A business or a business owner may set up a captive insurance company to insure the risks of the business and related or affiliated businesses. The benefits of a captive include flexibility in insurance coverage arrangements and the potential to retain underwriting profits. Captives may issue insurance coverage against a wide variety of possible liabilities and may be used to insure health coverage. Moreover, captives provide an opportunity to insure against liabilities that may be generally uninsurable or difficult to insure because coverage is unavailable in the commercial market or is excessively priced.
Captives have gained tremendous popularity for not only large corporations but also for small to medium sized companies. There are about 6,500 captives today with more than 37 states with statutes allowing the formation and regulatory oversight of captive insurance companies. Additionally, there are many different types of captives – from Single Parent to Group Captives, Association Captives, Risk Retention Group, Protected Cell Companies, Agency Captives, and 831(b) Captives.
Each captive requires service providers – captive insurance managers – to help determine whether a captive is suited for a client’s business, including what type of captive is the right fit and would produce real value. A captive manager will conduct a feasibility study of a company’s risk profile, and offers a wide range of risk management services, from analytics, loss control and claims advocacy and management for clients, among many other services. This all takes experience and expertise on the part of a captive manager to effectively represent the client and domicile.
When seeking a captive manager to help guide you through the process, look at the number of years of experience the firm has in the insurance industry, alternative risk markets and the captive insurance space. Also, look at the domiciles where the firm is an approved captive manager, the type of captives the firm has managed and their success. Successful captive operations need to be thoroughly researched and properly planned. Every client has different needs, which is why each captive structure is different. Maximizing the benefits to be gained from the captive means understanding and responding to the various business needs and concerns within the organization. To do this effectively, you need a captive manager with a broad range of skills.
Reputation in the industry is also important – not only that of the captive manager but also of the service providers (actuaries, regulatory and accounting professionals, TPAs, risk management firm) with which they choose to work.
The team at Caitlin Morgan Captive Services has built a stellar reputation in providing clients with captive insurance solutions supported by years of experience in establishing the successful formation and implementation of a wide range of captives. To learn more about how we can help you, contact us at (855) 975-4949. You can also find out if you or a client is a candidate for a captive solution by completing our preliminary Captive Candidacy form. This simple model, when completed, can provide you with some information about starting a captive of your own