Risk management is the process whereby corporate risk is identified and analysed, appropriate control measures determined and the residual risk either retained or transferred.  The combination of risk retention and risk transfer represents an organisations risk financing strategy.  The most common risk transfer medium is the conventional insurance market where the consequences of the risk occurring are protected for a given premium cost.  One of the factors affecting the premium cost is the level of risk retention (self-insurance) that the organisation is prepared to accept.

The most advantageous risk financing strategy is that which is based upon finding the optimum balance between risk retention and risk transfer.  In many cases, this optimum balance is best achieved through the utilisation of a captive insurance programme in conjunction with insurance and/or reinsurance transfer.  In effect therefore a captive insurer provides a formalisation of an organisations risk retention strategy and a vehicle through which the residual unwanted risk can be transferred in the most economically feasible manner.

Please contact Chris Schofield, FCII FIRM for more information.