Five reasons you should be using captives

Five reasons you should be using captives Combining life and general insurance in a captive can improve cash flow for your business, and make it more resilient to globally-interconnected risk. Here are the key advantages to consider based on a recent survey conducted by Bloomberg Audience Insights. 1 Raise the status of risk management Department heads and the C-suite are often too busy to give due consideration to risk, but setting up a captive can raise the prole of risk management within the business. Twenty years ago, if there was a Chief Risk Ofcer, it was just about buying a bit of insurance. says Ian Veitch, Global Head of Proposition & Underwriting, Corporate Life & Pensions, Zurich Insurance Group. As the world has become more complex, Chief Risk Ofcers are now looking over the totality of risks to see how they are connected. 2 Combine coverage strategically Life insurance risks are predictable, but general insurance risks are more volatile, with high claims in some years and low claims in others. Bringing these two together within a captive can smooth out variations and make things more predictable. 3 Improve cash ow and reduce costs The simple strategy with multiple bene ts Lloyds Register, one of the worlds oldest and most respected businesses, uses captives to help manage complex global risks. One of their most effective strategies is the pooling of employee benets and general insurance. There are risk management and nancial benets to combining life and general insurance a captive can deliver premium cost savings and improve cash-ow management and investment returns. And with the EUs Solvency II Directive coming into force from January 2016, adding employee benets to captives can be an effective way to diversify risk exposure and reduce the amount of capital required to insure against insolvency. Include global employee bene ts for global advantages 4 Employee benets account for about 30 percent of total employee compensation at most corporations. Despite this substantial expense, many multinational organizations underestimate the nancial advantages of moving their global employee benets programs into a captive, which can deliver additional underwriting prots when these programs are reinsured. 5 Break down corporate silos Traditionally, HR functions dont interact with risk functions, and the people in HR are likely to see decisions about benets, such as life insurance, as their domain. However, pooling risks brings benets to both groups, and setting up a captive can be a good way to build relationships between HR and Risk Managers. Ask the expert Dr rer. pol. Paul Whrmann Head of Captive Services Global Corporate EMEA/APAC/LATAM +41 44 628 82 82 Connect on LinkedIn