ALTERNATIVE RISK FUNDING SOLUTIONS AND CAPTIVES
Alternative risk funding solutions, including captives, consist of various ways in which organizations retain, finance, and manage risk. Sophisticated, forward-thinking organizations have for decades embraced alternative risk funding techniques to enhance the value and efficiencies of their employee benefits, and property / casualty insurance programs.
VOLUNTARY EMPLOYEE BENEFICIARY ASSOCIATIONS AND TRUSTS (VEBA)
Employers may look to offer employee benefits funded through a Voluntary Employee Beneficiary Association (VEBA) and other trusts. A VEBA is a form of a trust fund where Trust Owned Life Insurance (TOLI) or Trust Owned Health Insurance (TOHI) is purchased from a fronting company. The fronting company reinsures the program through a captive. We provide turnkey solutions through the use of VEBA’s that allow for a cost savings.
CAPTIVES
Captive insurance companies, or “captives,” are widely-used enterprise risk management tools that can produce attractive financial returns for their parent companies, while significantly reducing the cost of financing enterprise risk. Under current U.S. federal tax law, captives are effectively permitted to deduct contingent losses on an accelerated basis. The use of captives has steadily increased over the past several years–and the list of potential applications keeps growing. During the past decade, many employers have reinsured their employee benefit plans (e.g., group term life and long-term disability) through captives. Although U.S. benefit reinsurance transactions have attracted the most attention, there have been a number of transactions involving global benefits. Many companies are insuring all or a portion of their medical stop-loss coverage through captives. There are many reasons for the high level of interest in using captives to insure or reinsure employee benefits risks. Inclusion of employee benefits risks in the captive can diversify the captive’s risk portfolio, thus reducing volatility of the overall underwriting experience. In addition, the enterprise’s long-term employee benefit delivery costs may be reduced from retaining a more economically efficient level of employee benefit risk.
Our services include:
- Captive feasibility
- Captive program modeling
- Implementation
- Ongoing administration and actuarial support
