The
Captive Insurance Story
Eighty percent of all Fortune 500 companies in the US use this alternative as their preferred choice for the arrangement of Insurance and Risk Management. With our specialty in this area, and knowing that insurance companies question the cost of arranging insurance on assets with a higher than average perception of risk or exposure to losses, Bob and I are able to provide you with a no obligation presentation establishing how we may assist with an alternative solution in Captive Insurance. It provides real advantages over the traditional insurance market enabling clients to have more control over expenditure and at the same time provide the much needed insurance protection that in many instances has become expensively prohibitive or limited.
The Benefits
The benefits exceed more than merely being able to offer a reduced excess or widen the current cover available. The following is a short list of some benefits.
- Reduction and stabilization of premiums.
- Insuring the uninsurable.
- Control over the clients own insurance program.
- It has a positive impact on risk retention, risk management and loss control.
- Direct access to the reinsurance market.
- Reducing dependence on commercial insurers and insulating from insurance market cycles.
There are cash flow benefits (the premiums paid to an underwriter are lost to the underwriter, on the basis of risk transfer. In the event of a loss the underwriter pays out on the claim in accordance with the terms and conditions of the policy of insurance).
With a Captive, any funds / premium that is left after the payment of re-insurance and claims is retained by the insured and not lost as with the traditional market. Investment of the funds can then be accumulated with the investment income being taxed at a minimal rate depending on where we structure the Captive. Ideally we will utilise a facility in a country off-shore that enjoys a minimum percentage tax regime. i.e. Vanuatu, Bermuda, Cook Islands, Cayman Islands, Nevis, Singapore, etc.
What we are hearing
Post Covid, we saw a change in the risk appetite from insurers together with reinsurers around the globe. The Covid event, highlighted the exposure to underwriters with a maximum probable loss potentially exceeding everyone’s expectations in this area, together with creating supply chain exposures and inflationary pressures, post the event. Combining the impacts of Covid with the impacts of climate change, and an increase in claims incurred as a result, we have the perfect storm occurring. Many companies and organisations are now exposed to additional increased terms and conditions as a result. Terms and conditions that they feel uncomfortable with extending their risk appetite beyond their business plans.