A.M. BestTV: Starting a Captive Takes Months of Preparation

OLDWICK, N.J.--(BUSINESS WIRE)-- In this A.M.BestTV episode, which wraps up the second day of the annual Vermont Captive Insurance Association (VCIA) conference, experts in forming a captive said they start by determining if that type of insurance organization makes sense. Risk needs, taxation, regulatory requirements and location come next, they said. Click on http://www.ambest.com/v.asp?v=vcia2816nc to view the entire program.

Full-length interviews from the VCIA conference are available as well. Please visit http://www.ambest.tv/vcia16 for full conference coverage.

The feasibility study is the first formal step in forming a captive insurance company.

“A very methodical approach is used to determine whether or not a captive makes sense at all,” said Jim Swanke, director of risk consulting, Willis Towers Watson. “The first step, which is meeting with the client to determine that one’s goals and objectives, is really critical. It is not unheard of that at the end of a half a day spent with the client, we decide that a captive does not make sense. Additionally, data collection and risk analytics are also part of the process.”

“One of the next steps that we always go through is to develop a pro forma,” added William Motherway, president, Conner Strong & Buckelew. “Certainly the pro forma is important when developing a captive, since all regulators require a pro forma.”

Both agreed that a good feasibility study could be a four-to six-week process, because of the volume of data. The report, they added, is also complicated and needs to be thorough, as it is going to be reviewed by regulators.

“It is definitely a three- to six-month process from the start of feasibility to implement your captive,” said Motherway.

Recent episodes of A.M.BestTV include:

• Captive Insurers Challenged by Soft Market, Increased Scrutiny: At the first day of the VCIA conference, insurance executives said captive owners are faced with increasing competition from reinsurers and insurers willing to cut prices, along with extra scrutiny as regulators look more closely at business models and tax exposures: http://www.ambest.com/v.asp?v=vcia1816nc.
• Captives Covered by A.M. Best Outperform Their Commercial Peers: A.M. Best Senior Financial Analyst Fred Eslami reviews a new special report on insurance captives, which shows that on a composite basis, these insurers are reporting underwriting and financial results better than their overall U.S. commercial peers: http://www.ambest.com/v.asp?v=captive816.
• Parting Words From Insurance Information Institute's Hartwig: Keep Your Eye on the Value Chain: Robert P. Hartwig, outgoing president of the Insurance Information Institute, explains how shifting information flows are remaking insurance business models, why automobile insurance will endure and why the insurance industry should champion its role as the economic first responder: http://www.ambest.com/v.asp?v=hartwig816.
• California’s Carbon Focus Captures Industry Attention: Patricia Vowinkel, executive editor, Best's Review magazine, discusses California Insurance Commissioner Dave Jones' request that insurers divest of thermal coal holdings: http://www.ambest.com/v.asp?v=carbon816.

A.M.BestTV covers exclusive A.M. Best information and reports, targeted topics and key developments in the (re)insurance industry every Monday, Wednesday and Friday. Sign up for alerts of episodes at http://www.ambest.com/multimedia/ambtvsignup.html. View A.M.BestTV episodes at http://www.ambest.tv.

A.M. Best is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2016 by A.M. Best Company, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

View source version on businesswire.com: http://www.businesswire.com/news/home/20160811005824/en/

A.M. Best
Lee McDonald
Group Vice President, Publication and News Services
+1 908 439 2200, ext. 5561
[email protected]

Source: A.M. Best

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