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Harnessing Strategic Capital and Risk Management for Rapid Expansion and Growth

Small to mid-size insurers are challenged to stimulate growth in today's competitive market. Specializing in unique areas of insurance while increasing digital offerings allows insurers to stand out from the competition and accelerate growth. Specialized insurers with growing GWP can utilize Vesttoo’s Risk Management Solution to release capital for rapid expansion and growth

August 31, 2020
Strategic capital and risk management for rapid expansion and growth
Strategic capital and risk management for rapid expansion and growth

Small to mid-sized insurers are increasingly motivated to specialize in specific areas of the market while investing in digitalization in order to increase their Gross Written Premiums (GWP) and accelerate growth. Specialization in specific industries allows insurance providers to really understand client needs, positioning them to provide better coverage, while digitalization improves client reach and operation efficiency.

The concept of specialization in a unique field in order to grow your business is certainly not new, and in the current market conditions and fierce competition, taking advantage of the absence of large insurance companies in these specialized areas, geographical proximity and the need for close investor relations are the most efficient way to achieve high growth rates and profit margins, especially in the areas of P&C Insurance.

Areas seeing growth in insurer specialization include heavy vehicle insurance (e.g. commercial trucking), liabilities in specialized areas, property damage due to natural disasters and more.

Unfortunately, the growth of small to mid-sized insurers in specialized areas is limited due to regulatory solvency regimes forcing insurers to hold high buffers of regulatory capital on their balance sheets. Insurers are challenged to maintain and manage their growth under the constraints of risk and capital management according to the latest regulatory requirements on top of the fierce competition.

Reinsurance solutions, which can provide capital relief and re-stimulate growth, are not widely available to small to mid-size insurers. Reinsurer capacity is limited, and they are hesitant to provide adequate protection to these specialized insurers due to their lack of previous reinsurance relationships and smaller cover needs, making deals less profitable and cost efficient for the reinsurer, and more expensive for the insurer, lowering capital relief per dollar spent.

Vesttoo’s cost-effective Excess of Loss (XoL) Risk Management Solution provides insurers with the capital relief and strategic risk hedging they need, allowing them to take advantage of the freed capital for rapid expansion and growth.

Vesttoo's Excess of Loss Risk Management Solution
Vesttoo's Excess of Loss Risk Management Solution

Vesttoo’s solution utilizes accurate proprietary stochastic risk modeling to create robust forecasts and transfer the tail risk of previous sold and future policies to the capital markets through derivative structures, taking advantage of the unlimited capacity the markets have to offer. Capital market investors substitute traditional reinsurers on the other side of the deal - hedging risk on one hand while enabling growth and increasing profit margins on the other.

Utilizing the capital markets, while streamlining the risk modeling process makes Vesttoo’s solution cost-efficient for insurers, while maintaining profitability and benefits for investors on the other side of the deal. Vesttoo is interested in building strategic relationships with insurers at the beginning of their growth cycle, providing a completely customized, end-to-end solution, taking care of every step of the deal - structuring, legal processes, regulatory approval, collateral setup, operations and more.

Small to mid-sized specialized insurers benefit from Vesttoo’s XoL solution with a fast time-to-market, providing them with efficient and low-cost capital management with comprehensive protection while releasing the capital they need in order to expand operations, improve the competitive edge and increase profits.

Read more about Vesttoo's custom-made solution in our Aggregate Stop Loss Case Study.

Vesttoo has developed advanced technologies for data-driven risk management, transferring actuarial risk to financial risk through the capital markets. Vesttoo specializes in risk modeling and alternative risk transfer for the Life and P&C insurance markets, providing insurers with a low-cost strategic risk management solution for immediate capital relief, value enhancement and liability hedging.