CORPORATE AND STRUCTURED PRODUCTS

Centriq is able to enhance the efficiency of corporate risk management by providing customised combinations of insurance and risk financing solutions for traditional and non-traditional exposures.
These tailor-made solutions typically referred to as Alternative Risk Transfer (ART) or risk financing, provide cover for underwriting risks, timing risks, credit risks and a wide range of business risks not typically insurable.

The solutions are characterised by their profit share arrangements incentivising the insured to manage their risk, thereby benefiting by immediate receipt of a significant portion of the underwriting profits. Cover is provided by a blend of self-insurance and risk transfer layers unique to the client’s specific requirements.

The solutions are facilitated by way of either a cell captive or a contingency policy.

CELL CAPTIVES

A cell captive can be compared to a sectional title building where the insurer - Centriq - is the building’s body corporate and the client or cell owner is the owner of a unit. Centriq, through the issue of a distinctive class of shares to a client, enters into a shareholders’ agreement through which the cell owner is given access to the risk financing and conventional insurance capabilities enjoyed by the licensed insurer.

Through their shareholding, cell owners are able to participate in the underwriting of their own risks, those of their customers and connected third parties, i.e. benefit directly from any insurance business that they introduce to the insurer.

Cell owners undertake to keep their cells financially secure. No cross- subsidisation takes place between cells and a cell cannot be affected by the insolvency of another cell unless Centriq itself become insolvent. Centriq protects against this risk through comprehensive reinsurance covers.

Cell owners are incentivised to ensure their cell does not incur underwriting losses as the majority of underwriting profits and investment income are ring fenced in the cell for the benefit of the cell owner via the payment of dividends.
Who should own a cell?

Corporates, parastatals, individuals, mutuals or any other entity/body that understands the benefits of participating in their own insurance risks or that of their clients, because they have:
An appetite for and the ability to finance risk;

• A commitment to excellent in–house risk management;

• A favorable loss history;

• Exposures which are traditionally uninsurable or difficult to insure in the conventional market;

• Global exposures, and

• Employees and/or customers to whom they can sell insurance.

HOW SAFE IS THE CELL STRUCTURE?

Each cell is legally and financially structured to ensure its integrity and that of the company as a whole. Risks insured by each cell are often limited through reinsurance.
Benefits to the cell owner

• Reduced cost of conventional insurance;

• Ability to purchase reinsurance locally and internationally for conventional and catastrophe covers;

• Ability to sell insurance to customers and employees;

• Shares in underwriting profits;

• Ability to insure otherwise uninsurable risks;

• Surpluses from good years can be used to subsidise losses that may occur in future years, and

• Cells can be consolidated into the owner’s financial results.

CONTINGENCY POLICY OR RENT-A-CAPTIVES

Contingency Policies, also known as Rent-a-captive Policies, Primary Policies or Funded Risk Retention Policies, are insurance mechanisms that involve “renting” the infrastructure of an insurer and enable participation in the insured’s own risk underwriting in a flexible and cost-efficient manner.
the typical contingency policy will have the following features:

• A degree of risk transfer above the appropriate level of self-insurance

• An experience account providing valuable risk management information to the client regarding premium, reinsurance, claims incurred and notional investment income

• Regular feedback on the status of the policy

• Profit sharing potential upon expiry of the risks covered

CATEGORIES OF RISK AND THE CORRESPONDING SUITABLE INSURANCE STRUCTURE

PRINCIPAL MOTIVATIONS AND AREAS OF APPLICATION

The primary reasons for establishing a contingency policy are:

• Its appropriateness for risks which are difficult to transfer through conventional insurance

• It enhances financial and cash flow stability through being insulated from the effect of price and capacity fluctuations in the conventional market

• It is less expensive than conventional insurance for high frequency / low severity loss exposures

• It enables organisations to retain more risk for their own account in a tax efficient manner and restricts the purchase of insurance to catastrophe type covers

• The facility can be applied to practically any type of cover, either independently or in combination as part of a composite programme.

Other advantages are numerous, given that a contingency policy:

• Permits the insured to participate in underwriting profits from a good loss history

• Encourages better risk management and larger retentions to facilitate reduced cost of conventional insurance

• Incurs no incorporation costs, capitalisation, set-up or cancellation costs

• Provides access to centralised and low cost professional management.

OUR CAPABILITIES:

Centriq's expertise is in underwriting and structuring tailor made risk-financing solutions for both long term (life assurance) and short-term exposures utilising competencies in actuarial analysis, tax and accounting, legal, insurance/underwriting and risk management. Our approach is to analyse loss trends and exposures to provide suggested risk retention and risk transfer attachment points, and to test the optimal attachment point with reference to reinsurance pricing and the client’s capacity and appetite to retain risk. The optimal solution structured for the client’s unique requirements may integrate with the conventional insurance programme, or be structured as a stand alone to complement and provide additional cover where needed.
Centriq has access to local and international reinsurance markets and via our majority shareholder, Santam Limited, the largest short-term insurer in Africa, is also able to leverage economies of scale to secure reinsurance capacity at the most advantageous price.