What is a feasibility study?
The feasibility study, generally prepared by a consulting actuary, is documentation of how the captive program will operate and is a required element of the captive application. The study is often the pivotal piece of information used to decide whether or not to proceed with the formation of the captive. The study may include both a written summary of the business plan and five years’ worth of projected financial results. Those interested in forming a captive will need to accumulate three to five years worth of past premium and claims data as well as prospective information related to the insurance risks the captive is anticipated to write. The cost of the feasibility studies varies with the complexity of the captive program.
The feasibility study is really two studies. A market study that will analyze and report on your market conditions, both local and tourist, the competition, the fit for your concept in your market, attendance patterns, etc. The second part will contain the first meaningful projection of: (a) capital spending projections; (b) operating costs, and (c) the financial analysis of your project. All of these are critical elements in preparing your business plan, and both segments are essential in order to make realistic decisions regarding your project.
