From: Captive International
Enterprise risk management is not driven by captive insurance companies, it is mandated by an organisation’s board, and then executed by its senior management. It works best when there is a clear line of communication between the captive’s board and its owner’s risk management function, says Michael Zuckerman of Temple University Fox School of Business.
“Companies can no longer afford to think that ERM has nothing to do with risk-financing or insurance for that matterMichael Zuckerman
Specialised risk managers and risk owners are there to do the heavy risk management lifting for their companies. Captive insurance is a specialised risk management function, designed to enhance an organisation’s ability to control and fund risk creatively. Captives must, therefore, be integrated into their owners’ overall enterprise risk management (ERM) processes to be effective.
In The Risk Management Handbook, David Hillson defines risk as “uncertainty that matters”. ERM requires organisations to effectively manage and control uncertainty that matters, such as adverse events that disrupt their business operations and supply chain. An organisation that does not integrate its captive into the overall ERM process, treating it as “insurance not ERM”, is less effective because this specialised risk management asset is not being used to its fullest capability.