Your Mother always warned you about the people who would drag you down. She probably told you, “Bad company corrupts good morals.” This axiom is increasingly true in risk management and insurance as well.
The advent and growth of Alternative Risk Transfer (ART) approaches and vehicles has fueled an ongoing shift in the business insurance marketplace. More and more companies with solid risk management practices and good loss histories are moving some or all of their risk into the ART market. Said another way, “good risk” is leaking out of the commercial market and into the ART market. As this shift occurs, your business may find itself surrounded by (and sharing risk with) more and more “Bad Company.”
I’ve spoken with Business Owners, CEOs, CFOs and Risk Managers who have told me, “We had almost no losses, but our insurance premiums keep going up…” Or, “We didn’t have a loss or file a claim for years, and one claim caused our insurance rates to go sky high the next year… why weren’t we rewarded for all of those good years?” ART approaches can help provide cost control, flexibility and reward your business for a good loss history.
ART is often accomplished via a captive insurance program or Risk Retention Group (RRG). Both structures enable businesses to own all or part of an insurance company and share in either insurance profits or cost savings from loss controls.