The new semester brings about new challenges and new opportunities. Although we are not able to have events in person, we are still able to learn and grow together.
On Oct. 8, 2020, the Risk Management & Insurance Society (RMIS) hosted an event about captives with Jim Swanke. Jim has worked at Willis Towers Watson for the last 39 years and is currently their Director of Risk Consulting. He also teaches the Sustainability, Environmental, and Social Risk Management course in the fall as well as the Captive Insurance course in the summer.
Jim gave a brief overview of how captives work. We learned about the various types of captives, including a type of captive that has become increasingly popular recently: the cell captive. These captives allow companies to rent space and lower startup expenses. One of the most interesting things I found was the steady upward number of captives until around 2015 when a lot of micro captives were scrutinized more closely by the IRS and dissolved. Currently, captives are increasing in number again.
He also discussed the various reasons why a company would want to set up or utilize a captive, like filling voids that normal insurance companies would not and gaining access to reinsurers. Jim also covered the ideal characteristics for a captive, such as lines of coverage and size. Finally, Jim went over some applications of captives and the process from the original feasibility study, to the implementation of how it would work and how long it would take.
Overall, captives are increasingly common with a variety of different setups that can be a good alternative to traditional insurance in certain circumstances.