The News You Need for Sept. 17
How can a captive be part of your strategic toolbox? Are attacks on flight attendants back again? What happened when a mechanic lost his job right after taking FMLA leave?
Captives 101: Using Captive Insurance as a Strategic Tool?
Captive insurance is often viewed primarily as a risk management and cost reduction mechanism. However, as captives have evolved, companies have realized the strategic benefits they provide. Beyond acting as an insurance solution, captives can be integrated into broader business strategies, helping companies align their risk management with their business objectives, improve operational efficiency, and gain a competitive advantage. In this article, we'll look at how businesses can leverage captives as a strategic tool and how aligning captives with business objectives can open up new opportunities.?
Align Captive Objectives with Business Objectives?
Captives can be used for more than risk management: they can be designed to support a company's broader business objectives directly. By aligning the captive's goals with the parent company's strategic priorities, companies can better manage volatility, optimize resources, and improve financial results. A company that wants to expand into a new, high-risk market can use a captive to manage those risks more effectively. Captives can also help streamline risk financing by ensuring that risks are transferred and managed to align with the company's broader financial objectives. Companies prioritizing sustainability can use captives to support environmentally friendly initiatives or provide coverage for new emerging sustainability risks. By strategically aligning captives with the parent company's objectives, companies can achieve more than risk reduction: they can actively support growth, innovation, and financial stability.?
Improve Financial Flexibility and Sustainability?
Captive insurance allows businesses to manage their financial risks in a more controlled environment. One of the main benefits of captives is the ability to retain profits that would otherwise have gone to traditional insurers. This benefit allows companies to reinvest savings in critical areas such as product development, expansion, or even strengthening internal risk management. Key financial benefits include:?
Premium control. Rather than relying on fluctuating premiums, companies can stabilize costs by keeping risks within their cap.?
Investment opportunities. Captives can be designed to generate income by investing premiums in carefully selected assets, providing an additional source of financial flexibility.?
Capital allocation. Leveraging captive insurance allows businesses to reallocate capital more efficiently, allowing for better overall resource management. This capital can be used to fund growth initiatives or support new businesses.?
These financial benefits stabilize uncertain markets, helping businesses remain competitive while mitigating risk.?
Gaining a Competitive Advantage Through Risk Management?
Companies that actively manage their risks often have an advantage over their competitors. Captives allow businesses to develop a personalized risk management approach that gives them more control over pricing, underwriting, and claims. This degree of control can lead to better pricing models, more efficient claims management, and improved customer satisfaction. A company that uses its captive to develop a loss prevention program can reduce the frequency and severity of its losses. This programming reduces costs, creates a safer working environment, and potentially makes the company a leader in risk management in its industry. Captives also enable customized insurance solutions. Companies can design policies that cover unique risks or provide coverage unavailable in traditional insurance markets, creating a competitive advantage. They also enable faster claims resolution because by controlling claim processing, captives can speed up the claim process, improving efficiency and customer service. When a captive is part of a comprehensive risk management strategy, it can improve operational performance and market position.?
Strategic Use of Captives in Mergers and Acquisitions (M&A)?
Mergers and acquisitions are often accompanied by complex risks that must be managed effectively to ensure the transaction's success. Captives can play a strategic role in mergers and acquisitions by providing a structure to manage legacy liabilities, fill coverage gaps, and facilitate transitions between acquiring and acquired entities. Captives can offer M&A-related benefits such as:?
Managing pre-existing liabilities: By transferring liabilities to a captive, companies can better manage the risks associated with the acquired company's historical claims.?
Eliminating coverage gaps: Coverage gaps may occur when a business changes insurers during an acquisition. Captives can offer temporary coverage to fill these gaps.?
Streamlining due diligence: Companies can simplify the process by placing certain risks into a captive, making identifying and managing potential risks during an acquisition easier.?
This way, captives become a valuable tool for managing risk during complex business transitions, ensuring that transactions proceed smoothly and without unexpected costs.?
Supporting Long-term Business Strategy?
As businesses evolve, captives can adapt to meet their changing needs. Captive structures are flexible and can be expanded or adjusted to cover new risks, geographies, or business lines as companies grow. For example, a company that initially formed a captive to cover workers' compensation might expand its use to cover emerging risks like cyber liability or environmental issues.?
Captives' flexibility allows them to serve businesses over the long term, ensuring that risk management practices remain aligned with evolving corporate objectives. Companies that use captives strategically find that their captives become a central part of their overall risk management and corporate planning process.?
Captive insurance offers much more than cost savings or risk transfer—it can be an essential part of a company's strategic toolkit. When aligned with broader business objectives, captives enable companies to gain a competitive advantage, improve financial flexibility, and better manage complex risks. As businesses face an ever-changing landscape of risks and opportunities, captives can be tailored to meet those challenges, providing immediate and long-term benefits.?
The following article will explore the financial regulation associated with captives. While leveraging captives offers many advantages, managing them requires strict adherence to financial and regulatory standards. Regular auditing and accurate financial reporting ensure captives remain compliant and financially sound for optimal success.??
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Unruly Passenger Attacks Flight Attendant
Santa Ana, CA (WorkersCompensation.com ) – On Wednesday, prosecutors said a California man was arrested after attacking a flight attendant and trying to strangle them mid-flight.
According to a press release from the U.S. Attorney’s Office, Central District of California, Charles Angela Salva, 30, of Fremont, Cal., was onboard Frontier Airlines Flight 3581 from Santa Ana to San Francisco International Airport. Shortly after takeoff, while the airplane was climbing and under 10,000 feet, flight attendants noticed that oxygen masks in one of the rows in the middle of the airplane were out of the overhead compartment. Salva, they discovered, had pulled the masks down and gotten his hand stuck in the process, the US Attorney’s office alleged.
Officials said Salva began yelling obscenities at flight attendants and screamed, “We’re all going to hell,” and “This plane is going down!” When flight attendants tried to restrain him. Salva, officials alleged, grabbed at some of the other passengers on the plane before running toward the rear of the airplane.
When the flight attendants reached him, Salva attempted to choke one of the flight attendants, and pushed another flight attendant. According to the police report, Salva threatened to kill everyone. Passengers on the plane tried to help restrain Salva, but he broke out of the flex cuffs flight attendants had placed him in. During the attempt to restrain him, Salva kicked one of the flight attendants several times.
Eventually, Salva was restrained with a seat belt and the flight was diverted to Ontario International Airport because flight attendants did not feel safe trying to put Salva back in his seat, and feared he would get free again.
At least one passenger told officials that Salva seemed to be suffering from claustrophobia and acted like “he wanted to get off the plane.”
Officials arrested Salva when the flight landed and he was charged with interference with flight crew members and attendants. If convicted, he faces up to 20 years in federal prison.
The flight attendant that was choked and the flight attendant that was kicked required medical attention and were treated for their injuries.
Frontier Airlines confirmed the incident “involving a passenger who physically assaulted members of the flight crew and had to be restrained, forcing the flight to divert to Ontario, California.”
"We extend our utmost appreciation to the flight crew for their professionalism and to the other passengers who assisted during the incident, as well as local and federal law enforcement, and the U.S. Attorney’s Office, Central District of California, for their efforts to ensure justice," the airline said in a statement.
The incident comes as the Federal Aviation Administration continues to crackdown on unruly passengers since the number of incidents of violence against flight attendants reach a peak in 2021. That year, nearly 6,000 incidents of unruly passengers were reported to the FAA.
On August 21, 2024, the FAA announced that it had referred another 43 unruly passenger cases to the Federal Bureau of Investigation for criminal prosecution review over the past year.
The goal, officials said, is to ensure that unruly airline passengers are held accountable for their actions through criminal prosecution. Working closely with the FBI, and other agencies, the FAA has forwarded more than 310 cases of the most serious cases of unruly passengers for criminal review.
“Dangerous passengers put everyone at risk—and the Biden-Harris Administration has been clear that those who disrupt flights will be held accountable,”?U.S. Transportation Secretary Pete Buttigieg said. “Unruly travelers face stiff fines from the FAA and possible criminal prosecution too.”
Passengers face up to $37,000 per incident, officials said, as well as jail time.
“There’s absolutely no excuse for unruly behavior,” FAA Administrator Mike Whitaker said. “It threatens the safety of everyone on board and we have zero tolerance for it.”
According to the FAA, the rate of unruly passenger incidents has dropped by more than 80 percent since reaching a peak in 2021. However, the FAA said, unacceptable behavior continues to occur. Airlines have reported more than 1,240 unruly passenger cases in 2024, the FAA said.
In June, the FAA said there had been 915 cases of unruly passengers between Jan. 1 and June 9, meaning nearly one third of the year’s cases happened during the summer busy travel season. The FAA said 106 of the passenger disturbance cases were due to intoxication.