There is a growing interest from companies conducting a ‘re-feasibility study’ for their captives, according to Anne Marie Towle, CEO of Hylant global risk and captive solutions.
Organisations can benefit from conducting a ‘re-feasibility study’ as a means of sensing whether their captive remains fit-for-purpose and what improvements could be made to their alternative risk financing strategies.
Towle was speaking on the latest episode of the Global Captive Podcast, alongside Alex Gedge, senior captive consultant at Hylant.
“I do feel, though, that over the last couple of years there is a significantly greater amount of interest in re-feasibility, captive checkups, strategic reviews — whatever you may call it,” Towle said.
“Because a lot of times, even if a company was established in the last five years, those insurance companies were sometimes set up pretty quickly and might not have been as thoughtful.”
Towle said taking a step back and looking at the strategic aspect of how the utilisation is leveraged and optimised is important.
Towle said one scenario that sometimes triggers a feasibility review is a “changing of the guard”.
“Whether it’s the risk manager, the CFO, the treasurer, or even sometimes the CEO – who will help drive and ask questions: ‘What are we doing? Why are we doing this? Why do we buy what we buy?’”
Other reasons include a business plan change, or the current domicile not being receptive to certain lines of coverage or what Towle calls a “re-scoping” — re-looking at how to leverage surplus.
“Particularly if you’ve accumulated a lot of surplus, what is their flexibility from an investment standpoint, and how can you leverage it in supporting your risk management?” Towle added.
She believes it is important to review the captive’s goals and objectives at any point in the captive lifecycle, whether that’s five, 10, or even 20 years.
“What are those for your parent company, depending on the type of structure you’re in? Do those align with your board? And are they ready and willing to make changes?” she said.
Gedge explained that one fun thing about strategic reviews and re-feasibilities is asking, “how do we utilise your captive in the best way?”
And that includes all those nice, complex things such as multi-year, multi-line reinsurance, all the way down to self-insured deductibles, self-insured retentions, and all of these other elements.”