Captives A Work Of ART In Hard Market

When added to the unsettled state of the financial markets, along with the increasingly hard insurance and reinsurance markets, the forces unleashed by Sept. 11 might have set the stage for tremendous growth in the alternative risk-transfer sector.

Arguably, the foundation is in place for broader use of captives and other special-purpose insurance companies, as well as increased use of alternative risk-transfer devices such as financial or finite-risk reinsurance and securitizations.

The events of Sept. 11 have taught us the toughest and most sobering of financial lessons in recent memory. For those engaged in the business of assuming and spreading risk–the mantra of the insurance industry–Sept. 11 losses dealt a staggering blow beyond the ability of underwriters to predict or, up to that point, comprehend.

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