Choosing the Right Investment Manager for Your Captive Program

Captive formation and use have increased in many organizations in recent years. As risk management costs rise and some risks become difficult to reinsure at all, more communities are looking to remove traditional insurance profit loading and focus their efforts on their own captives.

In addition to a rise in new captive formations, changes within the capital markets and economic pressures have resulted in existing captive owners revisiting investment strategies for their captive.

Whether your organization is looking to form a captive for the first time or find opportunities to optimize and enhance your existing captive program, it is important to understand the nuances of how a captive works and the benefits one can offer. Working with an experienced investment manager and making connections with a collaborative team are essential to reaching the best outcomes.

Creating a Captive

Creating a captive formalizes the financing of selfinsured risk by forming a licensed insurance company owned and controlled by those it insures. This provides tribal governments and businesses with more risk management and cost control and the flexibility to choose what risks are self-insured under the captive and what are insured externally through commercial insurance. A captive is a fluid tool, allowing owners to control what risks are covered under the captive. As markets change and needs evolve, owners can move risks in and out of the captive to best serve their current strategies.

Selecting an Investment Management Provider

Selecting the right investment management provider to help your tribal business is imperative— both when forming a new captive and streamlining an existing one. It may seem simple to tap into a bank or other provider that you already engage. However, the right investment management firm for your captive should understand the complexities of insurance asset management, the underlying liabilities and risk lines as well as the unique needs of your tribal community. A provider with special teams focused on insurance and tribal business solutions can offer added benefits. To create an optimized investment program, an investment manager should utilize actuarial modeling to build out an initial investment strategy. With asset liability modeling analysis, your manager should be able to match your liabilities duration with the investment duration to maintain adequate liquidity to support claims.

Collaboration is key in managing an effective captive. Developing a strong relationship between the captive’s service providers creates a fully synchronized team, helping to confirm a successful captive program.

Working Together for Better Outcomes

An active investment strategy for your captives, both newly formed and existing, should help maximize investment income generation. An investment manager should understand your unique risk profile and its underlying liabilities and liquidity needs. Working together, you will be able to build a program to provide inherent liquidity through customized investment strategies and minimize capital market headwinds.

Let's Talk

Learn how PNC Institutional Asset Management can help meet your captives’ needs. For more information, please visit pnc.com/iam.

Schedule an appointment

SCHEDULE NOW

Find a branch near you

FIND NOW

Important Legal Disclosures and Information

These materials are furnished for the use of PNC and its clients and do not constitute the provision of investment, legal, or tax advice to any person. They are not prepared with respect to the specific investment objectives, financial situation, or needs of any person. Use of these materials is dependent upon the judgment and analysis applied by duly authorized investment personnel who consider a client’s individual account circumstances. Persons reading these materials should consult with their PNC account representative regarding the appropriateness of investing in any securities or adopting any investment strategies discussed or recommended herein and should understand that statements regarding prospects may not be realized. The information contained herein was obtained from sources deemed reliable. Such information is not guaranteed as to its accuracy, timeliness, or completeness by PNC. The information contained and the opinions expressed herein are subject to change without notice. Past performance is no guarantee of future results. Neither the information presented, nor any opinion expressed herein constitutes an offer to buy or sell, nor a recommendation to buy or sell, any security or financial instrument. Accounts managed by PNC and its affiliates may take positions from time to time in securities recommended and followed by PNC affiliates. Securities are not bank deposits, nor are they backed or guaranteed by PNC or any of its affiliates, and are not issued by, insured by, guaranteed by, or obligations of the FDIC or the Federal Reserve Board. Securities involve investment risks, including possible loss of principal.

The PNC Financial Services Group, Inc. (“PNC”) uses the marketing name PNC Institutional Asset Management® for the various discretionary and non-discretionary institutional investment, trustee, custody, consulting, and related services provided by PNC Bank, National Association (“PNC Bank”), which is a Member FDIC, and investment management activities conducted by PNC Capital Advisors, LLC, a wholly owned subsidiary of PNC Bank. PNC does not provide legal, tax, or accounting advice unless, with respect to tax advice, PNC Bank has entered into a written tax services agreement. PNC Bank is not registered as a municipal advisor under the Dodd-Frank Wall Street Reform and Consumer Protection Act.

“PNC Institutional Asset Management” is a registered mark of The PNC Financial Services Group, Inc.

Investments: Not FDIC Insured. No Bank Guarantee. May Lose Value.

PNC General Disclosure https://www.pnc.com/en/corporate-and-institutional/pnc-general-disclosure.html