Alternative Markets

The actuarial team effectively communicates their findings in a way which is easy for a layperson to understand.

— Robin Cohan
Quality Distribution, Inc.

Services

Alternative Markets

Whether it’s a captive insurance company, large deductible program, self-insured entity, public entity pool or syndicate, an alternative market entity is a risk retention program outside the traditional commercial property and casualty market. By virtue of the growth in the alternative markets for more than 30 years, the premium volume outside the mainstream markets is now greater than that written by the traditional markets.

Pinnacle understands the needs of those involved in the alternative markets, the most important of which is a desire to control insurance costs over the long term. Each program has unique risk characteristics that are often the impetus for the program formation in the first place. Differing geographic, industry or line of business mixes of business may dictate customized approaches to reviewing the risk profile for your program.

Pinnacle has expertise in a wide variety of lines of business, regulatory jurisdictions and industry niches. Not only do we have a team of experienced consultants at your service, we also have the local knowledge unique to individual market segments such as:

  • General liability for contractors
  • Medical professional liability for physician groups
  • Workers compensation for temporary staffing firms
  • Law enforcement liability for public entity pools
  • Commercial auto liability for taxi and/or public livery

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Case Studies

Captive Dividend Assessment
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Captive Dividend Assessment

An onshore, single parent captive was concerned with the amount of retained earnings and wanted to establish a policy for the minimum capital for the program to trigger dividend distributions. Pinnacle compared the program’s capitalization to a wide variety of industry standards for similar programs from rating agencies, regulators, and other sources. The results of this analysis lead to a recommended board policy regarding a minimum capital threshold for dividend distributions and ultimately to a significant dividend being declared to the parent company.

Captive Feasibility Study
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Captive Feasibility Study

When a regional physicians group, with a moderate deductible program realized they were not getting due credit for more than a decade of exceptional loss experience, they decided to explore other options.

They chose Pinnacle specifically due to our expertise in captive and self-insurance programs.

Initially, Pinnacle discussed options including segregated cell captives, single parent captives, and even risk retention groups once they began to consider marketing the program to other similar regional physician groups.

While the customer was considering the structural alternatives, Pinnacle pursued a funding analysis. Credibility weighting the customer’s experience with industry benchmark data, produced estimates of expected losses and loss variability in several different loss layers. This not only showed the additional risk associated with higher limits of self-insurance, but was also tremendously valuable in negotiations with fronting carriers and reinsurers.

The client decided to increase the deductible on the coverage provided by their insurer, which offered more responsive pricing due to Pinnacle’s funding analysis and to form an off-shore captive providing deductible buyback coverage.  The comfort level our client had with the insured’s services also influenced the decision.

Pinnacle also worked with the captive manager to develop the feasibility study and pro forma financial statements that become the foundation of the captive application. The application was approved as submitted and the captive is running quite successfully.

Cayman Captive
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Cayman Captive

Pinnacle serves many of the largest group captives in the world, many of them domiciled in the Cayman Islands. These reserve analyses are typically produced twice a year and serve multiple purposes. First, they provide a range of reasonable estimates which management uses to determine their best estimate of ultimate losses and unpaid claims liabilities. Second, these reserve estimates can then be allocated to individual members to determine the outstanding liabilities and potential future assessments, if any. Finally, the allocated ultimate losses become the basis for renewal pricing estimates for each member. Pinnacle’s approach to estimating and allocating reserves in group captives is unique in the industry and sets our alternative practice apart with its efficiency and accuracy.

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