Although captives are widely recognized as efficient vehicles to formally fund a wide variety of corporate risks, they must be managed with the same rigor that businesses apply across all their operations.
In the current extended soft commercial insurance market and low-interest-rate environment, captive utilization can be diminished by attractive pricing and conditions available in the traditional insurance market.
Today, as risk managers struggle to maintain the relevance of their captives, many see opportunities for expanded utilization by focusing more on non-traditional business and financial risks. Sometimes, this results in increased premium writings. In other cases, however, these efforts are offset by a reduction in traditional risks that have been removed from the captive's portfolio and placed in the commercial insurance market.
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