What is Captive Insurance?
Simply put, a group captive is an independent insurance company owned and managed by its members. The captive insures the risks of its owner/members by covering the predictable losses and transferring away the catastrophic, unpredictable losses. Captives typically reduce upfront premium expenses and return underwriting profits and investment income to the owner/members. Most captives are incorporated and operate under the jurisdiction of an offshore domicile, an arrangement that allows greater flexibility and increased control over insurance services and expenditures. There are two types of group captive programs: homogeneous captives, which are made up of companies that belong to the same industry, such as contractors, trucking companies, and staffing companies; and heterogeneous captives, which are made up of companies from a wide range of industries, such as manufacturing, distribution, service and retail. Regardless of captive type, owner/members share the common goal of gaining co
Captive Insurance is a risk management tool which allows businesses to more effectively and efficiently manage corporate risk. In addition, it offers a more efficient means to retain risk within the corporate structure. What type of company can benefit from captive insurance? Captive Insurance can suit a range of companies. Large corporate structures often benefit from creating a wholly-owned captive, or “pure captive” to insure risks germane to the organization’s business needs. Smaller companies can benefit from captive insurance planning by aligning with other similarly situated companies and participating in a group captive, association or sponsored captive insurance company. At what point does the use of a captive insurance company become cost effective? As with any new business structure, there are certain administrative costs which may create a threshold for participation. Typically, the minimum corporate premiums required to make a pure captive cost effective would be approxima
Captive insurance is insurance or reinsurance provided by a company that is formed primarily to cover the assets and risks of its parent company or companies. Captive insurance is essentially an “in-house” insurance company with a limited purpose and is not available to the general public. It is an alternative form of risk management that is becoming a more practical and popular means through which companies can protect themselves financially while having more control over how they are insured. Companies both large and small are having an increasingly difficult time finding and affording traditional insurance policies to cover their risks and assets. Premiums are increasing at a steady clip, making insurance coverage nearly cost prohibitive for most companies, leaving them vulnerable to catastrophic loss. Some companies have risks that are difficult or impossible to cover. Increasingly, traditional insurance companies are setting up their credit rating structures without considering ac
A captive insurance company is a wholly owned insurance subsidiary of a non-insurance parent, which is used to self-insure the risks of the parent and associated companies. These may be industrial, commercial or government organisations. The captive is formed to insure all or part of the risks of that organisation. Captive insurance companies can also be used by trade associations or companies with similar business risks, allowing them to join together in a cost-effective way to obtain insurance. The captive insurance company concept has been of major benefit and a significant contributor to the profitability and balance sheet strength of thousands of large organisations throughout the world. There are approximately 5,000 captive insurance companies worldwide. Most of them are domiciled in tax attractive locations, where the regulatory framework is such that the regulators make prompt decisions and where capitalisation requirements are commensurate with the risk assumed. The growth in
A Captive Insurance Company is an insurance company that primarily insures the risks of businesses which are related to it through common ownership. For example, the owner or a group of businesses can form a wholly owned Captive Insurance Company for the purpose of insuring his related companies. The insured businesses pay premiums to the Captive in exchange for insurance. The Captive can be owned by the business owner , his spouse, his relatives, a Trust, or any of the companies he owns.
