Appointing Service Providers for a Risk Retention Group
Apart from the customary financial and legal service advisers, the key service providers to be considered will consist of an underwriting management company and reinsurance intermediary.
Working with the right service providers is often key to a Risk Retention Group's success. It is important to ascertain that the professional services required are available and to ensure that the right ones are selected. Service Providers can include Underwriting Managers, Consultants, Legal Counsel, Auditors, Accountants, Reinsurance Intermediaries and Loss Control specialists.
Since the passing of the 1986 Liability Risk Retention Act and the emergence of captives in general, the industry has grown in sophistication. All services are widely available, but as with any hiring of services, care needs to be taken that those chosen are professionally qualified as well as capable of providing an efficient service.
Depending on the resources available to it, a risk retention group may wish to either use its own underwriting manager or alternatively it may outsource the underwriting function to an existing managing general underwriter or third party administrator. The underwriting function is key to the success of the business. Rates and policy forms, as well as underwriting guidelines, will all need to be developed and utilised to ensure that the best coverage is made available at the most cost-effective price, at the same time ensuring that an underwriting profit is achieved so that members are not asked for additional contributions.
The role of the Underwriting Manager can include:
The Role of the Reinsurance Intermediary
The relationship with the reinsurance intermediary is important as the intermediary will be responsible for designing the reinsurance program and ensuring that risk transfer objectives are achieved.
Reinsurance Intermediaries are situated in the U.S., Bermuda and the London market and will often work with intermediaries in other jurisdictions in which they are not represented.
In today's world of easy electronic access. most reinsurers can be accessed directly by any intermediary regardless of where they are located, although Lloyd's of London only transacts reinsurance business with registered Lloyd's brokers.
The role of the Reinsurance Intermediary should include:
Also in this section
The Federal Liability Risk Retention Act of 1986
Preparing a Feasibility Study for a Risk Retention Group
Filing an Application and Monitoring a Risk Retention Group
The Advantages and Disadvantages of Risk Retention Groups