Having a captive adds strength and stability to the operations of the parent company, especially when faced with some of the challenges we are right now, according to Christine Brown, assistant director, Vermont Department of Financial Regulation on a panel at the World Captive Forum (WCF). Speaking on the panel, which focused on creating capacity and opportunity in a changing market, Brown says a captive can be utilised to stabilise premium, especially in hard markets like this. Also on the panel, Anne Marie Towle, global captives insurance leader at Hylant says that although there have been some success stories, there have been some clients who have not been successful at navigating the market, for example, where they’re looking at triple-digit increases. Towle explains that these companies have explored captives in the past and it's about sitting down and looking at their risk appetite. She says: “But how can you manage the concept of retaining the risk, and in some circumstances, these organisations already retained a portion of the risk so it's not a foreign concept.” Towle notes that she refers back to a risk spectrum and as a company moves up that risk spectrum, and having more programme control and financial control, “it is about balancing it out and explaining to the key stakeholders at an organisation you're already taking on some of this risk, it might be just a slight portion more in a primary layer, but you’ve got to think outside the box right now and be as innovative as possible”. “Captives can be a real source of financial strength for a lot of organisations touching on a variety of different types of risk. And I think it's going to continue quite a bit into the future as well,” she adds. The panel also discussed that the more reactive the captive industry is, the better it’s going to be. Mike Maglaras, president, Michael Maglaras & Company, says that from the earliest of days, captives have been reactive. Discussing why it’s good to be reactive, Maglaras states: ”You're at your best, as a human being when you react to something. When you're presented a challenge that you've got to overcome, or you've got an issue that you've got to fight.” This is good news for the captive industry, according to Maglaras, who comments: “The more reactive we are, the better off we're going to be whether that is reacting to the commercial market, the reinsurance market, or brokers tell us that the market is changing — we're at our best when we are reacting in the captive business.” He also highlights that the opportunity of partnerships is important within the industry. “We can't exist without commercial capacity, we can't exist without reinsurance and we can't exist without stop loss. We are very much joined at the hip with the commercial insurance market, their fortunes are our fortunes, their failures are our failures and their successes are our success,” Maglaras notes. Future of captives The captive webinar also looked at what the future holds for captives and exiting the current global pandemic. Towle suggests that it's going to be a slower process than what everybody's hopeful for. “I don't think travel is going to immediately pick up. It may, it may, a little bit here in the US,” she says. Looking ahead there are going to be a lot of challenges in the market, Towle notes: “I'm hopeful that we will have new capacity that will continue to come in because I think there are financial markets out there that may look at insurance as an option.” But she explains that this could be an opportunity for captives to step in and help, especially within innovation and partnerships. Towle adds: “There has always been some innovation and great history of captives helping. For example, How can we be creative? How can we step in, such as cyber and some of the other coverages that are now available commercially?” Meanwhile, Maglaras suggests that the captive insurance industry is in the middle of a renaissance, which he bases on the hard lessons that have been learned over the past 12 months. He says: “We are all in this together. We share risks together, we share ideas together for sharing capacity and opportunity.” “I would say to you that we're going to emerge from this global pandemic stronger and more capable in the captive business that we were in a year or two ago. Because we've learned lessons, we learn how to assume risks that we didn't think we've assumed, we've learned how to calculate risks that we didn't know how to calculate. We had come together, and I predicted great things for the captive industry,” Maglaras concludes.
