"To maximize growth, captive insurance companies need to stay focused on their core competencies," says Andrew Barile. "To maximize growth, captive insurancecompanies need to stay focused on their core competencies," saysAndrew Barile. (Photo: Shutterstock)

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NU PropertyCasualty360 recently spoke with AndrewBarile, founder, president and CEO of Andrew BarileConsulting Corporation, Inc., about the main questionssurrounding captive insurance management. With more than 40 yearsof experience, including 18 in insurance consulting, Barilespecializes in many areas, including litigation support services,reinsurance and marketing negotiating, insurance agency marketfinding, and more. He is also highly skilled in captive formationand feasibility studies.

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NU PC360: What should organizations consider beforeestablishing a captive?

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Andrew Barile: Captive insurance companies are designed to beunique to the parent organization forming and capitalizing thecaptive insurance company. 

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Captives continue to be formedwhere the traditional commercial insurance market has failed toprovide the necessary coverage. For example, a company operating inthe cannabis industry should be forming a captiveto insure their liability exposures. Commercial property ownersshould be forming captives to provide commercial real estate rentdefault insurance for the losses they suffer when a commercialtenant cannot or will not pay rent. If the business risk can beinsured in the captive, then it is a great win for the parentcorporation.

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NU PC360: What areas should captives invest in tomaximize growth?

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AB: Tomaximize growth, captive insurancecompanies need to stay focused on their core competencies, whichare insurance products they are providing their parentcorporations. New types of coverages need to be created, such aseconomic recovery policies for gaming casinos. The controversybetween what is a business risk that cannot be insured, and whatcan be insured, still exists. Captive owners are creativeopportunists operating within the regulations and the custom andpractice of the insurance industry.

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NU PC360: What are the best practices riskmanagers/captive owners should adopt?

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AB: RiskManagers/captive owners need to take a more active role with theircaptives. Regulators of captives have mentioned that presidents ofcaptives do not even attend captive board meetings. Delegating theoperational management to the captive managers is not the onlyanswer. Captive owners need to appoint an insurance-experiencedboard of directors in addition to the captivemanager.

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NU PC360: What are the most common snafus whenmanaging a captive?

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AB: Themost common snafus' risk managers/captive managers/captive ownersmake is to underestimate how much insurance expertise it takes to ownand operate a successful captive insurance company. They do notdevote enough financial resources to the captive to create anexperienced management team. Too many captives still rely on theircaptive managers to provide and maintain the captive instead offocusing on how to grow the captive and increase itsprofitability.   

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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].