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The COVID-19 Pandemic: Opportunities and Implications for Captive Insurance

The COVID-19 Pandemic: Opportunities and Implications for Captive Insurance

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The COVID-19 Pandemic: Opportunities and Implications for Captive Insurance explores the challenges presented by today's business and economic upheaval, as well as the hardening insurance market, and what it means for the captive insurance industry.

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Demotech Releases First Quarter 2017 Financial Analysis of RRGs

Financial Analysis 480x377
June 30, 2017

Demotech has released its Analysis of Risk Retention Groups First Quarter 2017, which reports on the overall financial performance of risk retention groups (RRGs). The rating company's senior financial analyst, Douglas Powell, has concluded that "despite political and economic uncertainty, RRGs remain financially stable and continue to provide specialized coverage to their insureds."

The following are some specifics pulled from the analysis.

  • Since first quarter 2016, RRG policyholder surplus has increased 2.6 percent, representing an additional $121 million to policyholder surplus.

  • RRGs' liquidity in terms of the carried reserves remains conservative based upon a calculated 215.5 percent cash and invested assets to loss and loss adjustment expense reserves ratio.

  • Leverage for all RRGs combined (total liabilities to policyholders' surplus) was 160.9 percent. Demotech, Inc. prefers individual RRGs to report leverage of less than 300 percent.

  • The 78.4 percent combined ratio (loss ratio (65.8 percent) plus expense ratio (12.6 percent)) was within a profitable range.

  • $1.5 billion of direct premium written (DPW) reflects an increase of 4.2 percent over first quarter 2016. $902 million of net premium written (NPW) reflects a decrease of 3.8 percent over first quarter 2016.

  • DPW to policyholders' surplus ratio was 128.3 percent, while NPW to policyholders' surplus ratio was 76.7 percent. The analysis notes that an insurer relying heavily on reinsurance will have a large disparity in these two ratios. This includes individual RRG company financial results.

Captive.com readers should also read "Governance Standards Checklist for RRGs and Captives" and "Captive Industry and Risk Retention Group Auditing Challenges Discussed."

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