Captive Optimisation & Governance

Is your captive “set and forget”?

Many captives were formed in different regulatory and economic climates. Without regular stress-testing against current market conditions and frameworks (including Solvency II and Basel 3.1 / Basel IV), a captive can become a dormant capital trap rather than a value creator.

Moving beyond traditional lines

To maximise Return on Equity (ROE), a captive must diversify. We advise on expanding the risk perimeter to incubate emerging risks and, where appropriate, generate third-party revenue.

• ■ Incubating difficult risks: structure programmes for Cyber Liability, Supply Chain disruption, and Wage & Hour—where commercial markets retreat or capacity is constrained—allowing the captive to build data and reserves.
• ■ Third-party profit centres: transition the captive from cost centre to profit centre by underwriting customer risks (e.g., Extended Warranties, Vendor Insurance Programmes), diversifying the pool and creating an unrelated income stream.
• ■ Employee benefits & diversification: integrate employee benefits (Medical Stop-Loss, Life, Disability) to improve diversification and lower overall capital requirements through covariance effects.

Defensible strategies for the C-suite and regulators

Supervisors and auditors increasingly scrutinise substance over form—particularly around transfer pricing and the economic validity of risk transfer. We provide the governance framework required to satisfy auditors, tax authorities, and boards.

• ■ Economic substance & pricing: ensure premiums are actuarially justified and benchmarked against the market to support arm’s-length positioning.
• ■ Micro-captive (831(b)) remediation: targeted health checks to confirm risk distribution and operational validity for structures under scrutiny.
• ■ ESG & sustainability reporting: integrate the captive into the group ESG framework (e.g., underwriting climate transition risks, aligning investment portfolios with sustainable finance disclosure expectations).

The “Capital Velocity” Blueprint

We deliver a board-ready strategic roadmap that answers the questions that matter most—capital efficiency, risk-adjusted performance, and optionality.

1. Retention optimisation: are we retaining the right layers of risk given our current balance sheet strength and market pricing?
2. RAROC enhancement: is the captive generating a risk-adjusted return that exceeds the group’s cost of capital?
3. Exit & finality: if a captive or cell is no longer efficient, we structure closure solutions (run-off, novation, or sale) to release capital back to the parent.