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Determining Whether An Insurance Captive is Right for Your Insured

Posted on: October 4, 2012 by Caitlin Morgan

Determining Whether A Insurance Captive is Right for Your Insured

Determining Whether An Insurance Captive is Right for Your Insured

Last month in our blog we discussed how organizations view insurance captives as valuable risk management strategy as exposures have expanded due to globalization and interdependencies, financial upheaval, corporate wrongdoing, and increased expectations and demands from stakeholders. Now let’s look at how you – as an independent insurance agent – can determine whether establishing a insurance captive is right for your client.

When meeting with your client to discuss alternative insurance solutions, ask the following questions. If your insured can answer “yes” then proceed with a feasibility study:

  1. Is the company willing to invest time and money to create a insurance captive? Does it have the financial resources to pay the captive premium and provide the initial capitalization to establish one?
  2. Are the company’s premiums large enough to justify a captive’s annual costs?
  3. Is the company’s claims history better than other firms in the same class of business, or has its risk profile improved due to risk management protocols that have been implemented?

Once a company says yes, a study will evaluate whether a captive is right for your client. The study should include:

  • Financial projections with the estimated capital that’s needed to meet legal and cost requirements of the insurance captive
  • The amount of premium volume for a viable insurance captive
  • The source of business: country, subsidiary or third party
  • The client’s risk and circumstances
  • Which classes of businesses will be written
  • Details of existing reinsurance program
  • Policy limits
  • Recommendations for the most suitable captive
  • Estimated loss experience
  • Underwriting guidelines
  • Domicile review
  • Claims handling procedures

At Caitlin-Morgan, we can help you determine whether a captive is right for your clients, and we can help determine the type of captive and setting it up. We provide a variety of captive solutions including:

Give us a call at 877.226.1027.

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Posted in: Captive Solutions