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Captives Weather the Financial Storm

The financial crisis was a hot topic during a recent Vermont Captive Insurance Association conference - although most agreed, captives had fared better...
August 18, 2009

The financial crisis was a hot topic during a recent Vermont Captive Insurance Association conference - although most agreed, captives had fared better than many traditional insurers, according to a report by A.M. Best. Steven M. Chirico, assistant vice president at A.M. Best Co., said captives were more profitable than traditional commercial insurers, according to a recent Best's Special Report that examined the performance of 186 captives.

"Using combined ratio as a measure, the captive community significantly beat the commercial insurance market from a profitability perspective. The combined ratio for captives was approximately 5 points below the ratio for the commercial insurance market," Chirico said during a break at the conference.

Vermont regulators said they hadn't seen a single captive impaired due to the recession. "Our risk retention group's surplus actually went up year over year," said David F. Provost, deputy commissioner of captive insurance, in an interview at the conference. "Most of our captives are very conservatively run and very conservatively invested. So they really were not particularly impacted too hard by the recession."

Captives have been fairly insulated from the financial turmoil because of their conservative nature, said Greg Lang, head of business development for Munich Reinsurance America Inc. "A captive allows you to control your own destiny," Lang said.

Captives Weather the Financial Storm (BestWire 8/17/09)

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