Captive Consulting Solutions
You don’t have a captive but you are thinking about it?You’ve got a captive but you are wondering whether it’s a valuable or an optimal solution ?You’ve got a captive and you are looking for an exit strategy ?
You don't have a captive but you are thinking about it?
Captive Feasibility Study
Financing risk in a changing marketplace is a difficult task. Many potential solutions exist yet it is rarely possible to identify which is the most appropriate. A captive feasibility study is able to answer a key question ‘Would a captive insurance company add value to our organisation by improving our risk financing techniques?’ As one of the main tools used today by many organizations, it is essential to have appropriately assessed this question. As a risk financing tool, our study helps your organisation understand whether a captive is right for it, how it should be structured, where it should be located and how it should be managed.
- Identifies whether a captive is an appropriate risk financing tool for a company
- Analyses the optimal captive programme
- Determines the structure in terms of legal form, regulatory jurisdiction and capitalisation
- Provides a detailed plan of how to implement a captive, should it be appropriate
- Directly assists with setting premiums, allocating capital and developing projected financial business plan for the captive
- Considers the applicable accounting, taxation and regulatory hurdles and how they should
- Serves as a benchmark against which captive performance can be measured
Captive strategic review and optimization
Captive strategic review and optimization AGRC has a proven track record in helping organisations to optimise the use of their (re)insurance companies and extract maximum value of their risk management and treasury role allowing them in turn to focus on their core business activities. Our specialists can support you focusing on possible optimisation of your captives for
- Total cost of risk
- Treasury and refinancing solution
- Balance sheet release and accelerated claims closure
- Optimise profit allocation
We will work with you to tailor the exact scope of the review, which can encompass:
- Captive strategic rationale; redefining the risk financing objectives and requirements of the business
- Captive efficiency, including classes of business underwritten, levels of risk retained and interface with the (re)insurance market
- Domicile options
- Operational best practice, lessons to be learned from competitors analysis
- Capital and reserve adequacy analysis
- Quantitative assessment through discounted cash flow analysis
- Qualitative assessment through balanced score card methodologies
- Run-off efficiency, such as the commutation or novation of portfolios and the redomiciliation, amalgamation, liquidation or sale of captives
- Transition/exit planning and implementation
When it comes to optimising the risk financing strategy in light of the group’s objectives, the management of any corporation or group needs to address the following questions:
- What is the financial capacity and are there potential upside in retaining more risk?
- Is the optimal mix between risk retention and transfer?
- How to take informed decisions based on easily interpretable results?
To support clients in such a process, AGRC has developed an analytical approach enabling the optimisation of the retention levels and reducing the total cost of risks.
Most of the international groups own captives as Risk Management tool to be less dependent from the insurance market and to obtain minimum total cost of risk at Company level. However, some of these captives are over-financed considering the risks covered. Indeed no active management of the captive’s assets that could support the group treasury is implemented. Due to the current financial crisis, companies could take the opportunity to re-evaluate their (re)insurance programme and assets management in order to optimise the group treasury and its total cost of risk strategy that can achieve measurable added value at Company Level. We note an important trend for owners of large captives to implement intra-group loans to refinance the group although this is probably not the most appropriate solution.
Many of these techniques and services underpin and support the broader service offering within AGRC’s Risk Financing and ERM project teams.
Captive Exit Strategies: Any (re-)insurance captive owner could wish to have a clear strategy on how to possibly exit its (re-)insurance captive once needed. Various solutions can be considered and some of them are quite obvious such as to carry out loss portfolio transfers and to liquidate the (re-)insurance company. However this approach is rarely optimal and more sophisticated solutions can be structured such as transferring additional risks with a different profile into the captive with a view to make use of the underwriting capacity. Some domiciles also offer specific solutions such as Luxembourg which offers an active market for selling captives. Finally structured finance solutions can be implemented to optimize the exit strategy by integrating the captive within a group of financial vehicles.