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Risk Management Alternatives Loss Financing Techniques (Types Of Captive…
Risk Management Alternatives
Loss Financing Techniques
Risk Financing Goals
pay for losses
manage the cost of risk
adm. exp.
internal adm. &cost of purchased services
save- modify /eliminate
outsourcing claim adm.
risk control exp.
dec. (f)(s) inc. predictability
cost-benefit ana.
risk financing exp.
trans. costs
manage CF variability
tolerance for risk
maintain liquidity
pay for- retained losses
comply with legal requirements
Risk Financing Techniques:
Transfer & Retention
Transfer
Insurance
Non-insurance Risk Transfer
Hedging
Futures Contract
Retention
funding retained losses
Pre-loss funding
eg. captive insurer
current-loss funding
least exp.&popular
post-loss funding
borrowing- interest
Selecting Appropriate Risk Financing Measures
Mix of Retention&Transfer
Loss-exposure characteristics
Ind.- or org.- specific characteristics
risk tolerance
higher accept risk; higher retained
fin. condition
higher
core oper.
inf. adv.
ability to diversify
ability to control losses
Ability to administer the retention plan
Types Of Captive Insurance Plans
Single-parent(pure) captive
group captive
associate captive
risk retention group
Liability Risk Retention Act
agency captive
agent/broker
hard market
hetrero- single line of ins.
homo- multiple lines for ins.
rent-a-captive
protective cell company(PCC)