Captives
Types of Captives
Captive subsidiaries come in a variety of types, each with its own regulations, complexities and local nuances. Here at Concordis Group we work hard to clarify your specific needs, then shift into execution, delivering customized financial services for your captive insurance program. These are a few of the most common types of captives:
Pure (Single-Parent)
- Most common captive structure
- Wholly owned by one parent company and formed primarily to insure or reinsure the risks of the corporate parent or business partners
- Capital is determined based on the domicile of the captive, there is a minimum capital requirement in each domicile
- A ratio of premium to capital is determined by each domicile regulator
Association / Group
- Owned by many insureds and managed by the owners and the organizer or sponsor
- Usually a homogenous group by industry, but can be homogenous by line of risk (i.e. Workers Compensation, General Liability, Auto Liability). There are many heterogenous groups in existence
- Formed primarily as a long term comittment to risk management and to lower the cost of insurance and share risk with others
- Capital is related to premium/exposure and is dependent upon where the captive is domiciled.
Rent-A-Captive
- Various names ( e.g. segregated cell, protected cell, etc.)
- Core is owned by one entity, and ‘cells’ are rented to others
- Activity in cell is governed by contractual agreement or preferred share arrangement
- ‘Capital’ (in the form of cash, LOC, parental guarantee, reinsurance) must cover the maximum risk written by cell
- Usually formed for a specific purpose and can be a short-term reaction to the marketplace
- Easy exit if the market softens or a pure captive is pursued
Segregated Portfolio Company
- Sometimes referred to as a protected cell company
- A company which segregates the assets and liabilities of different classes (or sometimes series) of shares from each other and from the general assets of the SPC
- Segregated portfolio assets comprise assets representing share capital, retained earnings, capital reserves, share premiums and all other assets attributable to or held within the segregated portfolio
Risk Retention Group
- Regulated under the Federal Liability Risk Retention Act of 1986
- Can write direct –no front company needed and can operate in a state after it ‘registers’
- Can only write liability lines of risk –no Workers Compensation or property and is regulated very similar
- Insureds must be owners and owners must be insureds
- Once domiciled in one state the RRG must be accepted in all other states
