Microsoft Dynamics GP helps you gain deeper business and risk insight from internal and external data. A more comprehensive approach improves the accuracy and integrity of insight that you can gain with actuarial, financial, and operational risk. Microsoft Dynamics GP delivers breakthrough insight into business performance and profitability, improve combined and loss ratios, and provide an integrated view of enterprise-wide risk exposure.
As a risk management tool, captives have been in existence for decades and are now well established. In addition, captive owners today put their captives to more sophisticated use than ever before. Today, captives are being used by entities such as corporates, charitable organizations, trade associations, and insurance groups of all sizes. These range from multinationals to Fortune 500 companies to medium-sized business organizations. Practically every risk insured by a traditional commercial insurer could be insured by a captive insurer. The level of supervision that is necessary therefore, varies accordingly.
There exist multiple definitions and interpretations of captive insurance in the insurance world today, but one of the definitions widely used globally is the one used by the International Association of Insurance Supervisors (“IAIS”). The IAIAS defines a captive insurer as “an insurance or reinsurance entity created and owned, directly or indirectly, by one or more industrial, commercial or financial entities, the purpose of which is to provide insurance or reinsurance cover or risks of the entity or entities to which it belongs, or for entities connected to those entities and only a small part, if any, of its risk exposure is related to providing insurance or reinsurance to other parties.”
As an insurance operation, the nature of the risks to which captives are exposed is somewhat similar to that of traditional commercial insurers, but the degree of exposure may differ. Underwriting risk, counterparty risks, compliance risks, investment risks, operational risks, liquidity risks, potential risk of money laundering, terrorist financing, and fraudulent activities etc. all apply to captive insurers, but to varying degrees.
On the other hand, there are some unique risks which apply mostly to captives. For example, management risks, as most captives are managed by unrelated insurance managers. Another example would be higher than potential claims volatility as a result of limited risks. In order to identify, assess, mitigate, and monitor all internal and external sources of risk that could have a material impact on a captive insurer’s operations, it is critically important that captives have an effective risk management framework in place.
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