Summary
Many believe that it will not be the liability insurance market that will be the greatest influence in continued captive growth. Rather, it will be the increased placement of employee benefits into captives that will account for much of the growth of this risk financing alternative. Continued cost increases that have plagued employee benefits professionals for the past few years may hold the key to future expansion of the captive movement. A recent survey of 60 large international employers located in the United States, United Kingdom and Europe by employee benefits consultant Towers Perrin notes that cost savings is the major driver of this movement. Cost savings are typically derived from reductions or elimination of insurance company profit margins as well as some insurance company overhead. The survey estimates the following cost savings: 1. long-term disability coverage - between 15% and 25%, 2. group term life insurance - between 10% and 15%, 3. medical stop loss coverage - between 10% and 12%.
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Extract
A Change in Direction for Captives?
In general, the financial results of many property and casualty insurers have improved over the past few years, due primarily to intense rate increases. Consequently, there appears to be some light at the end of the tunnel for insurance buyers. Pricing for some lines of property coverage has stabilized and, in a few cases, has even declined slightly. In addition, the emergence of several new property carriers has added capacity to this market and has provided some competition for es...
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