Actuarial methodologies can place “almost any risk” in a captive


There are a number of actions captive owners can take to expand and add more risk to their captives in order to make it a bigger and better tool – and there are every more sophisticated methods of figuring out the costs of any particular risk the owner is worried about.

This is according to Brian Johnson, CEO and consulting actuary at Risk International Actuarial Consulting, who spoke at a panel at the Vermont Captive Insurance Association (VCIA) annual conference in Burlington, Vermont, which is taking place this week.

“The environment these days is that we can use actuarial methodologies to figure out how to place almost any risk into a captive, so don’t let anything limit your vision as to how you want to cover this risk and to expand your captive programme,” he said.

The panel explored what some captives have been doing to expand their business plans, and the reasons why.

Johnson’s first suggestion was the expansion of existing coverages within the captive as it grows and matures, gaining more capital and capacity.

“I have clients who over the years who continue to increase their retention so their reliance on the commercial market diminishes over time.”

He also recommended that captives start to look at manuscript policies as they start to see new risks or new tweaks needed in the policy.

“Clients do start to look to at manuscript policies to tailor their coverage to exactly what they need rather than what AIG thinks they need,” Johnson continued.

By looking at loss history, Johnson suggested the captive owner can gain a better understanding at what risk the entity bears that is either uninsured or underinsured, or is outside the coerage that have been purchase.

“There are repositories of data where you can get some kind of idea and sense of the risk that is available,” he said.

Johnson used catastrophic cover as an example. “You take the whole body of data, hurricane losses with maybe 50 or 100 in the data, not really enough to go on. But instead what they use are hurricane models that use all the parameters of the event and they simulate lots and lots of times and you can build a population of losses upon which you can price your coverage.”

“We can figure out whatever it is you are worried about. A captive is fantastic way to help you sleep at night and to finance and mitigate that risk.”

Risk International Actuarial Consulting, Vermont Captive Insurance Association, VCIA, Risk, Brian Johnson,

Captive International