“For insurers, profitability is more of a priority than growing their book of business,” says Ant.

Before presenting a risk to an insurer, she says it is essential to assemble detailed data to be submitted to a carrier. The broker needs to make an analysis of it to present a positive picture of the risk. It will also give the insured the opportunity to understand how much the company should consider retaining as a way of holding down rate increases.

The insurers interested in the risk need to be identified in advance and they need “ample time,” 60-90 days, before expiration. In addition, she recommends face to face meetings between the underwriter and insured that can include walk-throughs and phone conversations.

Some insureds may consider utilizing alternative risk transfers, primarily captive programs, for their workers comp programs.

Ellyn Casazza, a senior vice president in Marsh's captive solutions group, explains that the formation of a captive has tax advantages for the owner, but there are a number of considerations to be made first. Those considerations, she notes, can make a captive program far less attractive than one may have initially thought.

She says there are cost considerations upfront. The initial application for a captive can cost up to $50,000. That typically includes a feasibility study and other regulatory and legal fees.

The operation of the captive is not cheap, running approximately $100,000 a year “depending on size and number of placements and the administration,” says Casazza.

Then there is the self-procurement tax, which is similar to a surplus lines tax. It is imposed by the captive's home state and can be as high as 6 percent of the total premium. She says if the tax is that high, it could offset federal tax benefit the owner may have enjoyed.

Then there is the capital to finance the captive. Casazza says that for workers' comp risk “regulators look for 20 percent of captive premium which is based on loss projection.” The capital is usually secured either in cash or through a letter of credit.

The biggest challenge, she says, is demonstrating that the captive program is a risk transfer vehicle. She notes that many companies may find it difficult to demonstrate such a transfer or do not have the structures in place to qualify.

In the end, a company needs to decide if the benefit is worth the investment. She notes that a company with $10 million in expected losses will not see the same tax benefit as program with $100 million in expected losses.

Forming a captive, says Casazza, “depends on size of organization and whether the return is significant enough to cover the investment and cost to run the captive.”