RMs Turning To Captives, Fitch Finds
NU Online News Service, Oct. 22, 4:20 p.m. EST?More organizations are turning to their captive for insurance coverage, or considering establishing one as a risk management solution, according to a ratings bureau report.
New York-based Fitch Ratings found that the hardening market this year has led to increased deductibles, reduced capacity in certain sectors, and limited coverage for certain risks, as well as tougher security requirements through higher minimum credit rating thresholds.
"Organizations, therefore, are turning to their captive, or considering the establishment of one, as a risk management solution," the report said.
The events of Sept. 11 and subsequent increases in premium rates means that many organizations are "reassessing their appetite for risk, their own risk retention and their captive strategy," according to Fitch. "With the potential for further rate hikes in 2003 Fitch said it believes many insureds will consider their options for self insurance."
Fitch said that benefits associated with the use of captives include:
? A direct access to reinsurance markets.
? Coverage of unacceptably priced risks.
? Long-term planning.
? Cost savings of global consolidation of risks into fewer programs.
? Taxation benefits.
? Cashflow benefits that accrue as an organization retains funds within the captive.
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