Captive Insurance Continues to Be Valuable for Risk Management

Captive Insurance Continue to Be Valuable for Risk Management

Captive Insurance Continues to Be Valuable for Risk Management

Captive insurance is designed to provide owners with an efficient and effective vehicle for obtaining clearly defined risk management and risk-funding objectives regardless of the state of the insurance market (hard or soft), degree of difficulty in finding coverage, and other key factors. Captive insurance has proven over the years their strategic value, resilience, and stability.

What’s more, over the last 15 years due to several key factors such as globalization and interdependencies, financial upheaval, corporate wrongdoing, and increased expectations and demands from stakeholders, captive insurance has come to be viewed as even more valuable in terms of risk management.

A recent 2012 study (with data derived from over 1,200 captives) by a major brokerage firm sheds some additional light on insurance captives:

  • Financial institutions continue to be largest user of captives, with the health care industry a close second. Top industries forming captives also include: retail and consumer products, manufacturing, power and utilities, and construction.
  • The majority of health care insurance captives originate from the U.S. Their captives are primarily located in Cayman (48%), Vermont (24%), and Bermuda (16%).
  • Health care industry captive insurance owners are large users of alternatives such as protected cell companies and risk retention groups.
  • Bermuda ranks first as the domicile of choice for retail and consumer products industry captives.
  • Vermont is ranked first for real estate industry and construction industry captives.

Furthermore, certain alternative captive insurance structures, such as rent-a-captives, protected cell companies, and risk retention groups, have been trending upward. The major lines of coverage in captives, in order of size, are: Property (35%), General/Third-Party Liability (32%), Employers’ Liability/Workers’ Compensation (20%), Professional Indemnity (15%), and Auto Liability (13%). Including Employee Benefits coverage (life, health, and accident) within captives also continues to expand.

The reasons cited for forming captives among those who have them include:  formalizing risk retention financing, enhancing focus and discipline in risk control of fundamental exposures, access to other markets, such as reinsurance and local pool arrangements; and funding for uninsurable risk and/or for risk that is deemed to be overpriced by the marketplace.

We can help you with establishing a captive for your clients. Caitlin-Morgan’s expert consultants will assess your clients’ needs and customize a captive insurance solution that is perfect for them. Give us a call at 877.226.1027.

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