Alternative risk funding solutions, including captives, consist of various ways in which organizations retain, finance, and manage risk. Sophisticated, forward-thinking organizations have for decades embraced alternative risk funding techniques to enhance the value and efficiencies of their employee benefits and property & casualty insurance programs.Spring is a leader in developing innovative and intelligent alternative risk funding strategies that lower costs, improve management control, enhance coverage, increase program design flexibility and help establish financial stability for our clients.
We almost always recommend a feasibility study at the onset of a risk funding project to evaluate the client’s position and identify potential solutions. For feasibility projects our trained team uses a unique three-phased consulting process called Vision-Insight-Results. This approach provides a sound framework for the intuitive evaluation process.
The Vision Phase
You have the vision and you’ve asked the question – is there a better, more efficient and less costly way to finance risk? Our consultants share your curiosity, and gather the data necessary to provide a tentative answer to this question. If the answer is “yes” or “perhaps,” we move on to the next phase of the project.
Once we’ve validated our vision, we collect and analyze detailed loss and financial information, develop a series of alternative outcome scenarios,
The Insight Phase
Once we identified the preferred strategy (ies) we will refine the quantitative and qualitative issues and help our clients select the most appropriate course of action based on the degree to which the indicated outcomes conform to our initial vision.
The Results Phase
Now we know what the chosen alternate course of action will cost, and its projected long-term benefits. We are now ready to implement the program.
The Risk Financing Continuum
Except the first one, each stage in the risk-financing continuum represents a separate and distinct risk/return calculation. Guaranteed cost insurance transfers all of the risk in exchange for a premium. There is no risk/reward calculus because the client retains no risk.
The middle three stages represent varying degrees of risk assumption and protection. The green stages combine limited risk assumption with an insurance backstop, while the orange stage consists solely of retained risk without an annual maximum limit.
Finally, the dark blue stage represents the ultimate in formalized risk assumption – the captive. While captives require capitalization and incur administrative costs, for qualified organizations they provide the greatest possible return for the assumed risk.