Glossary of Terms
Actuary: The actuary’s role is to protect an insurer’s financial solvency, design and price products and establish appropriate reserve and capital levels.
Capital and Surplus Requirements: Bartlett Actuarial Group will work with you to determine the capital and surplus requirements for your alternative risk transfer program. These are typically dependent upon standards promulgated by the statutes and regulations of the captive’s domicile. In addition, we will employ loss models to forecast and quantify the level of assets necessary to provide financial cushions to your captive for potential adverse contingencies.
Captive Feasibility Study: This term refers to the in-depth analysis that Bartlett Actuarial Group will execute to explore the merits of employing the captive insurance concept to manage and control your insurance risk. In short, this study allows you to determine if utilizing a captive is right for you.
Captive Insurance Program: A captive insurance company is, in its simplest form, a wholly owned insurance subsidiary of an organization/company (parent) that insures all or part of the risks of its parent. Captives are usually formed by companies when business insurance for a certain commercial risk cannot be obtained through traditional insurance markets. They are usually monitored by a risk manager or financial officer at the parent company. Most are managed by a captive insurance management company, located within the jurisdiction of domicile.
Determination of Contribution Levels: Bartlett Actuarial Group will calculate the amount needed to adequately fund self-insurance trust fund balances. This calculation includes funds for both projected expenses and losses that will be incurred during the next program year and for any deficiencies for past program periods.
Due Diligence Support: The analysis conducted by the actuary to determine whether the acquisition has the value expected by the purchaser.
Domicile Review: Selecting the best domicile for your captive program can be complicated. Part of our process is to review all the options and make a recommendation on the best domicile for your particular program. Typical considerations include the regulatory environment, tax structure, infrastructure, and audit requirements of each domicile.
Expert Consulting Services (Discovery phase): The ongoing analysis conducted by the actuary prior to the trial where he assesses the financial impacts of the suit and makes recommendations to the client on whether there is merit in continuing the suit (the actuary can consult with the plaintiff or defendant).
Expert witness testimony (Trial phase): The actuary will bring his/her unique analytical skills, knowledge of the insurance industry and in depth financial analysis of the case to testify in favor of his client (client may be plaintiff or defendant).
Loss Certification: We can provide the actuarial certification of loss and loss adjustment expense reserves for captives to satisfy statutory, regulatory and accounting standards.
Loss Forecasts: Actuarial projections of incurred losses and payment patterns for future program years are our specialty. Loss forecasts are a key element in captive feasibility studies, premium determinations and development of pro-forma financial statements. They are the stepping stone to revolutionizing how you handle your insurance.
Loss Portfolio Transfer: The complicated transaction of ceding an entire portfolio of loss reserves for previous occurrences to an assuming insurance entity has become more common in recent years. Bartlett Actuarial Group is there to help you with determining adequate ceding premiums. This determination usually involves estimating the timing of payments, the potential for further reserve development, and the possibility of additional claim emergence.
Loss Reserve Analysis: Testing and certifying the adequacy of loss reserves is a large part of what we do at Bartlett Actuarial Group. This process encompasses estimating IBNR, which represents the estimated liability for all unreported losses, including deficiency in carried reserves. Our estimates are derived using techniques and procedures that satisfy guidelines promulgated by the Casualty Actuarial Society. In particular, the Statements of Opinion as to the adequacy of loss reserves must be completed by a “Qualified Actuary”, which our chief actuary has been for over twenty years.
Merger and Acquisition Financial Analysis: The financial analysis undertaken by the actuary to help evaluate the value of the insurer being purchased.
Organizational Structure: We will analyze your unique situation and make recommendations on which structure best fits your alternative risk transfer program requirements, e.g. single parent captive, risk retention group, group captive, self-insurance trust.
Overall Cost: The Captive Feasibility Study performed by Bartlett Actuarial Group details the costs of implementing an alternative risk transfer program, affording you the tools you need to better manage your insurance costs.
Premium Determination: To further assist you in getting better control over your insurance costs, we will calculate the dollar amounts required to fund administrative expenses, reinsurance charges, risk charges, loss adjustment expenses, and losses for current and future captive program years
Pricing Analysis: As part of our commitment to improving your bottom line, Bartlett Actuarial Group will provide a pricing analysis specifically focused on determining the most equitable and profitable rates.
Pro-Forma Financial Statements: Projections of a captive’s financial health in future periods is critical when determining the feasibility of implementing a captive program. Bartlett Actuarial Group will complete the projections, typically spanning three to five years into the future, allowing you to make an educated decision. The bases for these projections are a combination of loss forecasts, premium determinations, underwriting standards, coverage’s, economic environment and proposed investment procedures.
Program Formation, Implementation and Management: Bartlett Actuarial Group will provide a holistic approach to your alternative risk transfer program. Using our extensive contacts in the field, we can recommend the best team members to implement and provide ongoing management of your program (legal, actuary, captive manager, audit and asset manager).
Regulatory Support: States regulate insurance companies and often outsource work to service providers uniquely qualified to assist with the financial condition examination of insurance companies, rate filings, expert witness support and other studies needed by the state. Bartlett Actuarial Group is one of the service providers uniquely qualified to provide that support.
Retention Analysis: Bartlett Actuarial Group will work with you to determine an optimal balance between loss retention and loss transfer, taking into consideration such diverse factors as the uncertainty inherent in the loss process, the tolerance for risk and the cost of loss transfer.
Risk Retention Act: : The Liability Risk Retention Act (LRRA) is a federal law that was passed by Congress in 1986 to help U.S. businesses, professionals, and municipalities obtain liability insurance which had become either unaffordable or unavailable due to the “liability crisis” in the United States.
Risk Retention Group:A Risk Retention group is an alternative risk transfer mechanism. It is a corporation or limited liability association that is owned by its members and spreads risk and results among members. The federal government passed the Liability Risk Retention Act in 1986 which allowed Risk Retention groups to be licensed in one state but to operate in every state. RRGs only insure third party liability coverages.
Run-Off Support: Underperforming insurance companies may need an actuarial firm to assist with identifying the pros and cons of the run off strategy, evaluate claims for Run-off, perform the reserve analysis and evaluate books of business for a loss portfolio transfer. Bartlett Actuarial Group can provide these services.
Self Insurance Program:Self insurance is an alternative risk management method whereby an eligible risk is retained by a company, but a calculated amount of money is set aside to compensate for a potential future loss. The amount retained is calculated using actuarial and insurance information so that the amount set aside (similar to an insurance premium) is enough to cover the future uncertain loss. Self insurance is similar to insurance in concept, but it does not involve paying a premium to a traditional insurance company. By self-insuring some part of their risk, organizations can gain more control over their cost of risk while potentially improving coverages and limits, enhancing claims management and loss control, and gaining cash flow advantages. All states regulate workers compensation self insurance programs.
Traditional Insurance Program: A traditional insurance program is an arrangement under which the insured pays a premium to the insurance company in exchange for the transfer of risk to that company. Definition from Wikipedia.