Date: Thu, 18 Dec 1997 10:39:09 GMT Server: Stronghold/1.3.4 Ben-SSL/1.3 Apache/1.1.3 Content-type: text/html Content-length: 4117 Last-modified: Wed, 04 Sep 1996 02:52:56 GMT
A. The "Alternative Market" includes a wide range of approaches to financing corporate risk exposures in an alternative manner to the traditional insurance contact in which an insurance company, in exchange for a premium payment, assumes the risk of the insured. The "Alternative Market" can be defined as any approach to financing a corporate risk exposure in which the insured assumes a significanct portion of its own risk. Traditional insurance products which actually involve significant risk retention by the insureds are, however, difficult to identify. For this reason, estimates of the size of the "Alternative Market" tend to focus on captive insurance companies, risk retention groups, self insurance programs and policyholder-owned speciality insurers. | Q. What has led to the development of the "Alternative Market"? |
A. There are many factors which have led to the growth and development of the "Alternative Market". These include availability of coverage, price advantages, expense reductions, tax benefits, the ability to select preferred risks and control over the cost of claims. Traditional insurance is an extremely inefficient way to finance a large number of frequent, predictable losses (a process often referred to as trading dollars with the insurance company) for two reasons. First, the transaction costs involved are high, which results in the insured paying much more than the actual claims cost in "hard" markets and less than the actual claims cost in "soft" markets. | Q. What is the fastest growing segment of the "Alternative Market"? |
A. We believe that the fastest growing segment of the "Alternative Market" is the wide variety of medium sized companies which fall between the very large companies, which are firmly established in captive or self insurance programs, and the small companies which do not generate a sufficient volume of losses or premium to allow for the efficient structure of an "Alternative Market" program. This is the segment which Mutual Risk Management sees as its primary market. |
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