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Principal and Consulting Actuary Derek Freihaut joined Joel Applebaum, chief content officer for the International Risk Management Institute (IRMI) and Captive.com in an episode of The Edge of Risk podcast titled “Risk Transfer and Risk Distribution: Actuarial Insights for Captive Insurers."

Derek explores risk transfer and risk distribution, drawing upon insights from Pinnacle's white paper, Risk Distribution: Expected Adverse Deviation (EAD) Case Studies. He explains the benefits of using tools such as the EAD ratio and Expected Reinsurer Deficit (ERD) to help captive owners objectively assess risk distribution and risk transfer.

A better understanding of risk distribution and risk transfer can inform program design and reinsurance approaches for captive managers. The conversation focuses on how different reinsurance structures — quota share versus excess of loss — impacts risk distribution.

Derek also explained that risk diversification and distribution shown in EAD modeling have numerous risk management applications, including assessing and evaluating risk retention, capitalization and additional coverages. He emphasized that these insights help strengthen a captive's long-term strategy. Captive insurers that understand their risk transfer and risk distribution are going beyond simply meeting the requirements. "They are developing a better understanding of the amount of risk within their insurance company and allowing themselves to make the best decisions based on the risk appetite for their captive,” he said.

Tune in to hear Derek and Joel’s detailed discussion on risk transfer and distribution in the captive market.