Feasibility Studies

How do you know if a captive insurance company makes sense for your organization?

Simply put, a feasibility study is the analysis of the economic and risk management considerations involved in structuring and operating a captive insurance company, but its much more than that when its done with an eye towards aligning risk management and risk finance goals in the design of the captive entity.  The well designed captive becomes a partner in accomplishing the overall strategic goals of the company it insures by careful consideration of domicile selection, company structure, lines of coverage, and insurance retention levels.  We don’t utilize cookie-cutter solutions.  Our feasibility study work is ground up and customized for each client.  We utilize our experience to create bespoke programs that come alongside our client’s organizations to help them achieve their strategic goals by purposeful risk financing.

Actuarial Analysis

Cedar utilizes the services of actuarial firms that are experts in the captive insurance industry. The actuarial analysis is the statistical heart of the feasibility study. Actuaries use standard mathematical and statistical models to project future insurance costs based on past experience. The resulting “loss cost” is the projected cost of paying for losses in the projected year.

In order to conduct this study accurately the following information is needed:

  • Current and four prior years of insurance company issued loss runs dated within the last three months for each of the lines of business being considered
  • Exposures by line of business for the current and four prior years of operation. This would be any measure of the risk, including payrolls, gross receipts, number of power units, etc.
  • Projected exposures for the upcoming year
  • Company Financials at the last year end

Business Analysis

Captive insurance programs are not cookie-cutter answers to insurance questions. They offer unique solutions designed specifically to meet the needs of the client.

As a part of the feasibility study we meet with the clients and their insurance representative to interview them on their operations, structure and business flow. An understanding of the clients objectives and expectations is critical in designing a successful captive mechanism.

The Business Plan

All the statistical and business analysis comes together in the Business Plan. Presented to the client in a face-to-face meeting the business plan presents the actuarial and business review results in a holistic manner. The efficacy of a captive program is determined from an overall financial and risk management perspective. If a captive program is indicated the business plan is the foundational document to interest industry partners, to participate in supporting the program and regulators to license its operations.

Captive Company Formation and Ongoing Management

Once the decision has been made to utilize a captive insurance mechanism, Cedar Consulting LLC can help you navigate the regulatory waters to license your captive and then provide ongoing company management services.

The key to success in bringing a Captive or Risk Retention Group Business Plan to life is in knowing the steps for execution and having excellent relationships with domicile service providers and regulators.  Our experience in forming companies in multiple domiciles has given us the experience and reputation needed to efficiently bring your company to life as well. Cedar Consulting LLC can help to license your captive in any domicile worldwide. We can also perform captive management services domestically and refer offshore domicile management to our affiliate, Citadel Management Bermuda Limited.

Company Management

Proper captive management requires more than just financial statement preparation.

Your captive manager must stay abreast of the changes to regulations and overall market trends in order to communicate their impact to you as well as provide guidance on how best to improve your captive’s performance.  Our staff of professional accounting and insurance specialists collaborate to create strategic goals for your captive and then work diligently to execute the strategies.

We are currently licensed to perform captive management in several domiciles including Montana, New Jersey, North Carolina, Nevada, Tennessee and Utah with new domiciles added as clients require.

Analysis of Current Program Structure

Cookie Cutter solutions seldom provide the desired result. Captive insurance programs need regular review and analysis to maximize their impact on your company’s risk management and financial results. An independent third party review may uncover important improvement recommendations that have been missed over the years.

The business plan for a captive insurance company or risk retention group should be reviewed periodically.  In a dynamic insurance and regulatory environment a fresh look at the operations of a captive insurance company or risk retention group can help to identify opportunities for improved performance and reduction of regulatory risk.  While we provide this service to current clients as a part of our captive management services we also will perform third party evaluations of captives and provide recommendations for performance improvement.  Changes in the regulatory environment may eliminate a captive’s efficacy and we can assist in the runoff and dissolution of captives including handling the legacy loss portfolio through reinsurance.