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Captives help create holistic risk management: Zurich exec


AVENTURA, Fla. — Captive insurers function best when working with other insurance market participants such as insurers or brokers, offering organizations the potential for significant benefits as part of a holistic risk management program, according to Michael Kerner, Zurich-based CEO of general insurance at Zurich Insurance Group Ltd.

“Captives need to work with others in order to be successful,” Mr. Kerner said in his keynote presentation at the 23rd World Captive Forum in Aventura, Fla. “This is teamwork at its best.”

Mr. Kerner said captives can help organizations in several ways, including providing a tool to stabilize insurance program capacity and costs, offering risk management and risk control benefits and giving captive parents the possibility of better serving customers by providing third-party coverage through the captive.

“Captives provide rigor” to risk management programs, Mr. Kerner said in an interview following his presentation. The data collected through a captive program on claims and expenses and an increased understanding of the organization's risks are among the ways a captive can add such rigor, he said. “There's value that comes out of that process,” Mr. Kerner said.

In his keynote remarks, Mr. Kerner also addressed the current state of the insurance market and the recent World Economic Forum in Davos, Switzerland, in which he participated.

“2013 was a very good year for the insurance industry. I sort of refer to it as the perfect calm,” Mr. Kerner said. “I think it will be very difficult to match it, frankly, in 2014.”

Discussing some of the risks identified as most pressing in the World Economic Forum's Global Risks 2014 report, Mr. Kerner noted the increase in exposures to natural catastrophes with more development in catastrophe-exposed areas, and how some risks, such as climate change and natural catastrophes, are interconnected.

“Catastrophic risk is not just the weather getting worse,” he said. “It's humans putting more total insured value at risk.”

On the subject of cyber risk, the Zurich executive said, “One of the things we really struggle with in cyber space is getting all the constituent parties working together. Part of the reason they're not sharing is they don't know who to trust.”