Getting the best out of your captive was the focus for the second day of the Bermuda Captive Conference 2008 held at the Fairmont Southampton.

The session, entitled 'How effective risk management can enhance the performance of your captive' and which was presented by Scott Gemmell, vice-president of Marsh Captive Solutions, and Andrew Welch, business development director of Green Road Technologies, looked at the lower severity, higher frequency risks typically retained in captives and the value of actively managing them as well as techniques used to successfully reduce losses.

Ray Mattholie, from group risk management at Jardine Matheson Ltd., then spoke about 'Cultivating your captive', giving case study examples of how captives can grow in size and sophistication in tandem with the changing needs of the corporate parent.

Mr. Gemmell gave an overview of the risk management process involved in running a captive, from identifying and analysing the risks to designing and implementing a solution and then measuring its performance.

He talked through the various methods of identification including surveys and questionnaires, board and business unit meetings and even consultations of the risks, and how the risks are broken down into different categories.

The decision is then taken to either avoid, reduce, retain or transfer those risks, with the frequency of losses being reduced if the process is successfully implemented, said Mr. Gemmell.

"Reducing your risk can improve the profitability of your captive," he said.

"We believe that by actively managing the risks you can add value to your captive and generate additional profits.

"You can reduce the premium and give good news to the business units within that you might want to keep the premiums, you might want to keep the premiums at the levels they are at but write more risk, you can repatriate the profits to the parent corporation, you can use it to fund the risk management initiatives, or you can use it to give some risk management incentives."

Mr. Welch then gave a series of case studies of how to better manage risk, including employee and fleet risk. The morning was wrapped up by Mr. Mattholie, who gave an insight into how ICI, BT and the Jardine Matheson Group cultivated their captives.

"The parent of the captive does not stand still, it is always changing and you have got to consider responding to that and a captive is a way of doing that," he said.

"Captives are all about getting the right deal with risk financing and that is all about cost and cover, but, more importantly than anything, I think, it is about continuity.

"Captives are actually part of the enterprise risk management of major corporations and they are a way of a company showing that it takes risks seriously."