Captive Insurance Governance
The risk management function helps protect assets and enables the continuity of business operations. This can include operating a captive insurance company as a funding mechanism for self-insuring risk.
Adaptable and diligent oversight of captive programs can be vital to parent companies realizing their operational and financial goals. However, many captives often lack a governance framework that properly identifies and formalizes processes and controls across all of the captive’s coverages, thereby compromising operational transparency, internal controls effectiveness, efficiency and performance.
- Organizational structure
- Roles and responsibilities
- Vendor management
- Financial and operational controls
Organizational structure
Organizational structure forms a captive’s foundation and is critical to establishing important governance areas (e.g., roles and responsibilities). Individuals involved in other functional roles and reporting chains within the parent operate and manage most captives, but you should treat your captive organization as a standalone company that requires an independent organizational chart.
When creating or updating your organizational chart, be sure to include individuals’ titles, clearly indicating titles within both the captive and the parent. While this may seem contrary to the above, providing parent company titles in addition to captive titles can help you determine congruence in financial controls and the approvals necessary to operate both the parent and captive. In addition, it’s common to include key vendors such as the captive manager and claims administrator(s)’ contacts within the organizational chart to help gain a broader picture of the operation.
How PwC can help
PwC’s risk modeling services practice assists captive and self-insured clients with traditional pricing and reserving, data management and analytics, claims management leading practices and corporate governance, also offering innovative modernization solutions solutions.
We help clients assess and improve their captive governance by identifying and formalizing the process and controls across coverages and major insurance functions (including claims, reserving, pricing, funding and underwriting). We prepare detailed documentation on the processes in place for each coverage. We help clients identify controls owners and determine how they can effectively attest to completeness and effectiveness on a regular, scheduled basis. If errors surface, we can trace and isolate relevant facts and circumstances and suggest tangible improvements.
Our approach is to first identify each key process. Through detailed working sessions with key stakeholders, we can capture and document the workflow process. This helps reveal where and with whom risks and controls do or should reside. We then can create a logical risk control matrix for each key process. Finally, we marry each process diagram with its respective matrix into a narrative that tells the story of process, people and controls. This can help you improve your captive’s effectiveness, demonstrate good governance, facilitate the onboarding of new staff and satisfy internal audit requirements.
