A feasibility study is the decision document for captive ownership. It tests your actual program data against captive economics and its business purpose. Luzern works with clients before, during, and after feasibility studies to make sure the program we design on paper matches the needs of your business in reality. A feasibility study produces several specific artifacts:
- Loss analysis. An actuarial review of your loss history and exposures, producing the loss pick that drives the premium price you will pay your captive.
- Structure and domicile. The captive type and where it is licensed, each selected based on the needs of your program.
- Pro forma financials. Five years of projected performance, premiums, reserves, and surplus, under expected and stressed scenarios.
- Capital and collateral. What the captive would need to hold to demonstrate solvency, meaning its ability to pay claims even when losses run worse than projected.
- The business case. How the captive fits within the scope of your parent business so that everyone understands why it's being formed and how it will be used.
The output is a plan your CFO, broker, and board can review and approve. It's also all of the information needed to present to regulators for approval.
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