Printer Friendly
The Free Library
14,680,088 articles and books
Member login
User name  
Password 
 
Join us Forgot password?

Captive insurers enjoy popularity but still face hard-market realities. (Briefing).


The rapidly hardening hardening, in metallurgy, treatment of metals to increase their resistance to penetration. A metal is harder when it has small grains, which result when the metal is cooled rapidly.  insurance market of the past two years has encouraged an explosion of alternative-market insurance solutions, especially captive formation.

But there's a down side--reinsurers, under intense pressure from losses attributed to events of Sept. 11,2001, and the stock market, are much more reluctant to back captives fully. Adding to the complexity is the shrinking number of insurers willing to act as fronts--to lend their good name and high financial-strength ratings to captives as support, for a fee.

In a panel discussion on these hard-market realities at the International Captives Congress in Bermuda, Paul Baffle, a partner with JLT JLT Journal of Lie Theory
JLT Jardine Lloyd Thompson Group PLC
JLT Junior Leader Training (Boy Scouts of America)
JLT Just Like That
JLT Junior League of Toronto
JLT Junior League of Tulsa
JLT Junior League of Tampa
 Risk Solutions Management (Bermuda) Ltd., a captive manager, said there are "harsh realities Harsh Reality are a little-known, proto-prog band born in Stevenage, Hertfordshire out of the remnants of the Freightliner Blues Band (formerly the Revolution) in the early sixties.  we have to deal with out there today."

With restricted availability of 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.  and rising costs for fronting services, increased retentions and stricter collateral requirements, captives are squeezed by a classic supply-and-demand problem.

Robert Davis Robert Davis can refer to:
  • DJ Screw, influential rap DJ and inventor of "Screwed" music.
  • Robert Davis (New Orleans), who was beaten by three police officers in New Orleans shortly after Hurricane Katrina
  • Robert Davis (inventor), inventor of the oxygen rebreather
, senior vice president of business development with Ace Risk Management, said the hard market in fronting, from the insurer's perspective, has more peril The designated contingency, risk, or hazard against which an insured seeks to protect himself or herself when purchasing a policy of insurance.

Among the various types of perils for which insurance coverage is available are fire, theft, illness, and death.


PERIL.
 than it once did.

"In order to satisfy some of the more stringent corporate-governance rules, particularly since the Sarbanes-Oxley Act See SOX. , using a quality front carrier is needed," he said.

Why would an insurer get involved in fronting? "There's a high return on equity," said Davis. "It also lowers the expense ratio when you cede reinsurance business to a captive in exchange for a fee."

But the downsides include a reduced net-to-gross ratio. "If the ratio is out of proportion--a lot more gross than net--it is looked on unfavorably by rating agencies," he said.
2002 New Captive Formations by Domicile


Cayman Islands          97
Bermuda                 79
Vermont                 70
Guernsey                49
British Virgin Islands  45
Barbados                19
Ireland                 18
South Carolina          21
Hawaii                  16
All Other Non-U.S.      24
Other U.S. States       24
COPYRIGHT 2003 A.M. Best Company, Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 2003, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

 Reader Opinion

Title:

Comment:



 

Article Details
Printer friendly Cite/link Email Feedback
Author:Pilla, David
Publication:Best's Review
Geographic Code:5BERM
Date:Jul 1, 2003
Words:303
Previous Article:Offshore captives warned to be wary. (Briefing).(Brief Article)
Next Article:Terrorism Risk act presents questions. (Briefing).(U.S. Terrorism Risk Insurance Act of 2002)(Brief Article)
Topics:



Related Articles
Experts Say a Soft Market is Best For Starting Captives.(rent-a-captive)(Brief Article)
Trends Begin to Emerge As Captive Industry Grows.(captive insurance industry)(Brief Article)(Statistical Data Included)
Tax Breaks Fade as Incentive To Form European Captives.
Captivating Growth.(Statistical Data Included)
Vermont nears 600 licensed captives after record year.(70 such insurers added in 2002)(Brief Article)
Rites of passage: Australia and New Zealand are often viewed as the gateway to larger markets in Asia, but insurers have to overcome problems in...
Risk-retention levels hard call for captives. (Briefing).(Brief Article)
Terrorism Risk act presents questions. (Briefing).(U.S. Terrorism Risk Insurance Act of 2002)(Brief Article)
Putting up a good front: insurers, captives and buyers must fulfill specific responsibilities if fronting arrangements are to survive.(Alternative...
Captive Island. Puerto Rico's long-time plan to become a haven for captive insurance companies is becoming a reality.(Property/Casualty)

Terms of use | Copyright © 2009 Farlex, Inc. | Feedback | For webmasters | Submit articles