Captive Insurers - Frequently Asked

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 A captive insurance company is an insurance company owned by the insureds, established to insure the risks of its owners. It provides coverage similar to traditional insurance but is tailored specifically to the needs of its owners. 

Forming a captive can offer several benefits, including:

• Cost savings through reduced insurance premiums.
• Greater control over risk management practices.
• Retention of underwriting profits and investment income.
• Customized coverage tailored to the specific needs of the business.
• Improved cash flow flexibility.
• Direct access to the reinsurance market.

Any business with significant and predictable insurance risks can benefit from a captive. This includes industries such as manufacturing, construction, healthcare, transportation, and professional services. 

 There are several types of captive structures, including:

• Single-Parent Captives: Owned by one company.
• Group Captives: Owned by multiple non-related companies.
• Association Captives: Formed by a trade or industry association.
• Rent-a-Captives: Companies "rent" the captive's capital and services.
• Protected Cell Captives: Segregates assets and liabilities of different participants.

A feasibility study can help determine if a captive is right for your business. This involves assessing your business’s financial strength, risk profile, and potential cost savings. Our experts can guide you through this process. 

 Regulatory requirements vary depending on the domicile (location) of the captive. It generally involves meeting capital and reserve requirements, obtaining licenses, and adhering to reporting standards. Our team can help navigate these regulations. 

 The process of setting up a captive can vary but typically takes several months. This includes feasibility studies, regulatory approval, and operational setup. Our experienced team can streamline this process for you. 

Ongoing management responsibilities include:

• Regulatory compliance and reporting.
• Financial management and accounting.
• Claims handling and processing.
• Risk management and loss prevention strategies.
• Regular review and adjustment of coverage and reserves.

Owning a captive involves financial risk, as the captive is responsible for paying claims. There are also operational risks, including regulatory compliance and management of the captive’s financial health. Our team provides ongoing support to mitigate these risks. 

 A captive generates profit by retaining underwriting profits and investment income that would otherwise go to a traditional insurer. Effective risk management and loss prevention strategies can enhance profitability. 

 Yes, in some cases, captives can insure third-party risks, providing additional revenue streams. However, this depends on the regulatory framework and the specific structure of the captive. 

To get started, contact our team of experts who will conduct a feasibility study, guide you through the regulatory requirements, and assist with the formation and ongoing management of your captive insurance company. 

"Frequently asked questions" are a listing of most commonly experienced questions and  the simplified versions of the most typical answers.  This should not be construed as legal advice.  Please refer to your policy for actual language, terms and conditions.