Risk financing at its core is about achieving the optimal balance between risk retention and risk transfer. Too often, however, Housing Associations are overly weighted towards increasingly commoditised insurance products – products which rarely align with business objectives and incur a premium cost that does not reflect actual loss performance.
Taking risk control
At Overark, we are able to redress that balance through smarter risk financing, and by so doing help drive down the total cost of risk.
Smart risk financing is about positioning each individual Association as the fulcrum of the overall solution, and shifting the balance from insurance to overall risk control. We achieve this by establishing a clearly defined risk retention strategy, based on a granular understanding of your risk profile and underpinned by a self-insurance facility for predictable risks, while providing a route to the standard insurance market for those risks which require it.
Tried and tested benefits
While relatively new to the Housing Association sector, self-insurance vehicles such as captives and protected cell companies have been driving the risk control strategies of many FTSE 250 and Fortune 500 companies for decades. And the reasons for this are simple, as they:
- Enhance overall control by facilitating greater risk oversight at the strategic level
- Create efficiencies through centralising the management of risk
- Deliver premium stability by reducing the impact of general insurance market volatility
- Extends the scope of coverage to encompass risks that sit outside ‘traditional’ products
- Ensure capacity and coverage that is built around specific risk requirements
- Provide the flexibility to rebalance retention levels and cover limits to reflect market dynamics
- Improve claims visibility and support risk decision making through greater data access
- Reduce the overall cost of capital while providing access to underwriting profits
Overark works with Caucus Intelligent Risk PCC, a Guernsey based protected cell company (PCC), entirely focused on risk-led Housing Associations’ self-insurance programmes. The PCC is managed by the jurisdictions largest independent, and one of the most respected, Captive Managers. Caucus is licensed and regulated by the Guernsey Financial Services Commission.
Ultimately, effective risk financing is about creating certainty of cost, certainty of cover and certainty of control. While insurance spend will always be part of the risk management equation, risk financing must be a central part of your overall business strategy.
“At Overark, we are able to redress that balance through smarter risk financing, and by so doing help drive down the total cost of risk”