Hear experts discuss the most pressing questions the captives insurance industry faces today. Check back each week to see a new question tackled by our speakers.

Question 1: What is a risk register and how can it help quantify your risks in order to better inform your risk management?

PROVINCE OF NOVA SCOTIA

Bruce Langille

Managing Director of Risk Management & Security Services,
Bruce Langille

A risk register is there to help you make effective risk intelligent decisions.

A centralized Risk Register:

  1. Prevents repeating mistakes
  2. Provides guidance on prioritization/ mitigation
  3. Single source of truth
  4. Improvement over time
  5. Maintains confidentiality
  6. Law of guesstimates – when we are unsure of something, we make a guess. Gut grabs the most recent relevant information and the brain adjusts accordingly

Question 2: When should you measure and (re)evaluate your captive’s performance?

MARSH CANADA

Jason Keyfritz

National captives Solutions Practice Leader,
Jason Keyfritz

Captives have two distinct areas of performance to measure with different timelines.

Strategic: When established, a captive should have specific objectives. The internal stakeholders should be able to answer the question of how the captive is projected to add value to the organization. Over time, as the company changes, so does the business environment and leadership. Insurance market conditions also change. After a few years, every company should perform a strategic review to provide a fresh perspective of how the captive is projected to add value and if the original goals are still appropriate. The timeline would be accelerated, for example, in the event of a major acquisition or divestiture.

Operational: Given the established objectives, captive operational performance should be tracked through the policy year on a continuous basis. Tracking may include performance of both sides of the balance sheet as well as compliance, governance, and operational servicing goals. In particular, the captive would track the key areas that may have the largest impact on achieving the established objectives.

Question 3: How can an investment strategy help a captive?

CIDEL TRUST COMPANY

Gordon Anderson

President,
Gordon Anderson
  • Many captives are invested 100% in cash earning approximately .5 % or conservative bonds earning 2%. Undertaking a more diversified conservative strategy with 25-35% equities does not increase risk but can boost portfolio returns to 4-5%.
  • Liquidity is often over emphasized resulting in overly conservative portfolios with low returns not even keeping up with inflation
  • Liquidity is often over emphasized resulting in overly conservative portfolios with low returns not even keeping up with inflation
  • Actively managed low volatility strategies also materially out perform passive strategies
  • Accessing third party managers will almost always out perform proprietary strategies. Finding firms that only do investment management as their core business is important
  • Most active managers are “closet indexers” almost guaranteeing under performance
  • Asset allocation evolves as the captive matures