A.M. Best Special Report: Domestic Captives-- Improved Results, Preparing for Uncertainty.OLDWICK, N.J. -- Captive insurers posted a fourth straight year of growth in their capital base in 2006, raising the prospect of a stronger negotiating position with reinsurers if current trends continue. But growth in net premiums written slowed from the robust pace seen over the past five years, reaching just 2.7%, according to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. a special report by the A.M. Best Co. The report also stated: * Loss reserves and admitted assets for captives grew by 2.3% and 4.0%, respectively, and aggregate growth in surplus was 10.3%, an improvement on the pace from 2001 through 2005. * Fronting conditions have shown signs of improvement, while reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. is readily available and costs are negotiable NEGOTIABLE. That which is capable of being transferred by assignment; a thing, the title to which may be transferred by a sale and indorsement or delivery. 2. , even down in some cases, allowing captives to increase protection. * Competition and a soft market are pressuring group captives and risk retention groups to focus on sound underwriting, effective loss control and claims handling, greater efficiency and effective enterprise risk management. * The overall pure loss ratio improved from 2003 through 2006, dropping from 74.0 in 2002 to 51.7 in 2006, and the combined ratio before dividends declined to 90.0 in 2006 from 113.4 in 2002. * Despite the improvement in 2006, the captive industry's five-year average net operating ratio Operating Ratio A ratio that shows the efficiency of management by comparing operating expense to net sales: lags behind U.S. commercial casualty insurers, reflecting captives' role as the insurance mechanism for their owners, while the general industry operates primarily for a profit. * New governmental reinsurance or backstop insurance programs such as Florida's catastrophe program have led reinsurers to redeploy re·de·ploy tr.v. re·de·ployed, re·de·ploy·ing, re·de·ploys 1. To move (military forces) from one combat zone to another. 2. capacity, creating potential cost-saving opportunities for captives. * Captives share the commercial insurance industry's concerns over the fate of the federal Terrorism Risk Insurance Act The Terrorism Risk Insurance Act (TRIA) is a United States federal law signed into law by President George W. Bush on November 26, 2002. The Act created a federal "backstop" for insurance claims related to acts of terrorism. . * Formations of captive insurers have continued in the past year, despite a softer commercial market, because some coverages remain hard to find, insurance costs are volatile, and companies are facing pressure to improve corporate governance Corporate Governance The relationship between all the stakeholders in a company. This includes the shareholders, directors, and management of a company, as defined by the corporate charter, bylaws, formal policy, and rule of law. and boost efficiency. * Facing a softer market, captives have taken additional risks in investment portfolios, which could reduce liquidity and produce unexpected accumulations of exposures and risks of loss. BestWeek subscribers can download a PDF (Portable Document Format) The de facto standard for document publishing from Adobe. On the Web, there are countless brochures, data sheets, white papers and technical manuals in the PDF format. copy of all full special reports at no additional cost or a combination of the PDF copies plus all related spreadsheet files of the report data at no additional cost from our Web site at www.bestweek.com. Nonsubscribers can download a PDF copy of the full special report (12 pages) for $55 or a combination of the PDF copy plus the spreadsheet file of the report data for $140 from our Web site at www.bestweek.com. Call customer service for more information, (908) 439-2200, ext. 5742. Founded in 1899, A.M. Best Company is a full-service credit rating organization dedicated to serving the financial services The examples and perspective in this article or section may not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. industries, including the banking and insurance sectors. For more information, visit www.ambest.com. |
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