SINGLE CAPTIVE
Benefits of a captive include:
> More efficient funding for large-deductible commercial policies
> Improved risk management
> Reduced dependence on commercial insurance
> Fund for risks that are uninsurable or uneconomical to insure
> Creation of new profitable business (i.e., the captive)
> Customized insurance coverage
Good candidate criteria
(at least one of the following):
> Spend $1 million or more annually on property and casualty insurance premiums, and $500,000 if considering a cell-type structure
> $100 million or more in annual revenue
> Have significant uninsured risk
> Have 500 or more employees
> Experience uninsured losses of $500,000 or more annually
> Sell warranties or service contracts to customers
> Sponsoring organization controls $5 million of premium
CAPTIVE EXAMPLES
> A large business forms a captive to cover the deductible layer of numerous lines of coverage, thereby reducing insurance costs and improving cash flow.
> Nonprofit hospital uses a captive to insure its professional liability.
> Insurance agency controls a large book of profitable business and forms a captive to reinsure a layer of this risk from the commercial carrier.
> Large-property owner forms a captive to increase and insure the deductible layer of its property insurance coverage.
> Manufacturer forms a captive to transfer risks not covered by a standard General Liability policy.
> Manufacturer, service provider or retailer forms a captive to issue extended warranty contracts to customers.
> Medical malpractice program reinsures a layer of risk and premium to a reinsurance captive, owned by a select group of doctors.
> Large business with high-deductible workers’ compensation program
> Employer with 500+ employees forms a captive to insure medical stop-loss risk as part of its self-insured health program.
> A large employer uses a captive to cover not only health insurance but also executive retirement programs, group term life, long-term disability and voluntary benefits.
> A contractor forms a captive to cover performance risks, construction defects and warranty risks.
> An association forms a captive to cover the general liability, workers’ compensation and E&O liability of its members.
> A business with specific exposures not available at a reasonable price in the market forms a captive to cover the first layer of those risks, then obtains reinsurance for the excess.
