Ventiv Technology

THE CAPTIVE INSURANCE COMPANY'S GUIDE 2 CHAPTER 1: KEY CHALLENGES To begin with, it's important to understand how data management is related to the key challenges captives face. As we'll see, data is central to both the problem and the solution to each of the challenges (all of which will be familiar to captives managers) described below. KEY CHALLENGES FACING CAPTIVES AND THE ROLE OF DATA IN EACH 1. Increasing regulatory and corporate governance requirements Compliance with Solvency II or the equivalent legislation, as well as expanding corporate governance around risk management, is a significant challenge for many captive managers. The reporting requirements based on legislation and standard audit requirements can be quite burdensome. Accurate figures are key, since reporting on gross and net positions and reinsurance arrangements will directly impact the capital the captive has to hold. Today's captive manager needs control, auditability and transparency over their operational data such as premiums and claims. The ability to access, analyze and report on growing amounts and types of data is central to meeting the evolving regulatory and governance mandates. 2. Parent-company financial reporting requirements Until recently, many captives have underestimated the challenges in satisfying the parent company's own financial reporting requirements. Yet it's hardly surprising that corporate boards are calling for accurate, comprehensive reporting on the captive's potential impact on the enterprise's finances; after all, a captive is part of its parent's balance sheet. Here again, data management is crucial to providing auditable financial transactions that cover, for example, all premium and claims-related activities and movements. 3. Providing data to actuaries and commercial carriers Another challenge is giving actuaries the data they need to calculate capital requirements, claims reserves and premium allocations. In order to make these calculations, actuaries are being more forceful in their demands for a higher level of scope and detail, auditability and reliability. And when captives go to market, commercial carriers are demanding extensive data for competitive pricing. 4. Growing risk-management requirements More than ever, regulators are expecting captives to be run like commercial insurance carriers, including proper risk management policies in place as well as fit and proper people in key positions such as risk management, finance and audit. Furthermore, proper documentation is expected. Access to accurate, comprehensive data is a prerequisite to activities such as: a. Managing counter-party exposure; b. Meeting strict reinsurance policy and claim notification time limits; c. Monitoring aggregates and claim positions; and d. Managing of premium cash flows between corporate, captive, commercial insurers, reinsurers and business units.

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