10 October 2013

The captive benefit at a fraction of the investment

Alterra Risk Management has launched an offering to the US market that delivers “all the benefits of the captive concept, but in a more cost-efficient manner for clients”.

That is the word from Scott Gorman, executive vice president—business development at Alterra Risk Management, who said that the company is looking to introduce a wider US audience to the captive concept through a low-cost rent-a-captive platform that will enable clients to leverage the expertise and captive infrastructure of Alterra.

US businesses will be able to “plug into Alterra’s captive facility in the Cayman Islands”, a rent-a-captive approach that will help to drive down the cost of ownership. Rather than shouldering the expense of setting up and bedding in a captive themselves, companies can utilise Alterra’s captive capabilities to establish a cell within the Alterra structure, only paying once the business is up and running. In this way they can then “share in the underwriting profits, without the burden of traditional upfront consulting fees”, said Gorman.

Gorman said that he anticipates risks from the architectural, engineering, construction, marine and defense industries to be a good fit for the Alterra captive facility, with the company foreseeing a national footprint among participants. “We are agnostic as to where the business is located”, he said from the company’s base in Charleston, South Carolina.

Addressing the mix of risks that will be placed in the company’s Cayman captive, Gorman said that classes would be segregated, but that clients would be encouraged to add additional lines of business into the captive. “Diversification by line provides a better spread of risk for clients”, he explained.

Gorman said that while a strong fit for SMEs, the concept has the potential to gain ground among larger US companies. “Rent-a-captives have not gained as much traction to date largely due to a lack of education regarding their potential”. Alterra is evidently looking to change that. As Gorman explained, “captive insurance should be considered a long-term strategy, one that rewards those with an eye on risk management”.

Gorman added that Alterra is also able to help those companies considering a single parent captive, with the company on-hand to walk them through the process.