Marsh Captive Solutions' 2016 Captive Benchmarking Report, analyzed 1,139 captive insurance companies (managed by Marsh globally) for benchmarking analysis. With the title, “Captive Solutions: Creating Security in an Uncertain World,” the 44-page report covers many topics from reasons to form a captive, roles captives can play, and the changing regulatory landscape. In this post, I will summarize Marsh's findings in the area of investments for captive insurance companies.
401(k): Finding The Right Asset Allocation
One of the most important decisions you have to make in your 401(k) plan is asset allocation — that is, how much you put in stocks, bonds, and cash. Asset allocation is the strategy of dividing your investments across various asset classes in order to reduce risk through diversification. Here are two simple approaches to get you started.
A Look Inside Captive Insurance Companies’ Investment Portfolios (2014)
Marsh recently published its 2014 Captive Benchmarking Report, analyzing 1,148 captive insurance companies (managed by Marsh globally) for benchmarking analysis. Since the credit crisis, captives that have a parent company have invested approximately one third of investments toward loans to their parent company or other intercompany investment. Prior to 2008, many more captives were invested in equities. The motivation behind intercompany investments with the parent entity or affiliates is to minimize the cost of capital employed in the captive and enhance the parent company's liquidity. Reinjection of resources to the operations of the parent company is also a side effect of the current low interest rate environment. Further, the parent company has greater control over the captive’s invested assets.
Avoid Four Common Portfolio Mistakes That Could Hurt You
In my 15 years as an investment adviser, I have reviewed many portfolios. Typically, these situations arise when engaging with a new client or reviewing a current client's funds outside of my advisement, e.g. 401(k). Sometimes, a prospective client asks me to perform a portfolio review like a patient seeks out a second opinion. Whatever the occasion, I enjoy the opportunity to look at another adviser's work which often provides insight into his/her investment philosophy, background, and approach. We work with a diverse clientele with widely varying investment needs and objectives. Whether the portfolio belongs to an individual, non-profit organization, or captive insurance company, there are recurring themes that I find and would handle differently. Here are four common portfolio mistakes that you should avoid.
Cost of Not Investing Your Captive Assets
In seven years of offering investment management services to captive insurance companies, we are acutely aware how conservative many captive owners are when it comes to investment objectives and goals. A cookie cutter “one size fits all” approach does not work when it comes to constructing investment portfolios. The makeup of a captive insurance company’s portfolio should take into account the type of risk insured, projected loss patterns, and cash needs. In some cases, captive owners are so risk averse that they choose not to invest and are content to sleep well at night by owning money market funds and cash. Among captive managers, accountants, and actuaries, quite a few people have asked me, “What is the cost of NOT investing?”
Asset Protection 101: Is the Bear (Market) Coming Out of Hibernation?
Welcome to our Asset Protection 101 series. With exception to diversification, the industry doesn't like to talk about asset protection because it goes against conventional thinking and the way that most advisors operate. However, one size doesn't fit all clients so we will take on these topics in this series.
With the market now 4.5 years into its bull run, investors must ask themselves, “How much longer can the party last?”