☰Your program is designed to handle large losses. The actuary prices premium expecting bad years, and the feasibility study stress-tests the structure against adverse scenarios. The captive's capital exists precisely for the year when losses run worse than projected, and reinsurance is placed above the retention so a severe year is capped at a known number, per claim and in aggregate.
If losses do exceed the projections, there is a plan: reinsurance recoveries absorb the layer above your retention, the regulator works with the owner on a plan where capital needs reinforcing, and the next renewal is an opportunity to re-price using the latest data. It is also why early-stage programs often start with modest retentions and grow them as surplus builds; the structure earns the right to take more risk.