A challenging time for captives
It's getting harder and harder to remain a captive. Income is down, CAT losses are up, and customers are demanding new forms of interaction which necessitate investments in digital technologies. Captives are struggling to find ways to do more with less.
Captives face wider global challenges as well:
- It's getting harder to maintain uniform procedures in an international environment where accounting standards are developing in different ways
- New regulations, such as the General Data Protection Regulation in Europe, demand increasingly detailed reporting – a necessary but time-consuming activity that can detract from core business activities
- US states, which have jurisdiction over the industry, must comply with new rules by the early 2020s following a recent agreement between Europe and the US to level the insurance playing field
Captives know new digital technologies can help address these challenges, but struggle to know which will address their specific issues, and how to scale them up.
But digital investments raise new issues. How can captives provide new services while maintaining the low-cost value proposition that distinguishes them? They recognize that digital tools and data science are revolutionizing business globally, but they fear that day-to-day-operations could suffer while they introduce innovations. And with historically low interest rates impacting their revenue, they're concerned about the cost of bringing in new technologies and automation.
Their dilemma: How to reap the potential that transformation offers in the face of these challenges?