SRS has managed captives and other insurance vehicles for more than 25 years, and in that time, we’ve defined and operationalized the services a high-performing insurance company manager should provide to every client, no matter the size. Every decision we make is based on client needs and how best to serve them.
Accurate Financials. Delivered On-Time.
What makes a good captive manager? What does good service look like in the captive management industry? These aren’t easy questions to answer because “captive management” is not a well-defined service. Contracts tend to be long-term or evergreen, with little movement between managers. This means that an owner’s only frame of reference may be their experience with how one incumbent manager operates.
What should owners expect?
Let’s start with one of the fundamentals of captive management – financial statements. This is a core function of what a captive manager does. Financial statements should be accurate and on-time, every time. Year-end financial statement audits should be clean and the opinion should be unmodified with no material weaknesses in internal controls.
Dear manager, please do your job.
It’s shocking how many insurance company managers fail to provide the most important and most basic service that a captive insurance company requires: a complete set of accurate financials delivered on time!
- Financials should always be prepared in accordance with applicable accounting standards and include standard financial statements (balance sheet, income statement, statement of cash flow, and relevant supporting schedules) presented in a format customized as necessary to a client’s needs.
- In addition to the standard financial statements, it should also include an underwriting analysis to monitor the performance of different lines of coverage, underwriting years, and policies.
- The manager should be able to provide more in-depth reporting as required, for example a comparison of actual claims data compared to estimated data at the same stage of the development cycle. This lets an owner know whether the captive is ahead or behind of what was funded.
There are many legitimate reasons why financials may take longer than expected to deliver, but most surprises can be minimized via the captive manager focusing proper attention on financial statement inputs and details in a timely manner. With appropriate controls implemented at the right time, roadblocks and hurdles can be identified sooner than otherwise and then resolved by the appropriate parties. Your manager should be in constant communication about the status of the financials and what is needed to properly complete them. Your captive manager is expected to maintain transparent and accessible financial records. The records should be organized and easily understandable, allowing you to monitor the financial health of your captive and make informed decisions.
Your manager is obligated to ensure that the financial books and records of your captive comply with the regulatory requirements specific to your chosen domicile, which is essential to avoid penalties and maintain good standing with regulators. An important component of this is to carefully follow the reporting obligations imposed by the domicile where your captive is established.
What happens when your captive is audited?
Your management company should always be ready and willing to provide immediate access to financial records and assist the auditors in addressing any questions that arise. The audit process should be smooth and efficient.
To aid the process, your manager is obligated to adhere to the documentation and record retention policies required by your domicile. This includes retaining financial records, all supporting documentation, and relevant correspondence for the correct period of time per regulatory guidelines.
You can and should expect more
Expectations regarding YOUR financial books and records must be clearly defined, upfront, with the insurance company manager. This includes setting the frequency and format of financial reporting and communications, as well as any specific requirements or preferences you have. This also includes access to your financial books and records at any time in any format such that if you desire to have a copy of the past seven years monthly or quarterly financial statements, you can obtain this without complications.