Communication and data are key to captives preparing for next soft market

Open communication and data-driven insights can help captive owners and service providers be proactive ahead of the next soft market, experts say.

They were speaking during a panel session at the Captive Insurance Companies Association 2024 International Conference in Arizona, which has attracted 659 attendees.

“We’re in the middle of a hard market, and hard markets tend to keep everyone on their heels, rather than on their toes,” said Amy Evans, executive vice-president at Intercare Holdings, a claims management company.

Hard market cycles appear to “sneak up on us” and the industry always seems to be in reactive mode, Evans said.

“Unlike the last soft cycle, which lasted forever, we don’t know how long this hard cycle will last, so we need to be prepared for the soft cycle so we’re not being reactive,” she said.

For captive owners and service providers, that’s going to require communication, she said.

David Beyer, director, risk management, at Alaska Air Group, said the company uses its captive as a risk management tool and to smooth out the pendulum swings of the commercial insurance market.

Communication between captive owners and service providers is essential, as is internal communication with company executives to show how the captive adds value, Beyer said.

“We like to make sure that we treat everything as a partnership. You have common goals, and you need to work toward those. When you have common goals, you need to communicate those effectively,” he said.

“If we’re not satisfied with the communication that we’re receiving back from our partner, speak up and encourage them to improve,” he said, adding: “If it’s not improving then we look to find alternative means.”

Insurers can offer guidance to captive owners by sharing data and market intelligence to prepare them for the next market cycle, said Jennifer Guidry, divisional vice-president at Great American Insurance Group.

It’s currently a hard market, but rates in certain lines such as directors and officers liability and workers comp are soft, while rates are up in casualty lines, Guidry said.

Having conversations with captive owners about how interest rates and rising nuclear verdicts are impacting the way insurers look at the business is critical, she said.

“It’s sharing all the things that we see on the carrier side with a captive so they’re fully aware of how we think about risk and how the market thinks about risk, so they can position themselves accordingly,” she said.

The panel was moderated by Marcy Van Stee, director, acquisitions, at The RiverStone Group.

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