Finance, Investments, and Accounting
For captives, especially smaller captives or group captives, passive investing can help reduce frictional investment expenses in a low yield, total return environment. A recent S&P webinar and "Wall Street Journal" article strengthen the argument for passive investing, thereby reinforcing a case for captives' use of passive investing.
A review of the reported financial results of risk retention groups reveals insurers that continue to collectively provide specialized coverage to their insureds while remaining financially stable, according to the latest Demotech report on the sector. While risk retention groups have reported net income, they have also continued to maintain adequate loss reserves while increasing premium written year over year.
Today's financial news headlines are filled with stories about the rise of passive investing as investors abandon active managers. Those who own captive insurers or who oversee management of their portfolios should understand the active versus passive management debate and why active investment management, at least for fixed income portfolios, often makes sense. Active management needs to evolve, but it will survive.
The Financial Accounting Standards Board has issued ASU 2015-09 for nonpublic, calendar year-end insurance company filers. This Accounting Standards Update requires additional disclosures to provide better insight into an insurer's initial claim estimates and subsequent adjustments and to help financial statements users understand the frequency, severity, and timing of future cash flows related to the estimated claim costs. This article summarizes the new requirements.
It is important for captive board members to be conversant in certain key concepts. This article, fourth in a series, looks at assets of captive insurers and the components of an investment policy.