Reinsurance—How Captives Benefit

 
Captive Uses Trends & Innovations | Steven McElhiney | President & CEO | EWI Re, Inc.

According to Steve McElhiney, president and CEO of EWI Reinsurance, reinsurance partners can expand a captive's ability to write profitable business over time and create mutually sustaining benefits between the captive and its reinsurers. (1) Reinsurance allows captive insurers to leverage their capital position by permitting captives to fund the right premiums with acceptable leverage ratios in the context of finite capital. (2) Captives generally use manuscripted insurance policies with broader coverages than found in the typical marketplace. Fortunately, reinsurers often have a wider risk appetite than traditional insurers, thereby allowing captives the freedom to utilize broad and enhanced coverage forms. (3) Captives often have a very limited exposure base and one or two key reinsurance partners can help captives drive better outcomes while providing valuable knowledge and perspective on an entire industry. Ultimately, a captive can gain a greater understanding of its own risk and better manage this risk through such reinsurance partnerships, thus providing it with incalculable long-term benefits.