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CAPTIVE SUCCESS FACTORS 4. CAREFUL UNDERWRITING Underwriting standards and process are the responsibility of the underwriting committee of the board. The underwriting process ensures that adding new members is a benefit to the captive/RRG rather than a detriment. The rating method used should be simple, equitable and consistent. A process to expel members who consistently show themselves to be poor risks should be developed. As the captive/RRG continues to grow and mature, greater underwriting authority and responsibility can and should be exercised by its underwriting committee. 5. RISK SHARING It is important for captive/RRG members to agree that one member’s catastrophic loss will be borne, in part, by all of the members. While careful underwriting will ensure that over time each member’s premiums will cover its own expected losses, the extraordinary losses must be shared. The underwriting committee should approve a risk sharing policy in accord with wishes of the board of directors. 6. RISK MANAGEMENT APPROACH A heavy emphasis on risk control can help to reduce the total program cost. Training for adherence to loss control standards inspection guidelines and rewards can be used by captives/RRGs to heighten members’ awareness of risk management issues and thus lower losses. A risk management information system assists management in focusing on critical exposure and loss areas. The captive/RRG should emphasize the importance of local risk assessment and enhanced risk control with the active assistance of its service providers.
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