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Take Control, Reduce the Cost of Risk with Our Creative Captive Solutions

The captive insurance market since the 1960s has grown worldwide to include over 7,000 captives – in 1980 there were just 1,000 captives. Originally adopted by Fortune 500 companies as a risk management solution to help reduce the cost of risk, captive insurance strategies have since become increasingly diverse, creative and, in many cases, an indispensable tool for many businesses and organizations, including nonprofits, in the U.S. middle-market sector.

With estimated revenues between $10 million and $1 billion, there are over 200,000 firms in the captive sector, representing 44.5 million jobs and revenues of more than $10 trillion dollars.More than 70 jurisdictions across the globe have some form of captive legislation.

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How Do Captives Work?

Captive insurance is increasingly becoming a more popular means to manage risk, especially for middle-market companies. Unlike a risk purchasing group or self-insured pool, a captive is a licensed and regulated insurance company that insures the risks of its owners, policyholder/members, affiliated business or unaffiliated business and organizations, including non-profits. Owners of captives not only put their capital at risk, they also participate in helping control the underwriting, claims and investment decisions of the insurance company. The captive operates similarly to a traditional insurance company and it may either issue policies directly to its insureds or act as a reinsurer to another carrier that will actually issue the policy. The captive assumes premiums and pays claims. It also sets aside reserves to pay any legal obligations as result of its insurance coverage or reinsurance agreements. It pays for its operating expenses and can produce an underwriting profit, which can be shared with owners. Additionally, the captive earns investment income on loss reserves and invested assets.

Generally, all captives have a Board of Directors and are required to undergo insurance examination and audits. The operations are typically outsourced, using a captive manager to perform the day-to-day operations, maintain a set of books and records, and liaison with the board and regulators.

There are many types of captives: Agency Captives, Single Parent (aka “Pure”), Group or Association Captives, Protected Cell Captives (PCC), Reciprocal Captives, Branch Captives and Risk Retention Groups (RRGs).

Why a Captive is a Good Option?

The Nature of the Traditional P&C Insurance Cycle

Like many other industries, the property and casualty insurance market experiences periods of rising (hard) and falling (soft) premiums across all lines of insurance. Captives are a good option both during a soft and firmer market. During a soft market when premiums are highly competitive, you can negotiate pricing with reinsurers and fronts, the capacity needed, and other associated variables to your benefit. Additionally, the cyclical nature of the insurance industry usually portends that a firming of the market will typically follow with price increases and stricter underwriting requirements. With an established captive already in place, you’ll be in a position to avert the pricing increases that come with a firming or hardening market, continue to have control over costs and drive better outcomes. You can also expand into coverage lines for risks not covered in the traditional market. For example, while the majority of captives are writing standard property and casualty business, there are a growing number writing cyber, employee benefits, trade credit and many other lines. Captives are also now being used to cover longevity risks, and are increasingly involved in insurance-linked securities transactions.

The captive insurance solution is well established, has stood the test of time, and continues to offer an efficient, cost-effective alternative for organizations, large or small, around the world.

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What Makes A Good Captive Candidate

Before going down the road of determining whether a captive is a good fit for you, there are several variables that should be reviewed.

These include:

  • Is your company’s loss ratio better than the industry’s average?
  • Is your business profitable?
  • Is there positive cash flow?
  • Are you currently self-insuring or using a large deductible?

Why Caitlin Morgan Captive Services?

Caitlin Morgan Captive Services provides end-to-end captive management solutions to assist you in achieving greater control over risk and improving profitability.

We bring many benefits to the table, including:

  • Captive consultants and alternative risk experts
  • Experienced captive staff and support
  • Access to existing Protective Cell Captive (PCC) through Caitlin Morgan Insurance Company
  • Flat fee structure for services
  • Fast-track implementation for deductible reimbursement programs
  • Industry specialty including healthcare, education, professional liability
  • “Captive Candidate” expedited process

Our value proposition is to provide information that can shorten the learning curve of determining captive benefits through a process that is convenient, transparent and cost efficient.

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6,500+

Captives Worldwide
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90%

of Fortune 500
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$100 Billion

in Premium

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