The consultants at Demotech combine sophisticated tools with analytical ability to gain an understanding of the insurance market to assist clients identify their optimal operating capacity. Self-insureds, captives, risk retention groups and insurance companies depend on Demotech to provide analysis and benchmarking. For example, clients who choose to retain more risk believe that, in the long run, it is more cost-effective than the purchase of reinsurance.
For these clients, optimal operating capacity depends on:
Appetite for risk. In broad terms, clients want to retain predictable losses and transfer unpredictable losses. Each client's appetite for risk may vary depending, in part, on its goals with regard to earnings, financial stability, profitability and capital structure.
The insurance market. Insurers do not operate in a vacuum. Risk that is not retained needs to be transferred. The total cost of addressing risk depends on the pricing available in the insurance and reinsurance markets.
Regulatory constraints. Retention levels may be mandated or restricted based on an insurer's surplus level, financial condition, direct written premium, expense ratio, etc. We can assist in the development and implementation of an appropriate resolution of the matter.