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Now Is the Time for Captives to Take Control of Data with Analytics

David Thomas

As the insurance and reinsurance markets harden in the wake of the coronavirus pandemic, now is the perfect time for captives to take more ownership of their data with risk analytics software technology.

As the hard market takes hold, with some risk managers citing premium price hikes of up to four times that of last year, our captive-owning clients are, perhaps not surprisingly, re-evaluating their risk appetite. This is both in terms of the level of risk they are looking to write themselves, and the level of risk they will look to cede to the insurance market.

Traditionally however, particularly for the smaller captives, this process has largely been conducted in the dark with the key data, such as that on claims experience, held firmly in the grasp of the re-insurer or insurer and out of reach of the captive.

In fact, for far too long captives have been following rather than leading when it comes to negotiations over cover. But this imbalance is changing through the advent of affordable plug-and-play data services and analytical tools.


Gain Insights with a Structured Database

For captives to truly lead the process of re-evaluating their risk appetite and reassessing their retentions, they must have all the information they need at their fingertips – but not in a big mess of data.

To be really useful, and to really play a role in due diligence on these fundamental decisions, the database needs to be structured in a way that enables the recording of:

  1. Contracts (whether direct or ceded)
  2. Details of premium written and earnt
  3. Risk and financial data for each claim

By linking, for example, the claims to the insurance contracts, the captive can then gain informed insights into their loss ratios per entity or policy line, into loss control and into how to reduce retention costs.


Achieve More Bargaining Power in Negotiations

All of these developments mean that captives no longer have to be in the guessing game and beholden to insurance market insights. And, of course, with knowledge comes not only greater understanding of your risks, and what to keep or cede, but more bargaining power when dealing with the insurance and reinsurance market in terms of pricing and coverage limits.

As Sir Francis Bacon once said, ‘Scientia potentia est’ or ‘knowledge is power’. Now is the ideal time to ditch the spreadsheet, come out of the dark and shine an analytical light on your portfolio.


Next Steps

To learn more about how captives can take more ownership of data with technology, check out our recent discussion on the Global Captive Podcast.


global captive podcast

Sep 10, 2020

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