losses, hard market rate increases and emerging risks. This elevated the important role captives have in many organisations, with more risk managers taking on a more valuable role.

Some of this started even before the pandemic and the hard market occurred. Organisations were putting more risk and new lines of business into captive insurance programmes to increase diversification while benefiting from stable pricing. One of the long-standing strengths of captives is their ability to offer an efficient means of covering these unusual and changing risks.

During this period of captive insurance growth, the pandemic accelerated adoption of technology which has introduced efficiencies across many sectors of the captives industry. The resulting information gathered can be useful in identifying areas where practices can be changed and improved to better manage the risks and reduce losses.

Changing perceptions

With the captive insurance industry having some of the strongest growth we have had in some time, we have an excellent opportunity to showcase the value of captives to their parent companies and to educate the broader financial markets. However, despite all of the positive growth of our industry, many negative perceptions about our industry persist.

These negative perceptions are because of much of the bad press and actions that have occurred with a small segment of captive insurers. In the past year, the US Internal Revenue Service (IRS) announced the development of new audit teams going after small captives, and in 2021 captive insurance was again on the IRS’ Dirty Dozen list.

If some captives are perceived to be abusing the tax code, it damages the reputation of all captives. We do not want the IRS to treat all captive insurance companies as bad actors which can create negative perceptions of the entire industry. I believe most in the industry are doing captives right, but if you are one that is not, the IRS is motivated to come find you.

The Captive Insurance Companies Association (CICA) has a long history of advocating for captives of all sizes, and for having them be formed for the right reasons and be properly operated using industry best practices. Most captives support this position, but we need more of our industry to be vocal in this support. We need to share stories publicly about successful captives and their case studies for formation and on-going operations and to present them at industry conferences.

Can you imagine a day when a mainstream news outlet or regulatory regime would characterise a captive insurance company as a “responsible and prudent way for a company to better manage their risk”? We have not-for-profit hospitals forming captives as a better way to implement risk management practices and to increase patient safety and outcomes.

That is just one example of a successfully structured captive and the type of successful operation that could be the model of the benefits captive insurance represents to the broader marketplace. We all have a role in setting the record straight about the proper utilisation of captive insurance.

Competing for talent

As well as promoting the many benefits of captive insurance we need to continue advocating the dynamic nature of the captives industry and the career opportunities it provides. With the explosive growth of captives in the first half of this year, combined with the growing retirements of professionals aged 55 to 64, experts are predicting increased competition for talent.

Captive insurance is on the cutting edge of risk management and provides interesting and rewarding careers with the purpose, stability and creative problem-solving young professionals want. Our industry is where innovation happens. Young professionals coming into the industry have more opportunities to develop skills related to innovation and developing new products than in other industries.

Whether it is navigating a hard market, or addressing business interruption and cyber risk, these areas are consistently growing and changing, and captive insurance professionals have to learn and adapt along with the changes.

“Reach out to students and young professionals about the exciting and rewarding careers that captive insurance can offer.”

CICA is leading the development of programmes for our members by providing career support and development opportunities for young professionals. These programmes have been positively received and participation in them is increasing. Our NEXTGen and Amplify Women committees have been offering some great networking and educational opportunities in small group settings.

These committees and several pairs from our Mentorship Program are giving presentations at industry conferences and actively using social media to raise awareness and engage future talent. Our essay contest is entering its fourth year with high praise from all participants for the opportunity to dig in and learn about the exciting work and the career opportunities in captive insurance. Even students who have their first jobs lined up tell us they’ll consider captive insurance for the future.

We are proud of the new programmes and initiatives we have put forward. We have received overwhelming support from our members and are excited to report increasing participation and new opportunities. This is reassuring and we are grateful to the many member volunteers that are vital to these programmes’ successes.

Help us share the best practices and proper utilisation that the vast majority of the industry follows and reach out to students and young professionals about the exciting and rewarding careers that captive insurance can offer. The pandemic and the hard market have provided additional value to all captive insurers and together we can make a difference in changing perceptions and attracting new talent.

Dan Towle is president of the Captive Insurance Companies Association. He can be contacted at: dtowle@cicaworld.com

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