What is a Captive?

A captive is a licensed insurance company that is wholly owned and controlled by its insureds and insures the risks of its owners. 

A captive operates just as any insurance company would by issuing policies, collecting premiums and paying claims. However, it neither offers insurance to the public nor is it regulated like a traditional insurance company. It is regulated as a captive. 

Essentially, it allows businesses or groups to self-insure where owners can stabilize coverage for their specific exposures while participating in the potential underwriting profit and investment income. 

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Who uses Captives?

For the ideal captive candidate, we look for successful, profitable large to mid-market companies in all industries that often have hard-to-place risks or set a strong emphasis on risk management. This includes government entities and non-profit organizations.

Criteria for forming a captive:  
  • Good risk management and/or loss ratios
  • Long-term commitment
  • Financially sound
  • Willing to assume risk
  • Has difficult to place coverage
  • Has predictable insurance risk
  • Has formalized risk management program 

Captive Types  

We can help set up and manage all types of captives, including but not limited to: 

  1. Association captives

  2. Group captives

  3. Microcaptive using 831(b) regulations

  4. Protected cell/segregated portfolio companies

  5. Risk retention groups

  6. Single-parent or Single-cell captives

  7. Special-purpose captives

  8. Special-purpose financial captives
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Risks Captives Cover

Captives can provide insurance coverage for many different lines of insurance. Most cover conventional property and casualty insurance such as general liability, product liability, deductible reimbursement of workers’ compensation, auto liability, professional liability and directors and officers liability.

Risks that are more volatile are typically placed into the commercial insurance market since it has more capital and capacity. However, captives can also provide specialized coverage for these higher risks that are hard to insure such as employee benefits, pollution liability and credit risk to name a few.

Benefits of a Captive

Benefit #1 - Coverage

Insurance coverage options are increased for the company because a captive offers lines of business unavailable or difficult to obtain in the commercial insurance market. 

Benefit #2 - Capacity 

Limits of coverage can be expanded with a captive, or companies can more easily access reinsurance, which creates additional capacity. 

Benefit #3 - Cost 

The captive can be used to finance risk at a lower cost than with traditional coverage. Many of our clients invest their saved premium, turning a cost item into a profit center. In fact, our clients often remark how impressed they are with the cost-efficiency and control gained from a captive. 

Benefit #4 - Control 

We determine whether forming a captive insurance company for the organization will help improve cash flow and control expenses so a business is in control of how its premium dollars are spent.

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