A captive insurance company (CIC) can provide many benefits. The feasibility study identifies these benefits, and determines if a solid business case can be made for a CIC’s formation.
Our preliminary assessment is an excellent 1st step. A formal feasibility study can be completed in connection with assembling a license application post engagement, or if your project is complex, a formal feasibility step is usually a required first step as no one is able to devote a substantial amount of time without fair compensation on complex captive projects.
Our managing director has prepared captive feasibility studies for several of the largest captive management firms on projects domiciled in most top on and offshore domiciles. We require independent actuarial involvement with all our feasibility studies.
Many actuaries providing services to captive managers now offer feasibility studies, not merely actuarial reports. This is a recent trend.
Basic Elements of a Feasibility Study
Here are the core components of a feasibility study:
- current insurance coverage review and analysis
- enterprise wide risk assessment
- proposed captive coverage design (insureds, policies, pricing, fronting parties and requirements, pooling requirements, loss collateral requirements, etc. – your design will vary depending on who you decide to work with – no two captive service providers will come up with the same design unless you hire an expert to create a request for proposal (RFP) that must be adhered to)
- capitalization and reserves required
- actuarial analysis (quantitative examination to determine expected losses, profitability and solvency ratios)
- business, financial and operation plan
- financial projections for captive operations
- accounting and tax considerations
- domicile options and recommendation
- ownership decisions
- management team
- service providers (should reflect expected terms of engagement even if not yet engaged)
Please contact us to determine if preparing a feasibility study is the next best step for you to determine if a captive makes sense for your organization.