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Negotiating early with insurers key to captive success: Experts

Posted On: Mar. 7, 2023 9:17 AM CST


RANCHO MIRAGE, California – Risk managers with captive programs need to negotiate early with insurance markets and collaborate with their carrier partners, experts say.

“You can never have enough information,” said Jennifer Guidry, Hartford, Connecticut-based division vice president of business development and marketing-alternative markets at Great American Insurance Group during a panel session Monday at the Captive Insurance Companies Association 2023 International Conference.

Captive managers need to negotiate early on and focus on preparing and understanding how their insurer partners are structured, Ms. Guidry said.

Collaborating with others to understand how they’re structured is “a key piece of critical information,” because in that negotiation process “it’s going to play out in terms of how they view pricing fees and their expense structure, which is obviously important to you,” she said.

As captive managers are putting together their captive, coverages and advisers, asking questions to determine if insurer partners have the product filings they need is also important, Ms. Guidry said.

Great conversation starts with collaboration, said Adriana Scherzinger, Chicago-based vice president, head of captive sales and execution, U.S. national accounts and middle market, at Zurich North America.

It’s important that insurers consider the limits, claims history and risk mitigation factors the captive and customer have implemented, along with any changes in the regulatory environment, she said.

“We look at financial information, the financial risks of the parent company and the financial risks of the captive. This is really integral with credit risk decisions,” Ms. Scherzinger said.

Timing is “a keystone” for negotiating in the captive space, said David Raymond, vice president of specialty group captives at The Travelers Cos. Inc. in Hartford, Connecticut.

Negotiating with captive clients is much more akin to a family than a business relationship, he said.

“You can have negotiations with your spouse and you can leave the room and not be happy with that negotiation, but you’re expected to come back into the room at some point,” Mr. Raymond said.

“That thought process of how am I coming into this conversation really drives the rest of the conversation. If you don’t prepare for that you’re going to be woefully underrepresented in your own position,” he said.

Trust and active listening are also important, to be sure that clients get what they need, he said.

Seeing insurers as partners that are working with you is important, Ms. Guidry said.

“I’ve had times when different captive owners have come in and have conceptually had an idea they wanted to put together. We were able to engage with them as a partner by bringing in expertise,” she said.

Building partnerships with insurers, with their fronting arrangements and brokerage team all play a role in helping ensure that risk managers do a good job with their captive and for their organization, said Theresa Severson, Aurora, Illinois-based vice president, insurance and risk, at Kite Realty Group, who moderated the session.