CAPTIVE INSIGHT
HOW TO RUN
A SUCCESSFUL
RISK POOL
GARY OSBOURNE
+1 516 658 6829
gosborne@riskpartners.com
riskpartners.com
The pooling of risk has been around for centuries. This concept, which entails organisations
sharing – and thus, spreading - risk, is often considered to be the primary reason that
insurance even exists at all. But in order to better ensure success when participating in a
risk pool, there are several concepts that should ideally be present.
FACTORS TO CONSIDER BEFORE
COMMITTING TO A RISK POOL
Risk pools in captives can allow organisations to both spread risk and provide a tax benefit.
As an example, risk pools can offer unrelated risk to a captive insurer so that the parent
company may take a tax deduction for the premium that is paid in. So, there is no doubt
that taking part in a risk pool can provide substantial monetary benefits for participants.
However, just like any other financial endeavor, there are several factors that must be
present in order for a risk pool to be successful. These include the pooling of similar risks, a
common underwriting methodology, and the potential for gain or loss.
Likewise, prior to jumping into a risk pool, it is essential to determine how the pool is
structured, what the underwriting process entails, and why the pool is (or was) being
formed in the first place.
These criteria may be better determined by answering the following:
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