THE CAPTIVE INSURANCE COMPANY’S GUIDE
Overcoming Data Challenges in a Regulated Environment
WHY SHOULD YOU READ
In order to help organizations lower their total cost of risk, insurance and risk professionals
need to be able to instantaneously cross-examine their risk and insurance data. However, many
organizations struggle to achieve this goal, spending valuable time manually manipulating and
consolidating their enterprise-wide data. This is often at the expense of being able to add real value
to their organizations by helping reduce losses and proactively managing and mitigating risks.
This guide looks to provide a valuable insight
into how a Risk Management Information
System (RMIS) can help your organization
The guide is also packed with client
testimonials, insights from industry research
and practical worksheets to determine if your
organization could benefit from an RMIS and
the value it can provide.
We hope this guide will be a useful resource
whether you’re investing in an RMIS for the first
time or re-evaluating your current supplier.
Demonstrate what types of
businesses use an RMIS.
Explain what an RMIS does and
the value it brings.
Find out if you need an RMIS.
THE CAPTIVE INSURANCE COMPANY’S GUIDE 1
Since 2011, the number of captive insurance companies has grown
by some seven percent annually, according to the MRMR Captive
Benchmarking Report 2014. Such a healthy rate of growth suggests
parent organizations appreciate the value to be had from establishing
and managing their own insurance carrier. Aon’s 2015 Global Risk
Management Survey has confirmed the top reasons behind this trend:
REASONS FOR CAPTIVES
Reason 2015 2013
Strategic risk management tool 33% 18%
Cost efficiencies 16% 18%
Reduction of insurance premiums 11% 12%
Control on insurance programs 10% 11%
Access to reinsurance market 9% 7%
Risk finance expense optimization 8% 12%
Cash flow optimization 4% 7%
Other 4% 6%
Tax optimization 4% 4%
Ability to establish reserves 4% 4%
Parent companies must constantly reviewing the performance of their
captives, to ensure they are continuing to deliver value and remain aligned
with the corporation’s strategic objectives. With increased regulation
and governance on both captives and their associated parent, there is a
heightened need for efficient operations in the captive; effective handling
of data is at the core of this need. In particular, captives handling larger
volumes of data or with many data sources cannot afford to ignore the
needs resulting from increased regulation and governance.
As business requirements change (for instance, the captive’s need to
adapt to a change in the risk management strategy of the parent), the
technology and associated data management need to evolve with those
changes. Different types of captives will need different solutions, so it is
certainly not the case that one size fits all.
The following chapters will examine how captive managers can use
technology to overcome data challenges and the resulting benefits.
Chapter 1: Key Challenges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Chapter 2: Looking At Solutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Chapter 3: Understanding the Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Chapter 4: Who Benefits Most? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Chapter 5; Case Studies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Chapter 6: Technology Investment Approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
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CHAPTER 1: KEY CHALLENGES
To begin with, it’s important to understand how data management is related to the key challenges captives face. As we’ll see, data is central to both
the problem and the solution to each of the challenges (all of which will be familiar to captives managers) described below.
KEY CHALLENGES FACING CAPTIVES AND THE ROLE OF DATA IN EACH
1. Increasing regulatory and corporate governance requirements
Compliance with Solvency II or the equivalent legislation, as well
as expanding corporate governance around risk management, is
a significant challenge for many captive managers. The reporting
requirements based on legislation and standard audit requirements
can be quite burdensome. Accurate figures are key, since reporting on
gross and net positions and reinsurance arrangements will directly
impact the capital the captive has to hold. Today’s captive manager
needs control, auditability and transparency over their operational data
such as premiums and claims. The ability to access, analyze and report
on growing amounts and types of data is central to meeting the evolving
regulatory and governance mandates.
2. Parent-company financial reporting requirements
Until recently, many captives have underestimated the challenges in
satisfying the parent company’s own financial reporting requirements.
Yet it’s hardly surprising that corporate boards are calling for accurate,
comprehensive reporting on the captive’s potential impact on the
enterprise’s finances; after all, a captive is part of its parent’s balance
sheet. Here again, data management is crucial to providing auditable
financial transactions that cover, for example, all premium and claims-
related activities and movements.
3. Providing data to actuaries and commercial carriers
Another challenge is giving actuaries the data they need to calculate
capital requirements, claims reserves and premium allocations. In
order to make these calculations, actuaries are being more forceful in
their demands for a higher level of scope and detail, auditability and
reliability. And when captives go to market, commercial carriers are
demanding extensive data for competitive pricing.
4. Growing risk-management requirements
More than ever, regulators are expecting captives to be run like
commercial insurance carriers, including proper risk management
policies in place as well as fit and proper people in key positions
such as risk management, finance and audit. Furthermore, proper
documentation is expected. Access to accurate, comprehensive data is
a prerequisite to activities such as:
a. Managing counter-party exposure;
b. Meeting strict reinsurance policy and claim notification time limits;
c. Monitoring aggregates and claim positions; and
d. Managing of premium cash flows between corporate, captive,
commercial insurers, reinsurers and business units.
THE CAPTIVE INSURANCE COMPANY’S GUIDE 3
And finally, some captives are tasked with helping to manage risk within
the parent; for these captives, having visibility of the parent’s risk profile is
5. Meeting strategic goals and parent expectations
Businesses today demand efficiency and cost-effectiveness as a
matter of course. It’s important for a captive to be well positioned to
demonstrate its value to the parent company through, for example,
effective cash-flow management, alignment of corporate and business
unit risk appetite, and bringing in additional programs for coverage.
Captives have never had a more acute need for accurate, comprehensive
data. Today’s captive must be very flexible in its use of data not only to
respond to reporting requests from its parent company, regulators and
other stakeholders, but also to satisfy growing operational demands.
The rest of this eBook will explore how captive managers can harness
the power of data; even as the volume and types of data grow rapidly,
processes and tools are available that deliver real value to captives.
must be very
flexible in its
use of data.
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When one stops to consider the range of operational activities for which today’s captive is responsible, it’s no wonder that captives face many
of the same challenges as a commercial insurance company. Now more than ever, captive managers need control, auditability, efficiency, and
transparency over the entirety of their operations.
Many captive managers handle their risk management needs with a
variety of ad-hoc (typically spreadsheet-based) and localized systems. As
captives grow in complexity and responsibility, however, informal systems
and processes are often not adequate. For many captives, the solution is
a risk management information system (RMIS) that automates a broad
range of operations, from underwriting to claims management to finance
and corporate and regulatory reporting. These systems usually integrate
with their financial plus appropriate internal and external systems.
Every captive will have different needs, which is why it’s so important
that the process of selecting and implementing a technology solution
should be a consultative one, based on extensive discussion and exchange
of information. The system design will vary based on a wide range of
factors unique to each captive, including the type of captive, the program
structures in place, the countries in which the captive operates and the
parent organization’s expectations for the captive.
The captive’s flow of information, which is unique to each captive,
is another important factor in designing a technology solution. Any
technology system should be capable of integrating with external systems
(including those of carriers and TPAs) and internal systems (such as the
captive’s accounting system). Moreover, a system should be flexible and
adaptable so it can accommodate future changes to information flows;
a flexible system is also more likely to be cost-effective and able to be
implemented in a reasonable amount of time.
TYPICAL OPERATIONS SUPPORTED BY RMIS AUTOMATION
CHAPTER 2: LOOKING AT SOLUTIONS
»» Premium Allocation
»» Insurance contracts
»» Insurance contracts
»» Premium invoicing
»» Premium paid
»» Premium written/
»» Claims data
»» Sums paid and
»» Interfaces with
»» Underlying data for
»» Regulatory filings
»» Risk Management
THE CAPTIVE INSURANCE COMPANY’S GUIDE 5
These are the most commonly identified areas in which a technology solution can help a captive. Captive managers should consider the following checklist when
evaluating a technology system, while also bearing in mind that the captive’s needs are likely to change and evolve over time.
££ Manage complex insurance program structures, including fronting
and reinsurance arrangements.
££ Handle complex allocation of claims financials per participant (re)
insurer considering limits, aggregates, stop-loss and reinsurance-/
££ Manage legal compliance with Solvency II or its equivalent
(specifically, supporting the reporting requirements based on
legislation and standard audit requirements).
££ Provide auditable financial transactions to cover all premium and
claims-related activities and movements.
££ Manage loss exposures, including an understanding aggregate and
££ Manage the flow of premiums and cash among corporate, captive,
commercial insurers, reinsurers and business units, along with the
ability to see gross and net positions.
££ Provide an auditable and transparent view of ground-up claim costs
from the gross and net perspective for:
££ Local, corporate and captive (whether direct or reinsurance),
££ External market insurers (fronting and coinsurers), and
££ Re-insurers, including retrocessionaires.
££ Allocate and calculate premiums for global programs to business
units or at a more granular level, including tax and fees calculations.
££ Track captive incoming and outgoing premiums and commissions.
££ Calculate and track proportional and non-proportional premiums per
££ Calculate premiums written to premiums earned.
A CHECKLIST OF TECHNOLOGY CAPABILITIES
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CHAPTER 3: UNDERSTANDING THE BENEFITS
So far we have covered the captive’s need for accurate, comprehensive data and how technology can help captives meet that need. Managing ever-
expanding volumes of data—whether related to risks, policies or claims—is a clear driver to adopting technology. Now we’ll turn to the value you
should expect to realize through an effective technology solution.
When considering an investment in technology, it is important to prepare
a robust business case and identify the benefits that will arise from the
investment. The key benefits captive managers should expect from a
technology solution include:
MEETING REGULATORY REQUIREMENTS
In our experience, being able to meet expanding regulatory reporting
requirements is the primary reason captive managers today invest in
risk management information systems. A key benefit of having a RMIS is
that it provides captive managers with reliable, auditable data that can be
easily analyzed and reported upon.
MEETING THE PARENT COMPANY’S REPORTING NEEDS
Meeting the parent company’s own reporting requirements is another key
benefit of improving a captive’s data management. A captive forms part of
its parent’s balance sheet, and corporate boards want accurate reporting
on the captive’s potential impact on the enterprise’s finances.
IMPROVING RISK MANAGEMENT
The rise of corporate governance around risk management has led to
more parent-initiated auditing; as a result, captives must respond to a
mandate for more formal data management and enhanced reporting.
Accurate tracking and reporting on the evolvement of identified risks is
key for both the management and reporting of risks.
TIMELY NOTIFICATION OF REINSURANCE CLAIMS
Managing program complexity and reinsurance or retrocession
arrangements are key benefits of risk technology. Allocation of claim
financials and premiums handling is another important benefit. And
because reinsurers have strict claim-submission deadlines, managing
the notification and recovery of claims from commercial reinsurers is
THE CAPTIVE INSURANCE COMPANY’S GUIDE 7
IMPROVING DECISION MAKING
The enhanced reporting that results from improved data management
yields actionable insights. This leads to better and more informed
decision making with benefits covering:
• Improved notification of claims to reinsurers and coinsurers,
• Cash-flow improvement through better tracking of premium
collections and reinsurer recoveries, and
• Evaluation of program design, diversification and loss control.
IMPROVING BUSINESS PROCESSES
Raising the level of automation is another benefit of an effective technology
platform. First and foremost, risk technology should automatically
consolidate a captive’s data, and it should automate report generation as
well. These automations lead to a lean captive administration and satisfy
the respective stakeholders with timely reporting while also allowing for
improvements in business processes and efficiency.
In general, a technology solution should help the captive manager
maintain and improve focus on the task at hand, which span the range
of operational activities. At the highest level, technology should help the
captive better demonstrate its overall value to the parent organization,
including the value of the captive serving as the bridge between corporate
risk appetite and business unit risk appetite.
Drive the value
of the captive
THE CAPTIVE INSURANCE COMPANY’S GUIDE 8
CHAPTER 4: WHO BENEFITS MOST?
A key premise of this eBook is that, given the current and emerging requirements for regulatory and governance reporting, every captive has a
need for structured, auditable and reliable data. Captives already have financial/accounting systems in place, whether insourced or outsourced.
For some, this is sufficient to manage their technical underwriting entries in an ad-hoc manner, so increased technology usage needs to be
evaluated on an individual basis.
This chapter considers the characteristics and types of captives that
would most benefit from deploying technology for the purpose of
improving data management.
A good place to start is by matching your captive’s characteristics to the
list that follows. In our experience, we’ve found that captives who exhibit
most or all of the following traits are good candidates to assess whether
or not they will benefit from the increased use of technology.
AFFECTED BY GROWING VOLUMES OF DATA
For many captives, managing higher volumes of data, whether related to
risk, policies, or claims, is a key driver to adopting technology. In some
cases it makes sense to consider technology where there are groups of
captives, whether part of a risk retention group, a group of cell captives
or indeed captives under a single manager. That said, most cell captives
are structured in a simple way and controlled by their parent, so they
normally require no specialized technology.
Program complexity with multiple participant insurers and reinsurance
or retrocession arrangements is often another key driver to adopting
specialized technology; this is especially applicable in managing the
allocation of claim financials through the program to each party, plus
handling the incoming and outgoing premiums as well. And last but not
least, today more than ever it is important to have a firm grasp on the
notification and recovery of claims from commercial reinsurers.
WORKING LAYERS IN PLAY
Especially on the claims side, a factor in using technology is whether
the captive is involved in working layers with high-frequency claims. If,
however, the captive is only involved in catastrophe layers that will rarely
be touched, there is little value in handling this via a formal technology
THE CAPTIVE INSURANCE COMPANY’S GUIDE 9
Pursuant to legislation in the United States and in other countries as
well, many parent companies establish captives (typically very small
ones) primarily for the purpose of tax optimization. For most of these,
the existing financial and accounting systems used by the parent or
outsourced captive manager are more than sufficient, and no further
technology investment is needed.
Yet a growing number of captives are expected to serve a more
comprehensive set of roles. When it comes to achieving optimal
management of the captive’s underwriting and claims data, technology
has a key part to play and is aligned with the top reasons for parent
companies having captives: strategic risk management; cost efficiencies;
reduction in insurance premiums; and control over insurance programs
(per the 2015 Aon Global Risk Management Survey cited in chapter one).
THE CAPTIVE INSURANCE COMPANY’S GUIDE 9
THE CAPTIVE INSURANCE COMPANY’S GUIDE 10
CHAPTER 5: CASE STUDIES
Numerous captives rely on Ventiv’s RiskConsole risk management information system to manage rapidly expanding reporting burdens and
underwriting requirements impacted by claims, policies and their associated financial movements. In some cases, both the captive and the
corporate parent use a combined RiskConsole solution which was recognized with a 2015 Innovation Award from Business Insurance magazine.
Converging into one solution or the same technology platform can deliver
significant benefits to both the captive and its parent. Of course, the
precise approach needs to reflect the particular needs of the parent and
captive; for example catering for their respective approach to arms-length
requirements or independence from writing third-party business.
Following are three brief case studies illustrating how technology can
deliver real value to captives and their corporate parents.
THE CAPTIVE INSURANCE COMPANY’S GUIDE 10
THE CAPTIVE INSURANCE COMPANY’S GUIDE 11
GLOBAL CHEMICAL PRODUCER
A leading global chemical producer, with significant U.S. operations,
maintains captive insurance companies for insurable risk transfer and to
support the parent company with global insurance management claims
management and risk-engineering activities.
When the opportunity came up to replace their self-built risk management
information system, which had been used for more than ten years, in
combination with other ad-hoc system such as spreadsheets, the insurance
department saw an opportunity to consolidate into a single system.
Their insurance department also saw an opportunity to use data more
effectively for their global insurance programs, while also standardizing
and automating processes. The benefits realized have so far included:
• Elimination of multiple systems; both ad-hoc and legacy databases
have been moved to a single system.
• Ability to allocate premiums in an auditable manner for tax compliance
and year-on-year transparency for the business units.
• Claims financials allocation resulting in the production of insurance
bordereaux to recover from commercial insurance and reinsurance
• Information and reporting available for preparing Solvency II
• Integration of insurance financial transactions with corporate
• Overall improvement of business process.
The RiskConsole system effectively manages all aspects of their global
insurance programs. It has significantly improved the insurance team’s
effectiveness, saving 500 hours of aggregation and reporting work per
year plus the need for a dedicated IT resource. It also allowed them to
converge multiple systems into a single, auditable and supported system.
THE CAPTIVE INSURANCE COMPANY’S GUIDE 11
THE CAPTIVE INSURANCE COMPANY’S GUIDE 12
GLOBAL ENERGY COMPANY
A leading U.S.-based global energy company, a major player in all aspects
of oil and gas as well as geothermal energy, was involved in multiple
joint ventures across the globe with an international team managing
insurance for global programs and ad-hoc projects. The company needed
to report on insurance costs on a total joint-venture level. The company
also needed to report on their corporate net position as well as their
captive net position and the position of any participating players in the
commercial insurance and reinsurance market.
Ventiv’s RiskConsole RMIS has met the company’s needs and delivered
benefits that include:
• Ability to report on premium expenditures between corporate joint
ventures and then through into their captives (gross and net), plus
corporate spend versus commercial market expenditure.
• Replacement of numerous Excel spreadsheets, which neither
supported reporting needs nor contributed to stable business
THE CAPTIVE INSURANCE COMPANY’S GUIDE 12
THE CAPTIVE INSURANCE COMPANY’S GUIDE 13
PROFESSIONAL SERVICE COMPANIES
Professional Service Companies
Two leading U.S. professional service companies are implementing the
Ventiv’s RiskConsole RMIS solution for captives.
In both cases, their existing situation was challenged by a combination of
legacy formal systems, ad-hoc spreadsheets and manual procedures as
part of their operational system for insurance administration.
Ventiv’s RiskConsole RMIS was selected to allow them to have a single
insurance administration system covering:
• Integrated matter reporting and case management from partnerships.
• Managing claim financial responsibilities between local retentions
(including fronters), captive and reinsurance markets covering reserves,
payments and recoveries arising from a complex program structure.
• Elimination of manual and ad-hoc procedures with an automated,
integrated and systemized business process with associated
• More flexibility in deciding the service providers involved in managing
the insurance administration, allowing for in- or out-sourcing.
• Availability of ISO27001 data certification and hosting of the system plus
their data outside the United States using the Ventiv EU data center.
THE CAPTIVE INSURANCE COMPANY’S GUIDE 13
THE CAPTIVE INSURANCE COMPANY’S GUIDE 14
The first five chapters of this eBook have focused on:
The challenges that may lead a captive manager to
consider a risk management information system;
What such a solution should be able to do;
The value a captive manager should expect from a
What kinds of captives are good candidates for a
technology system; and
Case studies illustrating how a RMIS helps real-
If your captive decides an investment in technology is appropriate, then
this chapter outlines some of the considerations and next steps.
Before approaching any technology investment, then the following needs
to be established:
• Overall objectives and outcomes expected from the investment in
• Current position identifying any challenges or issues with the current
systems, procedures and processes.
• Future desired position identifying any new requirements or resolutions
of existing challenges/issues.
• Prioritization of all identified requirements and potentially phasing of
CHAPTER 6: TECHNOLOGY INVESTMENT APPROACH
THE CAPTIVE INSURANCE COMPANY’S GUIDE 15
There are some considerations worth highlighting:
1. It is important for all technology investments to not just consider the
technology (systems and analytics) elements but also to factor the
management, or people and process, aspects as well. Understanding
of the captives business processes, people and their knowledge helps
understand initial gaps and getting to the best solution designs and also
the planning for implementing and rolling out the new technology. The
incorporation of change management and associated transformation of
processes helps ensure a successful outcome for the project.
Ventiv has developed the Risk Technology Evolution Model to help
an organization understand their maturity levels in respect to risk
technology and how to evolve from the current position to their desired
future state. Whilst this has been more focused on a parent’s needs,
a Ventiv representative would be happy to discuss how this can be
applied to your situation.
2. When considering what is foreseen to be included into the project,
then it is better to focus first on the areas that will yield most benefit
from the application of technology. For instance, areas with a higher
volume and/or frequency of activity make good candidates for applying
technology; complex but less frequent workflows, meanwhile, can
remain manual, at least in the initial phases.
3. Based on our experience for some captives there can be synergies
between the captive and parent. If appropriate this can result in
significant additional cost savings and other process efficiencies too.
Ventiv’s technology platform can provide both captive and corporate
solutions, either combined or individual (click here to learn more about
Ventiv’s Combined Corporate & Captive Risk Management Solution,
winner of Business Insurance magazine’s 2015 Innovation Award)
If you would like to know more about how to progress your investment in
technology, then please contact Ventiv and our representative would be
happy to discuss further.
THE CAPTIVE INSURANCE COMPANY’S GUIDE 16
• Many captives have driven the management of their technical underwriting
entries via spreadsheets and other ad-hoc manual solutions.
• With the rise of regulatory and corporate governance requirements and
increased parent reporting, these solutions are providing significant
challenges to the captives.
• This Captive eBook has explored the benefits on improving the managing
of technical underwriting entries through better data management using
• Through the implementation of technology, the captive can gain significant
benefits, helping satisfy the regulators, auditors and parent company.
• Investing into the right degree of technology at the right time is essential.
THE CAPTIVE INSURANCE COMPANY’S GUIDE 17
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Contact Ventiv to learn more on how technology can help you.