Alternative Risk Financing, Part 1 access to specialist captive reinsurance markets.
• Direct customer / broker maintaining control over company claims administrator and risk service providers.
• Direct customer / broker structuring risk mitigation innovations.
Key Elements for Consideration
Captives are often established by firms that are experiencing consistently unacceptable renewal terms from traditional insurance markets. This can often be the result of increasing claims costs in a select industry segment or line of business, or it could simply be as a result of negative market dynamics – with opportunistic traditional insurance markets.
However, any consistent yearover-year renewal pricing increases by traditional insurance markets typically are the result of a growing
shortage of reinsurance capacity, based on certain industry segment restrictions or line of business performance outcomes, such as commercial automobile line of business difficulties.
Often, these are market-driven restrictions generated by consistently underperforming lines of business. There are four elements that comprise key considerations for CR / ST owners to consider when evaluating alternative risk financing / captive options including:
Strategic Elements:
• Creating a defined platform for implementation of an integrated risk mitigation strategy.
• Setting the provision for risk mitigation discipline in all cranerigging-transport operations.
• Establishing formalized risk retention levels with customer organizations.
• Utilize“ A-Team” risk resources to support captive profitability.
Financial Elements:
• Participate in underwriting profits and investment income.
• Maintain provisions for unknown losses.
• Develop a true risk profit center mechanism.
• Create stability and consistency in captive program results.
Operational Elements:
• Having direct access to reinsurance markets.
• Maintaining a dedicated focus on practical risk management.
• Direct engagement with independent claims administrators.
• Creation of subject matter expert risk resources.
Marketplace Elements:
• Remove premium level volatility.
• Resolve coverage restrictions.
• Eliminate coverage capacity
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