African Insurance Collective
Let us redefine our insurance together
Together we find solutions for us, by us
For us, by us, that is the future of South Africa’s tourism and hospitality industry
We have waded through the complex fine print that led us to work in isolation and not have the right support when we needed it most. After extensive research, we are now ready to share the options with you and highlight our best solution.
RISK FINANCING
We find the most efficient method of risk financing for us
The risk financing function becomes important when considering the pursuit of optimising the ‘total cost-of- risk’ (TCOR) to an organisation. What is the ‘total cost of risk’? - The total cost of risk is the sum of the following:
TCOR =
Retained Losses/Self-Insurance
Risk control & management costs
Admin Costs
Insurance Costs
The main emphasis in the risk management process is to manage the physical risk situation through risk control and directing attention to the most efficient method of financing your risk.
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Unreimbursed losses (self-insurance, self-retained losses)
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Risk control and management costs (loss prevention costs)
-
Administration costs
-
Insurance costs
THE MECHANISMS
We find a balance between how much risk is retained and how much is transferred
On Balance Sheet
Overdraft/ Credit Facility
Contingency Policy
Cell Captive
Insurance License
A simple illustration of the cheapest available mechanism to a more sophisticated self-insurance mechanism available is shown in the diagram below. The main emphasis in the risk management process is to manage the physical risk situation through risk control and directing attention to the most efficient method of financing your risk.
THE
OPTIONS
Cell captive offers the best solution for us from the three financing techniques
The most cost-effective option will always be to retain the entire risk on the balance sheet, however, the following risk financing techniques offer advantages and disadvantages .
Cell Captive
An insurance facility is set up through purchasing a dedicated class of ordinary shares of an established Cell Captive insurance company. Governed by a shareholders’ agreement, the Cell Captive provides the owner with capabilities enjoyed by a licensed insurer, with an opportunity to insure its own risk and/or offer branded insurance products to its own customer base. A Cell Captive schematic looks like that of a contingency policy.
More on Costs and Benefits
Contingency Policy
This structure is typically well-suited for exposures deemed to be a low probability, high severity as the premium is more closely matched to the annual cost of risk, rather than the exposure layer.
Insurance Market
Continency Policy
Stop Loss / Market
Attachment Limit
Deductibles / Excesses
More on Costs and Benefits
Spread-Loss Structure
A conventional policy that provides insurance protection on a conventional basis with added benefits of allowing the insured client to participate in sharing of underwriting profits and implementation of sound risk management policies.
Contingency policies provide the primary layers of an insurance programme or can cover to risks not insurable. In addition to this, Contingency Policy can also be used to buy-back and significant deductible which may be imposed by the underwriters.
Insurance Market
Year 1
Year 1
Year 1
Deductibles / Excess
Day 1 Stop Loss / Market
Attachment Limit
More on Disadvantages and Advantages
African Safari Collective | Semper | Willis Towers Watson
Willis South Africa | FSP: 267 | Registration No 1997/0204/6907