Take a share of your own risk
Appoint a captive manager to set up a captive – a private insurance company you own and control – that allows you to take on a manageable exposure of your own insurance risk. Technically, your captive acts as a reinsurer for that exposure.
Select The Risks You Can Control And Afford To Cover
You don’t have to include all of the lines of business you currently buy. Just the ones that you’re comfortable with, that you can mitigate with risk management, and that is likely to generate a profit for you.
Spread Some Of Your Risks
As an insurance company, you will need to take on risks unrelated to your business. Being part of the RE-PAID program makes this easy because only top-performing businesses are admitted with historically low loss ratios. 30% of your captive’s risk is assigned to other clients in the program, and you take back the equivalent amount of risk from them.
This has the effect of further limiting the impact of claims on your captive.
Take A Finite Amount Of Risk For A Finite Period
Limit Each Loss
If there’s a loss in your business, your captive covers the first part of your claim, up to a limit that you set. It means your captive is never exposed for any single loss beyond your appetite for risk.
Set the limit for any single loss that fits your appetite for risk:
- $250k
- $350k
- $500k
If a loss exceeds that amount, your insurers are there to cover you up to the full limits of your insurance policy.
Control Total Losses
You get an aggregate limit too, which protects your captive against an accumulation of losses unexpectedly getting out of control.
Typically, your aggregate limit will be 4x your any one occurrence limit, ie:
- S1m
- $1.4m
- $2m
If an accumulation of losses exceeds this, your insurance policy will again cover you.
Take Risk For A Finite Period
With RE-PAID, you know when you’re underwriting profit is free and clear.
All liability to pay claims is typically removed for you after 3 years for property and 5 years for casualty risks, although this can sometimes be extended if you wish.