13 March 2018Analysis

Captives remain a helpful tool for accessing reinsurance


Are captives the best way to access reinsurance otherwise not available to the insured?

That was the topic debated by a panel of experts at the CICA 2018 International Conference, in a session entitled “The Great Debate: Challenging or Changing?”.

The event featured speakers: Hugh Rosenbaum, retired principal of Willis Towers Watson; Gary Osborne, president of USA Risk Group; and moderator Joel Chansky, consulting actuarial at Milliman.

Rosenbaum said he felt that in the modern world, captives aren’t essential for direct access to the reinsurance market, and that there are many fronting deals that buyers now can access instead.

However, Osborne took the perspective of a group captive. “For a group captive it may the only way to access reinsurance for smaller accounts,” Osborne said, citing trucking companies and medical groups. “It’s a true, tried and test method,” he added.

During this debate it was noted that many captive managers will say that captives are a good way of accessing the reinsurance market – but the question was posed: what do the reinsurance brokers say?

Rosenbaum argued that reinsurance brokers that have the confidence of reinsurers are sometimes key to getting such a direct placement accomplished.

“If the insurance industry was better organised and had better confidence in these buyers, the opportunity would be there,” said Rosenbaum.

Osborne added that several of his reinsurance broker contacts have suggested a group captive has been an effective way to get clients together when they’ve got the reinsurance product ready.

The debate also covered topics such as whether captives provide a cost benefit over the traditional market, whether they improve claims handling, create third-party opportunities and help fund risk management programmes.

In terms of third-party opportunities, Rosenbaum suggested there are many other ways of doing third-party business, and the costs of getting into the captive can be substantial.

Osborne argued that third-party opportunities are appropriate for captives when run carefully and the parent knows what they are getting into.


More on this story

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13 March 2018   Captive programmes can significantly contribute to healthcare cost containment and improve employee health in both the US and in other major territories where employers offer employee healthcare programmes.
Accounting & tax analysis
14 March 2018   The US Tax Cuts and Jobs Act 2017 represents the first major overhaul to federal taxes since 1986, and there are provisions that both US and international captives must be wary of. But changes are not expected to impact the numbers of captives formed.
Analysis
15 March 2018   Joel Chansky, a principal and consulting actuary in the Boston office of Milliman, has been elected chair of the board of directors of the Captive Insurance Companies Association (CICA).

More on this story

Analysis
13 March 2018   Captive programmes can significantly contribute to healthcare cost containment and improve employee health in both the US and in other major territories where employers offer employee healthcare programmes.
Accounting & tax analysis
14 March 2018   The US Tax Cuts and Jobs Act 2017 represents the first major overhaul to federal taxes since 1986, and there are provisions that both US and international captives must be wary of. But changes are not expected to impact the numbers of captives formed.
Analysis
15 March 2018   Joel Chansky, a principal and consulting actuary in the Boston office of Milliman, has been elected chair of the board of directors of the Captive Insurance Companies Association (CICA).