If you are considering forming a captive insurer to handle your organization’s risks, Huggins can assist you by performing the necessary feasibility study that is required to be submitted to the state insurance department.
Feasibility studies allow you to make informed decisions about the capitalization of your captive for both internal and regulatory purposes, with a focus on future forecasts of your program’s profitability and solvency.
Huggins can help you select risk retention levels that optimize the balance between risk, capitalization, and market conditions. Huggins can also assist you in determining the domicile that best fits your program needs.
Loss Funding Projections (Premium or Contribution Calculation)
Future loss funding for the premium to be charged by the captive insurer (or sometimes contributions to be made for a single parent captive) generally rely on commonly accepted actuarial methodologies, all of which contain certain assumptions about future costs, including expected loss ratios, loss development patterns, retention levels, benefit levels, recoveries, and trends in costs and exposures.
Huggins can provide alternative levels of funding corresponding to targeted probability levels (also known as confidence intervals) that will satisfy you and your board of directors as well as the requirements of insurance regulators.
Pro-forma Financial Statements
Pro-forma financial statements consist of an Income Statement, Balance Sheet, and Cash Flow Statement for the new captive, and are included as part of the Feasibility Study.
Huggins can perform sensitivity analyses using various trend, loss, and growth assumptions to allow you to explore the impact of various factors on the overall expected financial performance of the captive.
Loss Reserve Analysis
Setting a reasonable accrual for unpaid loss and loss adjustment obligations is one of the most critical functions of the captive’s management when preparing the program’s financial statements.
Huggins places an emphasis on using the organization’s actual data to the maximum extent possible (rather than relying on external benchmarks) in order to reflect your program’s unique loss characteristics.
Loss Reserve Analysis – Reinsurance Reserves
Reinsurance is used to manage the accumulation of risk within a captive by shifting some of that risk to another insurance entity.
Huggins consultants can help you review the proposed reinsurance contract language and we have the skill sets required to properly evaluate reinsurance risk transfer (a necessary function if you want credit for the reinsurance) and to help you establish loss reserves for your reinsurance.
Certification of Loss Reserves
Insurance regulators require that an actuary be appointed to certify the reasonableness of the loss and expense reserves held by the captive.
Huggins actuaries meet the standards for acting as your Appointed Actuary and will issue the required Statement of Actuarial Opinion for Loss and Loss Adjustment Expense Reserves and other related documents necessary for maintaining regulatory compliance.
Additional Services Offered:
The following services can be provided once the captive has received its license and has begun operations:
- Collateral Negotiations – Term, Timing and Amount
- Cost Allocations – Allocation of premiums/costs between members and/or departments
- Expense Analysis
- Discounting to reflect the time value of money
- Dividend/Assessment analysis
- Conduct cost evaluations of both ceded and assumed reinsurance programs
- Perform Risk Retention Studies
- Analyze loss experience under existing contracts, review proposed renewal contracts, and analyze existing contracts with regard to suitability for commutation
- Represent the Company in discussions/negotiations with Insurance Departments
- Provide litigation support and expert witness testimony on the Captive’s behalf
- Analyze unearned premium reserve adequacy
- Assist with product development
- Conduct pricing and submission of pricing studies, including calculations and support for loss cost multiplier filings
- Service Provider Analysis
- Review proposed legislation and regulations to determine the impact on Company operations
- Perform compliance calculations for Solvency II
- Conduct financial analysis and forecasting, including dynamic financial analysis (DFA)
- Perform merger and acquisition analysis
The Huggins Advantage
Our firm’s philosophy centers on our commitment to the highest level of quality service delivered by quality people. Our long tradition of providing responsive, technical excellence to our clients’ needs through an integrated team approach requires that we focus on quality in every aspect of every engagement.