Business continuity for captives

When Covid-19 hit the US in early March, one thing became very clear: that the vast majority of businesses were not prepared for a pandemic.

In a short amount of time from when Covid-19 hit the United States the country had the highest number of cases in the world, unemployment spiked to more than 14%, and many organisations realised that their business interruption insurance did not cover them in the case of a pandemic.

Many businesses do not plan for so called “black swan” events, like the Covid-19 pandemic. A black swan event is defined as an incident that was a surprise, had a major impact, and afterwards has been the subject of hindsight bias by people claiming that the event could have been predicted.

However, some organisations did prepare for this black swan event, outlining steps the company would take if a pandemic occurred in their business continuity plans. One of those organisations was Captive Resources, an independent captive consulting company with its head office in the United States.

According to Nick Hengtes, the CEO of Captive Resources, the company invests a lot of time in planning for the future, which was why they thought about pandemics when writing their business continuity plan. According to Hengtes, Captive Resources plans up to seven or eight years into the future and have strategies for many different situations mapped out.

“We do a lot of planning around here,” he said. “We put together an emergency preparedness plan probably 10 years ago, which is a 50-plus page guideline on how to handle lots of different emergencies.

“Everything from workplace violence, bomb threat, colleague injury, elevator emergencies, fire, all of those things. And the pandemic portion of it has been in there. We try to look at all the different areas that might have an impact on our business or our client’s business and prepare for that.”

When the pandemic broke out, Captive Resources said that one of the striking things was how quickly everything changed and having to manage that. “It was a very fluid situation,” Hengtes said.

In early March Hengtes was travelling for a board meeting and things seemed bad, but the US Government had not yet raised the country to a level three (which would recommend no non-essential travel).

Captive Resources had roughly 10 board meetings and 15 risk control, financial and broker workshops left for the season. So given the country was still at a level two, on the Tuesday Hengtes emailed contacts saying that they were going to continue with their plan to hold the meetings.

Then the next day the pandemic was moving so fast that he had to email again saying plans had changed.

“By Wednesday, we put out another e-mail that said we are recommending to our boards that they not go to their meetings, that they cancel their board meetings and that they cancel all workshops through May 15th. We had to tweak that a little bit on Thursday and clarify it on Friday. So that’s how fluid this thing has been,” he explained.

One of the biggest things throughout this has been communication. Hengtes has been constantly in communication with staff and clients, even if that means emailing every day or second day. It is, he says, one of the key things that has helped.

“I’ve got communications to our members from March 10th, March 12th and March 18th,” Hengtes said. “We’re communicating very frequently with them.

“I’ve got communications to our employees from February 27, March 11th, March 12th, another one on March 12th. And then we had a staff meeting by phone on the following Monday. So, you know, we’re trying to be very proactive in communication with everybody that we interact with.”

The response to this, Hengtes says, was “amazing”, with all their members being very positive despite how quickly everything had to change.

“But I will tell you, our members have been amazing. Within a day, I think, or maybe two days, all of our executive committees, our captive executives had been together, had had a phone call, and the boards had decided that they were going to have a proxy vote to cancel those meetings.”

Hengtes says that while most of the insureds Captive Resources works with are financially strong, there is no doubt that the pandemic will impact parent companies in some industries.

There has been much discussion around how the pandemic will impact the captive industry, with some managers seeing more interest in setting up a captive and the run-off market also set for a big year as parent companies use their captive’s capital to help them through a difficult time.

“The other really positive thing for us is who we do business with,” Hengtes said. “We’ve got 4700, 4800 US domiciled insureds in various captives. They’re all very financially strong.

“Now, having said that, there are some industries that are going to be really impacted. Anybody in the entertainment industry or restaurants. We’ve got a motor coach operation and those are all sitting on the side of the road right now.

“You know, we’ve got some industries that are going to be really hard hit and we’re going to help them as much as we possibly can to weather this storm.”

Another part of the business continuity plan that Hengtes believes has helped is how the organisation has communicated with its employees.

In early March, when Captive Resources announced the move to working from home, the company also gave its employees $1,000 each to help them if need be.

“We’ve been blessed that we’re a pretty financially strong company and been able to do some things. We will weather this storm,” he said.

“We did some things for our employees, for people that made under $100,000. This was before the government jumped in, we gave everybody a $1,000 immediately just because it was the right thing to do.

“So they can buy groceries and do the things that they need to do and they’re not worrying about their livelihood. We told everybody, you’re employed here there will be no layoffs, we are moving forward the way we always did.”

The benefits of doing this for their employees, Hengtes said, was that not only are their employees taken care of, but then when they are working they can focus on work because they’re not worried about other things.

“Everybody’s working from home, and that means we’re working from home. And I will tell you, it’s been amazing,” he said. “I really expected to see a slowdown in just everything right around here. And I will tell you it’s been busier than ever.

“I think the reason for that is our employees aren’t worried about their jobs. They’re not worried about being able to buy groceries. They’re able to focus on our clients. And that’s a real positive thing.”

Although in some respects it is business as usual for Captive Resources, the switch to the entire business working from home means that there were changes as to how everyone worked.

“We’re having to work differently. But I’ve seen emails going back and forth on issues that we’re having and people are on top of it. We’re evolving and we’re learning and we’re adapting. And I think that’s positive,” Hengtes said.

Part of the reason the business is working so well despite the unusual situation, according to Hengtes, is that Captive Resources already had a home working plan so employees could refer to that.

“I think what you get into a zone like this everything is so fluid,” Hengtes explained. “So it’s really interesting because I think that when you’ve got something in place that people know then they’re already used to the technology.”

Because Captive Resources had a work from home policy, it meant that the switch was a lot less bumpy for them according to Hengtes.

“It helps a lot with communication. People are having to try and get used to technology really quickly. And they haven’t maybe been prepared as much,” he said.

“Because if you haven’t had to work from home policy before and you’re suddenly having to shift to working from home that very quickly, it can take some getting used to. That’s kind of what I’m what I’m seeing from some other organisations just across the board.”

Even with all the planning, it was surprising to the organisation how quickly everything happened.

“I guess this didn’t sneak up on us, but it kind of did sneak up on us,” Hengtes said. “I’m looking at our pandemic plan, which has trigger points where if certain things happen, then we do certain things.

“And we went from trigger one to trigger three in about a day. We implemented the whole thing within a day.”

Despite having a pandemic plan that worked well, Hengtes explained that in the future the organisation will be updating it. “We’re going to know a lot more about how to handle pandemics in the future,” the CEO said.

“And we’re going to tweak the plan obviously once we get back, we’ll take a look at what worked really well. And some things have worked really well and some things that we may need to tweak to handle different situations.”

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