3 New Year's Resolutions for Captive Insurers in 2020

A hand writing on a New Year´s Resolutions list of items 1, 2 and 3

John M. Foehl | January 06, 2020 |

A hand writing on a New Year´s Resolutions list of items 1, 2 and 3

With 2019 behind us and the new decade and 2020 just beginning, I thought I'd pause to reflect on my New Year's resolutions both for the captive insurance industry and myself. There is a lot of advice out there concerning making your New Year's resolutions stick. In reading through these lists, I picked out some things that resonate with me.

  • Dream big, but start small.
  • Tackle one goal at a time.
  • Learn from the past, especially failures.

So, with those in mind, here are my three New Year's resolutions for the captive industry for 2020.

1. Create People Strategies

The need for talent across the captive industry is immense. And, while we have taken steps in the right direction to address this looming problem, such as the Captive Insurance Companies Association partnership with Butler University, more needs to be done. My coeditor, Rachel Moir, recently sent me a link to a new white paper from the World Economic Forum, titled HR 4.0: Shaping People Strategies in the Fourth Industrial Revolution. 1

The paper suggests that business, including the captive industry, will need to do more to develop the people required to move forward into the new decade. The foreword sets this tone, as follows.

The Fourth Industrial Revolution (4IR) is blurring the lines between people and technology, fusing the physical, digital and biological worlds. The impact of those changes on the way people work and businesses produce value will span all industries, economies and societies and redefine the future of work.... HR professionals are finding themselves at the front line of helping their organizations and leaders to drive technology absorption, foster innovation, enable new work models and, ultimately, attract, retain and develop the workforce of the future.

For many captives, this may seem like a rather nebulous idea better left to others to figure out. I suggest the industry view it through another lens: the concept of dreaming big and breaking down the idea into smaller, concrete steps. The paper talks about the need to reskill, upskill, and develop lifelong learning skills in the workforce. We are near record lows in the unemployment rate, but the employment participation rate continues to be lower than several decades ago. That's partly due to the aging out of my generation from the workforce. So, as talent becomes scarcer, how will organizations find new employees?

  • Focus on the person and not his or her résumé. Skills can be taught. Consider copying the coding boot camps that have been so successful.
  • Look outside the normal pipeline. Do we really believe with the use of technology that everyone within the industry will need a college degree?
  • Develop unique work relationships: part-time partners who split a full-time job, condensed work schedules, and 40 hours in fewer days are just some of the concepts to explore.

2. Oversee Black Swans, Gray Rhinos, and White Elephants

No, we aren't going to be talking zoology here—more like the increased occurrences of disruptive risks. This resolution comes courtesy of the National Association of Corporate Directors (NACD), an organization I have written about in the past. It's from one of its top three thought leadership articles for 2019: "An Animal Kingdom of Disruptive Risks." 2

The article cites a poll the NACD had recently conducted, where 62 percent of directors viewed disruptive risks as "much more important" than 5 years ago. Captive insurers are neither immune from nor inoculated against these risks. Therefore, captive boards should begin to familiarize themselves with this issue and start debating how to best cope in a more volatile, uncertain, complex, and ambiguous business environment.

For those interested, here are the NACD article's definitions for the three disruptive risks listed above.

Black Swan: events that are highly improbable, but not impossible, difficult to predict, and have a massive impact on the organization.

Gray Rhino: probable, high-impact trends, which are clearly observable but often ignored.

White Elephants: extant, existential risks that are difficult to address for numerous reasons.

Why are these three risks so challenging for captives to deal with? First, if your captive actually has an enterprise risk management program, a risk analysis is unlikely to capture them. Second, they have unique characteristics and complexities. Third, as a result, they create cognitive biases in directors that prevent them from dealing with them.

The article provides recommendations for how boards can begin to navigate these risks. It provides a series of small steps boards can take to begin the process.

3. Encourage Innovation

The captive industry has now reached middle age, and at least some captives are now dealing with a midlife crisis. The final resolution for 2020 is for captives to encourage more innovation. This is drawn from an older article I keep as part of my permanent library. I use the library as a starting point for ideas whenever I have a consulting assignment. The article is from Entrepreneur: "9 Ways Your Company Can Encourage Innovation." 3

The subheading on the article encapsulates why this is so important: "Every game-changer ever began as someone's idea. Configure your workplace to nourish your employees' little insights. The benefits can be bountiful." As we continue to seek to remain relevant in this rapidly changing world, the ability to adapt and innovate is critical. The business world is strewn with the wreckage of companies that thought they occupied a strong niche only to find out too late it wasn't so.

Best wishes in 2020, and please consider adding one of these resolutions to your board's agenda. As a former coach of mine always said, a good offense is a great defense. Be forward looking.

  1. The study, HR 4.0: Shaping People Strategies in the Fourth Industrial Revolution, December 2019, was conducted in partnership with the World Economic Forum, Saudi Aramco, Unilever, and Willis Towers Watson.
  2. "An Animal Kingdom of Disruptive Risks," by James C. Lam, NACD Directorship, National Association of Corporate Directors, January/February 2019.
  3. "9 Ways Your Company Can Encourage Innovation," by Igor Makarov, president of ARETI International Group, Entrepreneur, August 30, 2018.

John M. Foehl | January 06, 2020