A Simple Guide To Captive Insurance
A captive insurance company is an offshore vehicle within a corporate group, whose business is to insure some or all of the risks of the group. Captives may participate in a corporate group’s insurance and risk management strategy as either direct insurers of a groups companies or, where local regulations and other considerations require, as reinsurers. A captive may offer cover for almost any type of insurable risk and may insure every risk of a corporate group or confine itself to certain categories of risk.
Just Some Of The Benefits Of Using Captive Insurance
Capture underwriting profits. Conventional insurers want to make money, it makes sense for insured companies to retain the underwriting profits made in the years of normal losses themselves by writing the insurance in their captive, and shielding the captive against a catastrophe through reinsurance. Where companies have a better than average loss experience, their premium costs will reflect this.
Smoothing the cost of premiums. A captive allows companies to decide at what level they wish to participate in the conventional insurance market and hence at what level of premium to pay for risk transfer.
Niche products underwriting. The normal insurance market may not meet the needs of the parent company, often the underwriter will not or cannot offer the type of cover needed. In this case the captive may be able to supply the cover, buying reinsurance to cover itself against a catastrophe. It is a simple solution to a common problem, finding insurance that meets your needs.
Captive Domiciles
Captive Insurance companies will usually operate in certain jurisdictions, most are regarded as offshore. There are many places around the world where the economic environment is welcoming and conductive to the specific area of captive insurance. Whether you are looking to establish your own captive management company or are simply looking for a management company to manage your insurance risk these domiciles are the places to look. Amongst the best known of these captive domiciles are the Isle of Man, Jersey, Cayman, Hawaii and the Bahamas. Each has benefits and drawbacks compared to one another and you should research thoroughly to make sure that the captive market of your choice meets your requirements.