Captive Feasibility studies help clients considering captive insurance options to determine if a captive makes sense for their business relative to the traditional insurance marketplace.
Since considering a captive is more than just a price comparison, this analysis takes place at several levels. First, the loss and exposure data is analyzed by an insurance actuary to determine the projected ultimate losses for the client based on projected exposures. Next a comprehensive review of the business of the client is conducted. Finally, the results are correlated and presented in the form of a business plan that includes projected total costs, retention recommendations and financial modelling.
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:
Captive insurance programs are not cookie-cutter answers to insurance questions. They offer unique solutions but need to be 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 are critical in designing a successful captive mechanism.
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.