Willis Towers Watson
With a lot of activity in the captive marketplace, Sean Rider of Willis Towers Watson discusses why there is a continued appreciation for the value a captive can bring to an organisation’s risk financing strategy
How would you describe the current global captive insurance marketplace?
We are quite bullish on the global captive marketplace. We see continued new captive growth and activity in the US and Europe. Captive owners are interested in expanded captive utilisation and building analytically-driven captive strategies. We also see a movement towards captive rationalisation and consolidation in the global accounts segment where organisations have inherited several captives over time through acquisition. In short, there is lots of activity in the captive marketplace, and a continued appreciation for the value a captive can bring to an organisation’s risk financing strategy.
What’s driving demand for captive formations?
We continue to see demand for captives in all four of the leading areas for captive utilisation: retained risk finance, risk transfer rate improvement, access to alternative capacity and entrepreneurialism. No single area is necessarily leading the charge, however, I think the opportunity for owners to use a captive as a vehicle for blending non-correlated global risks and converting that portfolio into a holistic risk transfer solution into the alternative risk transfer (ART) marketplace is becoming a very compelling proposition. I am quite excited about the growth and dynamism of the ART marketplace.
How are advancements in data and analytics influencing captive strategy?
Yes indeed, analytics are playing an expanded role in helping organisations make data driven decisions around risk financing and captive formations. Remember that the captive is simply an execution tool for an organisation’s risk financing strategy, consequently the ‘captive’s strategy’ is tied to serving the parent’s risk financing strategy. As data is more effectively harnessed and analytics become more sophisticated, captive owners are making more effective and rational decisions around strategic risk finance, and ultimately the captive’s strategy is evolving to serve the increasingly sophisticated decision process around organisational risk. This is something we are very focused on and we have made significant investments developing analytical capabilities around our captive financial value proposition, and we are excited to empower clients with new support tools like never before.
What is the outlook for the rest of the year? Have you got any exciting plans for H2 2018?
We are optimistic about the marketplace for the remainder of the year. We’re particularly excited to launch our new analytical tool Captive Quantified, the first web-based, interactive captive financial modelling tool. It helps organisations evaluate the feasibility of a captive, helps them choose the best domicile for their needs and performs financial analysis and due diligence.
This will enable profoundly more sophisticated conversations with finance decision makers as to the value, volatility, and efficacy of the captive proposition at the feasibility stage and throughout the life of the captive. We view this as a real game changer and a further demonstration of Willis Towers Watson’s leadership in the market.
Willis Towers Watson recently expanded its global advisory services for cybersecurity risk, do you predict any crossover between that and captives?
In short, yes. Captive owners are looking to consider including coverage for cyber risk in their captives, primarily we see cyber being added to existing captives but there are a few recent examples where cyber risk was actually the impetus for the captive formation. When evaluating cyber, it’s more important than ever for us to be able to leverage our cyber risk advisory and cyber analytical tools in combination with our captive expertise to optimise the results for clients.
