title slide jun 8 – 10, 2015 how captives are supposed to work
TRANSCRIPT
Title Slide
JUN 8 – 10, 2015
www.bermudacaptive.bm
How Captives Are Supposed To Work
How Captives Are Supposed To Work
Speakers:
• Karl Klockars, former EVP & General Counsel, Covenant Ministries of Benevolence, Chicago and President Emeritus Covenant International Insurance Company, Ltd.
• Cyril H. Whitter, Jr., President & CEO, Independent Management, Ltd.
• Laurel Bowar, Risk Management Analyst, FAC Re Ltd.
Moderator:
• Page Rouse, President Two Rock Insurance Management Ltd.
• Formation questions
– What is the nature of the insured
– What is the geographical spread of risk
– What is the risk appetite of the owner
How Captives Are Supposed To Work
• What are the factors prompting formation
– Coverage availability
– Pricing
– Flexibility
– Control your own destiny
How Captives Are Supposed To Work
• Captive Advantages– Long term control– Loss control / prevention– Claims management– Saving on insurer and reinsurer profit margin– Retained underwriting and investment income– Access to reinsurance markets– Coverage availability and stability– Smoothing insurance market cycles– Control of retentions and quota share
opportunity
How Captives Are Supposed To work
• Captive disadvantages– Underwriting loss– Operational costs and oversight time
commitments– Mandatory loss control and claims
management costs (advantage & disadvantage)
– Initial start up costs including:• Feasibility study, actuarial study, legal fees,
initial capital, domicile selection, time invested in formation, possible fronting needed, collateral requirements
How Captives Are Supposed To Work
• Domicile selection– Capital required– Solvency requirements– Investment restrictions– Taxes/fees– Banking choices– Management/audit/legal services availability
How Captives Are Supposed To Work
• Why Bermuda– Sophistication of domicile– Excellent service availability– Strong links to insurance & reinsurance market– Solid infrastructure– Stable government– Skilled professionals, management
companies, attorneys, auditors, banking and investment services
– No currency risk– Welcoming to new ideas
How Captives Are Supposed To Work
• Operational factors– Offshore mind and management– Offshore board quorum– Long term commitment to risk management,
safety, claims handling– Investment decisions: Asset selection, take
risk on underwriting not investments, manager who understands captives
How Captives Are Supposed To Work
• Conclusion: Is it worth it?– Advice and opinions from:
• FAC Re• Covenant International Insurance, Ltd• IML & Two Rock
Questions?
How Captives Are Supposed To Work