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A captive is an insurance company created and wholly owned by one or more non-insurance companies to insure the risks of its owner (or owners). They are typically established to meet the risk management needs of the owners or members and can cover a wide range of risks. The type of entity forming captive ranges from a major multi-national corporation to a non-profit organization. Once a captive is formed, it operates like any commercial insurance company and is subject to state regulatory requirements including reporting, capital, and reserve requirements.
Why Form/Join a Captive?
The principal reasons for forming or joining a captive are:
There are a variety of types of captives to meet the insurance and risk management needs of organizations, including:
A Single-Parent (or pure) Captive is owned and controlled by one company and ensures that company and/or its affiliates. At Caitlin Morgan Insurance Services, we offer our single-parent captive solutions to business owners whose coverage needs extend beyond that of the average firm. With us, you can rest easy knowing your clients are getting the most comprehensive solutions from highly respected industry leaders. Our Single-Parent Captive solutions are the most popular type of captive insurance on the market today.
BENEFITS OF A SINGLE-PARENT CAPTIVE
Single-Parent Captives have been around for over 50 years and have proven to be a time-tested alternative to traditional insurance when organizing the financial risks of a commercial business. We can help you evaluate whether your client should be considering a Single-Parent Captive. This involves ensuring that there is a strong internal commitment, sufficient funding for start-up capital and expenses, a business plan approved by the selected captive domicile, the ability to meet certain minimum annual operating expenses, additional funding should loss experience be greater than expected, and ongoing monitoring and evaluation by upper management.
An Association Captive insurance company is owned by members of a common industry or trade association and is designed to insure the risks of that industry among its members. Participation is limited to members of the association. It’s similar to a group captive except that it’s sponsored or owned by a group of entities within a particular organization with common insurance needs and similar exposures. Our professionals at Caitlin Morgan Insurance Services can assist members of an association in determining whether a captive solution is right.
WHY AN ASSOCIATION CAPTIVE?
In addition, in offering captive services, associations can attract new members and boost their non-dues income.
Knowing how to begin to set up an Association Captive is critical. The association needs a competent and trustworthy consultant and service provider, guidance in determining the feasibility of a captive, the ability to raise the needed capital, and assistance in designing and implementing the captive. Trust the experienced professionals at Caitlin Morgan to help your association insureds evaluate whether a captive solution is appropriate for them.
A Protected Cell Captive (PCC) is an alternative to conventional commercial insurance and offers benefits similar to those available through group and single-parent captives at reduced start-up and ongoing costs. Many clients turn to PPCs to avoid the challenges associated with insurance market cycles and to be in a better position to control their own destiny. With a PCC, separately identifiable cells are created and owned by the same or separate cell users under which the assets and liabilities of each cell are legally segregated and ring-fenced from each other under statute. Cells can issue insurance policies and access reinsurance markets, just like a standalone insurance company.
THE PCC BENEFITS
In addition, there aren’t any restrictions as to the type of business that can be undertaken by a cell in most jurisdictions.
WHAT TYPES OF ORGANIZATIONS COULD BENEFIT FROM A PCC?
Potential uses and types of business for a Protected Cell Captive include funding increased deductibles for a company’s insurance policies, such as Property, Automobile, Employers Liability, and Product Liability; and writing niche insurance products where standard coverage is expensive or unavailable.
The captive experts at Caitlin Morgan Insurance Services can review the ins and outs of establishing a Protected Cell Captive and whether it makes sense for your clients. We work with some of the leading insurance PCC experts with market-leading experience in cell set-up and ongoing management.