Magazine article Risk Management

Executive Forum

Magazine article Risk Management

Executive Forum

Article excerpt

THE CAPTIVE MARKET HAS COME A long way since the Bermuda Company's Act of 1970 and Colorado's institution of the first U.S. Captive Insurance Act in 1971: twenty-four years! Since then, captive and other alternative funding mechanisms have become an important part of risk management programs.

During the years of this transformation, captive markets have proven themselves able to: smooth out the insurance cycles, (cycles can play havoc with the corporate budgeting process); allow for more flexibility and responsiveness in the design and implementation of insurance programs and meet specific needs of the organization, not only in a hard market but during a soft market as well.

Well-structured and well-managed captive and alternative funding markets are important tools to have in place when an insurance cycle hits. An insured's experience may have little or nothing to do with the affordability or availability of coverage in the general marketplace, if you happen to be in an undesirable business area.

The ability to directly access reinsurance markets allows for responsiveness to the insurance needs of the parent and the financial goals of the captive. …

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