The practice of financing losses arising from the implementation of the risk of danger {hazard risk), has undergone over the past 30 years, significant changes, among which should be noted three main points:
Increasing the share of losses financed by large corporations at their own expense (left large companies on the net retention).
Increasing the use of risk management techniques, alternative to traditional insurance.
The inclusion of several types of risks - operational and financial / market risk with the risk of danger - in program funding.
In the 1970s, the cost of risk the dangers faced by most of the large corporations has increased considerably. The result of this process was to increase the size of premiums on property insurance and liability insurance. In an effort to reduce costs, large companies increased their share of the risks being left on their own retention program financing risks.
Many corporations are saved by increasing the level of uncompensated losses on insurance contracts (franchise). A significant proportion of companies in the Fortune 500, to carry property insurance risk by creating a captive (captive insurance companies) insurers - subsidiaries focused on insurance risk parent company and affiliated entities. In addition, during the same period were developed and implemented a program of self-insurance (self-insurance plans), as well as other methods of financing risks.
Development of alternative methods of insurance continued in the 1980s. In 1986, the availability of liability insurance crisis provided the impetus to the further spread of captive insurance companies , the development of self-insurance programs and other alternative risk financing techniques insurance. Also in 1986, a group of companies established excident own insurer ( own excess Liability Insurer ) under the name of ACE, Ltd., whose task was the implementation of the liability insurance of the parent companies in case of occurrence of losses exceeding $ 100 million. By establishing such a group captive insurer specified group of companies, in fact, prefer to carry out mutual insurance , rather than relying on the traditional insurance market.
A similar type of insurer group (group insurer) called XL, Ltd. was established shortly thereafter to cover losses liability of more than 50 million dollars. At the end of the 1980s, this trend was reinforced by the creation of an additional group of captive insurance companies, serving the interests of corporate groups.
In addition, at the end of the 1980s, the company began to acquire long-term insurance policies for comprehensive insurance (multiline insurance policies), called the plans of the overall risk (integrated risk plans). Companies, therefore, given the opportunity, saving on insurance premiums, to purchase a single insurance policy that gives coverage for several years on the spectrum of risk, rather than the annual conclusion of separate contracts of insurance for each source of risk. Such multi-year programs have allowed companies to determine the cost of insurance for several years ahead.
In the late 1980s and in the 1990s, with the spread of the practice of holding and risk management, insurance premiums decreased compared to total insurance payments made insurance industry. Within the framework of the so-called soft market (soft market) costs associated with net retention of insurance risks, costs exceeded the transfer of such risks to third parties. Nevertheless, in spite of the continuing decline all insurance rates, the organization continued to maintain a significant share of the risk on their own holding. Such alternative risk financing programs, as captive insurance and self-insurance, are also widely used by many companies in this period, and their continued growth and expansion.
Currently, most of the large organizations it is more convenient to keep a significant portion of insurance risks on their own holding and developing administrative methods to manage this process.
Most companies will continue to use similar programs of their own and hold in the future, therefore, probably never to return to traditional insurance mechanisms for risks left on his own holding. Accordingly, much of this work is devoted to the analysis of risk financing programs, alternative to traditional insurance.
