25 August 2015
Reporter: Becky Butcher

RRGs financially stable through Q1 2015

Risk retention groups have a great deal of financial stability and remain committed to maintaining adequate capital to handle losses, according to a Demotech report on their Q1 2015 financial results.

During the last five years, cash and invested assets, total admitted assets and policyholders’ surplus have increased at a faster rate than total liabilities, according to Demotech.

Douglas Powell, senior financial analyst of Demotech, suggests the levels of policyholders’ surplus have become increasingly important in difficult economic conditions by allowing an insurer to remain solvent when facing uncertain economic conditions.

Since Q1 2011, cash and invested assets has increased 83.4 percent and total admitted assets have increased 64.6 percent. Over a five-year period from Q1 2011 through to Q1 2015, RRGs collectively increased policyholders’ surplus by 64.7 percent.

This increase represents the addition of nearly $1.9 billion to policyholders’ surplus.

The reported results indicate that RRGs are adequately capitalised in aggregate and are able to remain solvent if faced with adverse economic conditions or increased losses.

Liquidity for Q1 2015 was approximately 70.6 percent. A value less than 100 percent is considered favourable as it indicates that there was more than a dollar of new liquid assets for each dollar or total liabilities.

This also indicates a slight decrease for RRGs collectively as liquidity was reported at 71.9 percent in Q1 2014. This ratio has improved steadily each of the last five years.

Loss and loss adjustment expense (LAE) reserves represent the total reserves for unpaid losses and LAE.

The cash and invest assets to loss and LAE reserves ratio for Q1 2015 was 223.3 percent, a decrease from Q1 2014 when the ratio was 243.7 percent. Powell said these results indicate that RRGs remain conservative in terms of liquidity.

Powell believes that despite political and economic uncertainty, RRGs remain financially stable and continue to provide specialised coverage to their insureds.

The financial ratios calculated based on year-end results of RRGs appear to be reasonable, according to Powell, keeping in mind that it is expected that insurers’ financial ratios tend to fluctuate over time.

More research news
The latest news from Captive Insurance Times
Join Our Newsletter

Sign up today and never
miss the latest news or an issue again

Subscribe now
BCC: BMA to produce Bermuda Market Review
12 September 2017 | Hamilton | Reporter: Becky Butcher
A Bermuda Market Review, providing an overview of the captive insurance industry, is set to be released in the next few weeks, revealed Graham Lamb, assistant director of the BMA
Captives must maintain cyber vigilance
13 March 2017 | New Jersey | Reporter: Mark Dugdale
Certain captive insurers and risk retention groups must remain vigilant against cyber threats, despite exemption from the new rules in effect in New York, according to A.M. Best
FERMA: Drop in number of companies using captives
04 October 2016 | St Julians, Malta | Reporter: Becky Butcher
The number of companies using captives has fallen from 39 percent in 2014 to 34 percent in 2016, according to the eighth edition of the European Risk and Insurance Report 2016...
Risk managers rising in corporate ranks, finds FERMA
04 October 2016 | Brussels | Reporter: Mark Dugdale
European risk managers are taking a more strategic role in their companies with increasing access to top management levels and the board, a FERMA survey has found...
Aon sees decrease in cat bond transactions
09 September 2016 | Chicago | Reporter: Becky Butcher
A total of 24 catastrophe bond transactions closed during a 12-month period, ending 30 June this year, with a limit of $5.2 billion, a decrease of $7 billion on the previous period, according to Aon Securities...
Cost and control are top drivers for captives
04 August 2016 | London | Reporter: Becky Butcher
Control and cost savings are the primary drivers for companies with employee benefits in their captive, according to a Willis Towers Watson report...
Bermuda ILS industry creates over 400 jobs in 2015
22 July 2016 | Hamilton, Bermuda | Reporter: Becky Butcher
Bermuda’s ILS and convergence industry generated just shy of 400 jobs by the end of 2015, representing a 30 percent increase over the previous year, according to a new study by the Bermuda BDA...