Input and collection Carrier systems in today’s demanding and dynamic business
climate need to be part of an integrated and interoperable architecture that allows the carrier or a third party to bind and issue policies, capture policy level premium and loss data in real time, connect it, flow it and display it for effective performance management. Captives rely on financial systems that send correct invoices, track receivables, process incoming premium, and remit timely and accurate cessions to captives. Captives rely on third- party administrators (TPAs) tasked with claim-handling to fluidly and completely communicate claim performance in language that carriers can easily grasp and incorporate. And captives rely on management systems that create information from where there was only once data.
A robust, edit-intensive carrier policy administration system with
the ability to rate, quote and issue multi-line, multi-state policies for new business, renewals, cancellations, reinstatements, rewrites and endorsements, and export that data in a usable format to third parties, captures necessary data, avoids errors and eliminates multiple points of entry. The accuracy of the actual insurance policy issued is vital in capturing the exposures that the captive reinsures. If, for example, a named insured is mistakenly included on a policy and not accounted for in the pricing, then the captive will be assuming liability for which it is not receiving commensurate premium, which will thereby have a negative impact on the captive’s loss ratio. Additionally, when dealing with group captives, a policy issuance system that processes audits in an accurate and timely manner ensures that the appropriate premium is billed to the applicable captive member and hence the appropriate share of the captive’s liabilities is also assigned.
The efficiency and ease of use of the policy system is important
in allowing captives to build up critical mass without concomitant cost through the peaks and valleys of the business cycle. Policy systems built on a modern computing platform are better able to turn out a large number of policies and provide a single point of data entry requiring less human capital. In the end, an accurate and
64 CAYMAN CAPTIVE
efficient policy system allows a carrier to reduce costs and offer more competitively priced front fees for its captive clients.
Connect the data Accurate and reliable information at policy-level detail is great,
but it is not enough. Policy systems must be able to take that information and connect it to other sources to fully realise the efficiencies initiated at input. This places a premium on functionality (does it reside there in the first place?) and interoperability (can it link with other systems and data sources?). The ability to perform these connections not only creates further operational efficiencies, but sets the stage for the real value: multi-dimensional aggregation and creation of information from data. At a strategic level, the captive wants to monitor its own performance against plan by gross written premium, exposure by line of business, state, insured and class of business. At an operational level, there are third-party captive providers such as loss control, regulatory, accounting and claims providers that both send data to fronting carriers and rely on data from the carrier. Loss control vendors, for example, may best allocate their time and resources to a captive programme where preventable losses are identified by insured, territory, line of business or class code. Accounting firms require timely cession statements to prepare captive financial statements. State bureaus rely on data for experience modification factors, which impact captive premium. The ability of a carrier’s technology system to accurately and efficiently share data with third parties is not only central to overall captive performance, its absence is a drag on efficiency, productivity and opportunity.
Specialised applications Captives can uniquely capitalise on the power of dynamic and
integrated technology through financial systems that seamlessly invoice the correct installment, net appropriate carrier expenses (including reinsurance, front fees, aggregate fees and taxes), and
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