Vista L&C has assembled a team of professionals with extensive underwriting and structuring skills to provide flexible, innovative reinsurance solutions that are customized to a ceding insurer’s risk and capital objectives.
Benefits to our clients include:
- Capital Enhancement
- Expense Ratio Reduction
- Portfolio Rebalancing
- Exiting Non-core Businesses
- Reduced Investment Risk or Access to Alternative Assets
- Positive Impact on RBC Ratios
Vista L&C provides excellent counterparty credit with the establishment of protected cells and proper trust (or funds withheld) accounts to allow the ceding insurer to take full balance sheet credit for the reinsurance ceded.
Alternative Risk Transfer involves the use of structures other than traditional insurance and reinsurance to provide risk protection. Examples of such structures are captive (re)insurance, risk securitization, embedded value financing, catastrophe bonds, and risk retention groups. Advantages of Alternative Risk Transfer include cost reduction, superior customization, and profit participation.
In a “securitization” transaction, the (re)insured party transfers risk to a special-purpose entity (such as a cell of Vista L&C, or a stand-alone special purpose financial captive organized by Vista L&C), and that entity, to fund the risk-based capital needed to support the transaction, raises funds from one or more investors. In some transactions, the investors will manage the assets backing the insurance reserves, while in others, the (re)insured will continue to manage those assets, and the investors will follow the fortunes of the (re)insured. A securitization transaction may be useful for transferring risks that are difficult to (re)insure in traditional markets, including risks that are out of favor, risks that are priced too conservatively by traditional markets, or transactions that might otherwise be too small.
In a transaction involving financing embedded value or new business strain, the reinsured party cedes business to a special-purpose entity (such as a cell of Vista L&C, or a stand-alone special purpose financial captive organized by Vista L&C), and that entity pays a cash ceding commission to the reinsured by raising funds from one or more lenders. The cash ceding commission is available to pay sales agent commissions and/or fronting fees, as well as being available to fund risk-based capital requirements and tax expense arising from differences between tax and statutory reserves.
Captive Reinsurance may be appropriate for insurers willing to retain risk within their group, but where it may be helpful to have those risks reside on a separate, independent statutory balance sheet. This might allow for risk-based capital relief, more aggressive investment strategies, or more desirable accounting. Risks that are too difficult to transfer to professional reinsurers may benefit from Captive Reinsurance.