RIMS published a guide to help risk managers

The Risk and Insurance Management Society, in association with Ernst & Young, published a ‘how to’ guide for risk managers considering setting up a captive.

According to the report, before they get started risk managers should consider five things:

1) Abandon any preconceptions that could sway the decision

2) Obtain management’s unbiased support of the feasibility process.

3) Unless you have the expertise internally, hire an independent third party to analyse whether a captive is suitable for your organisation

4) Agree on the scope of the project

5) Clearly identify and document the key metrics to be used in the analysis, such as: tax rates, valuation of capital (does management value cash in the captive as much as cash in the parent), corporate risk tolerance (will captives take more risk in a captive than current programmes), premium and loss expectations, investment assumptions.

More information on the report is available here