As organisations gain access to ever-greater volumes of data and face an increasingly complex risk landscape, they are seeking insurance solutions that better reflect their risk profiles and evolving needs. We caught up with Tom Hoad, Head of Howden Ventures, to discuss why captives are becoming more important, how the sector is evolving and what that means for businesses and the wider insurance market.
Data, technology and emerging risks
Organisations across all sectors have access to more information than ever before. Combined with increasingly sophisticated technology, this is giving leaders deeper insight into their operations, vulnerabilities and risk exposures. As organisations gain a more granular understanding of their own risk profile, they are increasingly looking for insurance solutions that reflect those specific realities.
Combined with an increasingly complex risk landscape shaped by cyber threats, climate change and geopolitical uncertainty, this is increasing demand for more flexible and tailored approaches to risk management.
Together, these factors are driving the insurance industry to evolve its approach to understanding, managing and transferring risk.
Captives at the heart of the insurance ecosystem
Tom’s overriding argument is that when you have data points, you need a solution that can use them to build a view of risk.
Traditional insurance products and markets may not always be able to do that with the speed or bespoke approach required to reflect the breadth and depth of the data that clients are seeing.
This is why “captives are a fundamentally important part of the ecosystem” in Tom’s world; organisations looking to address specific risks need flexible and tailored solutions, and captives provide an environment in which those solutions can be developed and refined.
As Tom put it, captives are “a clever petri dish” for testing and learning about risk, whether that’s a known supply chain issue, a planned contingency or optimising risk transfer mechanisms.
They are, says Tom, “another way of incubating risk”, allowing clients to develop and test bespoke solutions and even feed those back to the wider insurance market later as proof of concept.
Building better solutions together
Of course captives can’t act alone, and nor should they. Tom argues that the future success of the industry is going to be based on collaboration and the basic principle of risk being a “client-first” consideration.
The traditional skills of insurers – their talent, expertise and balance sheet – should be combined with the flexibility of captives and the insights of clients to build the solutions that meet emerging needs.
Guernsey is one of the world's leading captive domiciles. The Guernsey captive industry’s role, as “part of the catwalk of what is possible with insurance”, is to “invest in the people, the talent, the platforms and the capabilities to rapidly create the solutions that our clients so desperately need”.
As technology, geopolitics and climate reshape the global risk landscape, the insurance industry will need new ways to understand, manage and transfer risk. For Tom, captives will play a central role in that evolution, by helping businesses develop more tailored and innovative risk solutions.
Tom Hoad leads Howden Ventures, an end-to-end platform that accelerates the launch and growth of insurance start-ups by bringing together funding, capacity, expertise, governance and distribution in one place. Listen to his full Guernsey Finance Podcast episode here.
