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Your captive strategy: managing change

Whilst captives are a medium- and longer-term strategic and financially beneficial tool, that bring control and stability to a company's risk management and cost of risk, there are inevitably circumstances where they cease to have commercial purpose and value, for instance following a change in risk management strategy, perhaps driven by changing core exposures or change in risk appetite, or following merger activity which could bring additional captives into the corporate fold. At this time, adopting a proactive approach to the management, winding up or sale of your captive can save a great deal of cost, both financial and managerial, and may even realise additional value. 

 

Disposal options

There are several strategic options in terms of what to do with a captive that is no longer needed including: 

  • Immediate closure (arranging to settle all remaining existing and potential liabilities, surrendering the insurance licence, followed by the sale or winding up of the captive vehicle) 

  • Orderly management in run-off (actively administering the business to facilitate the elimination of liabilities over a period, followed by ultimate by closure as above) 

  • Sale (to another business, especially attractive if the captive has direct writing capabilities or potentially profitable reserves) 

 

The choice between these alternatives is rarely straightforward and is dependent upon a range of criteria regarding the nature of the captive and its business, the objectives and sensitivities of the shareholder & other stakeholders, and, of course,  legal and regulatory requirements. Furthermore, within each of these options, there exists a range of tactical and operational alternatives, the optimisation of which can save further costs and add additional value. 

 

However, just as making the right choices can save substantial costs, so making the wrong choices can end up incurring substantial additional costs and missing out on value. This is where RISCS CWC can help. 

 

How we can help - our Managing Change Feasibility Study comprises the following: 

 

Managing Change Feasibility Study 

 

  1. Executive Summary: High level presentation of analysis, findings & recommendations, including a commentary on the business rationale for closing or selling the captive. 
     

  2. Business review : Summary of all historic business & reserves of the captive; analysis of the on-going obligations and requirements of the owners . 
     

  3. Summary of objectives : Analysis of the shareholders’ strategic & business objectives that impact the captive. 
     

  4. Analysis of exit strategy options : Analysis of which exit strategy best accommodates the needs of 2 & 3 leading to recommendation of optimal exit strategy. 
     

  5. Key features of recommended exit strategy : Summary of recommended option in terms of tactical elements, overview of obligations & requirements of all stakeholders, the final outcome & an execution risk analysis. 
     

  6. Execution plan : Including scope of work detailing activities by participant, timeline, & costs and RISCS CWC’s role as Project Manager. 

 

Following completion of the Managing Change Feasibility Study, RISCS CWC can work with you to project manage the implementation of the agreed execution plan, no matter where your captive is located.

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