The cycles and swings of the commercial insurance market have and will continue to have an impact on customers' buying decisions.

Being at the whim of the insurance market cycle is never ideal. Sophisticated buyers can manage their dependency on market cycles by using both risk transfer and risk retention techniques to provide long-term solutions for their most complex risks.

Fortunately, given the multiple risk-financing techniques available in the market today, companies have choices to assume more of that desired control — to protect their brand, mitigate risk, assure proper use of expenses and strike a balance within their risk appetite.

Options on the table

Retaining risks occurs in varying degrees and many forms. No company jumps into retaining all or a portion of its risks without careful consideration. It requires quite a commitment, a strong risk tolerance and a careful evaluation of options, which in today's market include the following:

• Paying a premium to buy insurance and transfer the risk.

• Taking a large, loss-sensitive deductible, or self-insured retention, in all or a portion of a risk-management program.

• Making a move to become a qualifying self-insured in a certain line of coverage or a certain state. Lines of coverage typically characterized by high frequency and low severity of claims are the most enticing for self-insurance. General Liability (GL), Workers' Compensation and Commercial Auto are often viable options.

• Forming a captive to fully address domestic, and perhaps even multinational, exposures. Given that more than 40 states have captive laws now, this has become a viable option for businesses of varying sizes, not just large corporations.

A nationwide retailer may opt to become a qualified self-insured and retain its GL risk to keep tighter control on expenses and more closely manage risks to its brand. Other scenarios include a small business with a growing fleet of vehicles that assumes a high deductible on its Commercial Auto policy or a multi-national corporation that insures its liability exposure through an offshore captive insurance company.