Failure Is this possible for a Captive?

Why do businesses fail Pricing Demand Supply Efficiency Expansion Diversification Capitalization Financial risks Governance

Why would a Captive fail Pricing Demand Supply Efficiency Expansion Diversification Capitalization Financial risks Governance Premiums, Exposures Alternatives, Risk Management Returns, Reinsurance Spending, dividends Surplus strain Unrelated, Risk Management Cushion, smoothing objective Counter-parties Enterprise Risk Management

Mitigating Factors Special Purpose Regulation Oversight Governance Timely reporting Conservative investment policy Credentialed service providers Solvency or Capital & Surplus requirements

Emerging Risks

Emerging Risks are developing or changing risks which are difficult to quantify and which may have a major impact

Motivation for Captives Coverage not available Coverage not affordable Narrow coverage, exclusions Why does this situation come about ? Bad loss experience for commercial market Too difficult to identify or quantify

Emerging Risk Landscape Asbestosis Telemedicine Endocrine disruptors Botulimin Toxin Nanotechnology Pervasive computing Health Care Reform

Common Denominators High uncertainty Little information available Frequency and severity difficult to assess Could be phantom risks (“may” have impact) No industry position No-one wants to make the first move

Captive Solution Special Purpose Coverage Design Limited Recourse Prepare v. Plan