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July 2010
CaptiveRISK
Bear vs Bull
Their extreme conservatism may have helped captives escape the
recession relatively unscathed, but is it time to take the bull by the
horns and make their investments work harder? As Helen Yates is told,
fortune still favours the brave.
Captives emerged from the economic crisis in better shape than many
other financial institutions, due in large part to the bearish approach of
their investors. The few that had a higher proportion of their investment
portfolio in equities – generally those captives writing longer-tail lines
of business – were slightly bruised, but out of the 200 captives rated by
AM Best, only one was downgraded. This was a large energy group
captive, which made the mistake of offloading its investments at the
bottom of the market. Even then, it was only downgraded one notch.
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