As the world grapples with new spikes of the COVID-19 pandemic, it's important to consider the disruptions such global crises can cause to organizations' supply chains. The COVID-19 pandemic created severe disruptions for many organizations' supply chains, and it's likely that a similarly disruptive event will occur in the future.
Corporate governance is critically important for captive insurance companies, as well as the managers and other service providers the captive employs. It's the captive's owner, though, that bears the ultimate responsibility for governance. The captive owner is responsible for operating a regulated insurance company and the associated compliance.
Captive insurers tend to rely heavily on external vendors, but those relationships can suffer due to not employing vendor management best practices. It is crucial to have effective vendor management in place because vendor performance ultimately affects the captive's performance.
There is likely to be a push by captive insurance company owners and policyholders to cover some of the risks uncovered by the pandemic. But risk and pricing are critical elements in product development, and captives need to ask if they can rate, price, and adjust these risks properly.
An actuarial analysis is typically required for companies that retain a significant dollar amount of insurance risk, usually through a self-insurance program or a large deductible program, according to Rachel Seale, consulting actuary with Milliman. The actuarial analysis can be useful when a company is considering using a captive insurance company.