No solo tuvimos la oportunidad de atender al European Captive Summit 2022 que se celebró el 30 de junio en Ámsterdam, sino que José María Corsino, partner en Delonia Software, fue uno de los ponentes. The summit allowed attendees to listen to and share ideas about business practices with their peers, an impressive group of about 60 Captive Owners and Professionals. Throughout the day, the various speakers revealed the current reality of the hardening insurance market and what it means for the captive business practice.
Captives: myths and realities
Throughout the summit, the Captive Owners emphasized the importance of clearly conveying what a captive is to the public,who typically know little beyond the fact that captive companies are often based in Luxembourg, the Netherlands, Ireland, Switzerland, and other low taxation places that favor industry. Indeed, in the case of captive insurers, it is beneficial for financial assets to be held in low tax locations to protect capital used to cover risk and safeguard the company, its assets, and employees.
Captives: costs or benefits?
One of the most interesting topics discussed at the Amsterdam meeting wasCaptive Operations and Effective Risk Management Practices. Management generally sees a captive as an inevitable cost, with the objective to breakeven. The participants came to a conclusion that might seem surprising: captives can provide a financial benefit for the parent company. Which poses a problem: what to do with those extra resources? In addition to the obvious answer: establish reserves to compensate for claims and provide self-insurance funds. Another interesting and often forgotten possibility is to invest part of these resources in improving digitisation, modernisation of the business and thus increasing its performance, as well as improving ease of management and compliance.
Cyber risk: a difficult threat to measure
Another issue that gave rise to a productive exchange of ideas among the panelists was the part entitled: Financing and Obtaining Efficient Capacity for Cyber Insurance (Financión y eficiencia en el ciberseguro). Cybersecurity threats are one of the biggest risks facing businesses today. Companies are currently more concerned about the risks posed by cyber-attacks than by other threats such as natural disasters or supply chain disruptions. A fact supported by this study conducted by Allianz. Measuring risk in this area is very difficult, not to mention the difficulty of finding sufficient coverage in the market. Therefore, in the case of a large company, only a captive will be able to offer sufficient capacity to cover the risk.
The unstable global situation
Facing the current obstacles in today’s turbulent world market. The war in Ukraine, trade conflicts with China, supply chain and distribution disruptions, inflation… The complexity of the present time means that in many cases only the captive (and not just an external insurer) can respond to the current challenges.
The symposium concluded with the shared sentiment that captives are the best option for large companies to manage their risk and, with the correct implementation, can provide substantial benefits in terms of services and financial resources. Benefit for it not only in terms of services but also in terms of financial resources.