In a soft market (insurer cash flow rating period) most insurance buyers substantially reduce or eliminate the risk they “retain”, choosing to use first-dollar guaranteed cost insurance because it is such a bargain.  In TODAY’S marketplace “retention” of risk has become necessary if not dictated.  The buyer assumes retaining more risk will pay off in reduced insurance costs.  HOWEVER, be prepared, it may be necessary for a buyer of insurance to substantially increase deductibles, move to a loss sensitive rating plan (Retro), consider some form or combination of self insurance, or utilize the Alternative market as a vehicle to transfer risk.


Captives – whether wholly owned, group, or rental – are available.  Business Owners should expect this option.  The Federal Risk Retention Act should be presented.  Other options must be explored.  Risk Retention Group (RRGs), Risk Purchasing Groups (RPGs), Cell Captives or RRGs, and Self Insurance with Stop-Loss Excess Insurance should all be identified and understood.


The primary key for Business Owners to save is by retaining some of the risk.  This will require the Business Owner to implement an effective safety and risk control program.   If losses are not avoided or mitigated, they will come directly out of the business.   Part of any decision to retain risk must include a commitment by the Business Owner to invest in an effective safety and risk control program.  This effort should be outsourced to be most effective.


During cash flow/soft market periods, Insurance Companies pay little attention to exposure analysis and risk underwriting, simply satisfied to obtain more premium to invest.  Hard reality has caused the insurance industry to stumble along trying to find the right direction, with the insurance buyers again caught up in the confusion.   Professional Risk and Insurance managers, who have experienced themselves over the years how this MOVIE plays out, are able to Advise and DIRECT their clients to the best solution available for their situation.


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