Captive Insurance Company

Captive Insurance Company

Captive Insurance Company

Insurances are well known nowadays. They are companies who offer people to invest, save and benefit in the future. It comes in different varieties and benefits also range differently depending on the policies in your insurance. You may be familiar with common insurances, but have you heard of Captive Insurance Company?

What is a Captive Insurance Company?

 A captive insurance company is an insurance built by owners of the company themselves to insure their own company. Due to this set up it is also known as self-insurance. This is usually formed if a company can not find any existing insurance that can cater their needs. Therefore, they create one with their management as shareholders. Then build their own policies that could cover their companies’ needs.  This is also a good way to reduce business risk.

Types of Captive Insurance

1.Single parent captive

Single parent captive is also known as pure captive. This insurance usually covers the loss exposure of the parent company. It allows it to monitor its operational risk and provide efficient claims.

2. Group Captives

This insurance is built by several parent companies that are in the same industry. Group captive is ideal if:

  • Reduction of start-up cost is desired
  • Willing to pool their risk as well as claim experience
  • Not yet capable of building a standalone company
  • Desire to have access on underwriting talent

3. Association captive

Almost the same as a group captive but owned by an association that belongs in the same industry.

4. Industry captives

This is often a result of organizations building insurance to solve a specific insurance problem.

5. Risk retention group

This insurance is allowed to be established if the participants belong to the same industry and they should belong to commercial businesses. They are exempted from state laws and state taxes. However, they are mandated to include a warning that their policy is not the same with the regular policies.

Benefits of Risk retention group

  • Risk management practices and loss control can be customized
  • Multi-state operations
  • For every good  loss experience comes dividends

6. Rent-a captives

The concept for this category is to be able to have the captive insurance rented. So third parties can avail of the services even if they are not included in the management. This can be achieved by giving guarantee that there will be no loss from its users.

Benefits of Rent-a captives

  • Control over one’s insurance program
  • It can minimize insurance cost in the long run
  • Coverage terms and conditions can be maintained continuously

7. Protected cell captives

This is almost the same with Rent-a captives but assets are protected from one another by having a segregated cell for each insured. Each cell has an agreement with the captive owners.

Benefits of Protected cell captives

  • Low cost on administrative and set up
  • No minimum capital for each cell
  • Flexibility on program designs
  • Control over one’s program

8. Micro captives

This is a license insurance company that has an annual written premium of $2.2 million.

Benefits of Micro captives

  • Greater Control and management of claims
  • Flexible policy, premium designs and payment schedule
  • Can be integrated with existing insurance policy

9. Diversified captives

This type accepts other businesses aside from its parent company’s business.

10. Special purpose vehicles

These are captives that reinsure contracts to their parent company. Thru bond issues transfer the risk to the capital markets.

Benefits of Special purpose vehicles

  • Separates risk and builds up capital
  • Easier transfer of non-transferable assets
  • Can be use to test the market before going into full investment
  • Undiluted ownership of the investors and stockholders in the parent firm

With all the details and benefits given by the captive insurance company,it would be better than getting insurance from outside your firm. You can customize your policies and you need not to worry about bringing out big capital since it requires only a minimal amount to most of the categories mentioned above. As long as it can protect your assets and liabilities then it will be a good investment. It is also flexible in general since you can control almost all fields of your premium. Insurance is a need nowadays. Businesses are looking for something to protect their financial status and such insurances are perfect to acquire.