"To maximize growth, captive insurance companies need to stay focused on their core competencies," says Andrew Barile. (Photo: Shutterstock)
NU PropertyCasualty360 recently spoke with Andrew Barile, founder, president and CEO of Andrew Barile Consulting Corporation, Inc., about the main questions surrounding captive insurance management. With more than 40 years of experience, including 18 in insurance consulting, Barile specializes in many areas, including litigation support services, reinsurance and marketing negotiating, insurance agency market finding, and more. He is also highly skilled in captive formation and feasibility studies.
NU PC360: What should organizations consider before establishing a captive?
Andrew Barile: Captive insurance companies are designed to be unique to the parent organization forming and capitalizing the captive insurance company.
Captives continue to be formed where the traditional commercial insurance market has failed to provide the necessary coverage. For example, a company operating in the cannabis industry should be forming a captive to insure their liability exposures. Commercial property owners should be forming captives to provide commercial real estate rent default insurance for the losses they suffer when a commercial tenant cannot or will not pay rent. If the business risk can be insured in the captive, then it is a great win for the parent corporation.
NU PC360: What areas should captives invest in to maximize growth?
AB: To maximize growth, captive insurance companies need to stay focused on their core competencies, which are insurance products they are providing their parent corporations. New types of coverages need to be created, such as economic recovery policies for gaming casinos. The controversy between what is a business risk that cannot be insured, and what can be insured, still exists. Captive owners are creative opportunists operating within the regulations and the custom and practice of the insurance industry.
NU PC360: What are the best practices risk managers/captive owners should adopt?
AB: Risk Managers/captive owners need to take a more active role with their captives. Regulators of captives have mentioned that presidents of captives do not even attend captive board meetings. Delegating the operational management to the captive managers is not the only answer. Captive owners need to appoint an insurance-experienced board of directors in addition to the captive manager.
NU PC360: What are the most common snafus when managing a captive?
AB: The most common snafus' risk managers/captive managers/captive owners make is to underestimate how much insurance expertise it takes to own and operate a successful captive insurance company. They do not devote enough financial resources to the captive to create an experienced management team. Too many captives still rely on their captive managers to provide and maintain the captive instead of focusing on how to grow the captive and increase its profitability.
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Heather A. Turner
Heather A. Turner is the managing editor of ALM's NU Property & Casualty Group. She can be reached at [email protected].
