Captives
In addition to our other insurance products, UME offers captives, a unique and innovative insurance solution. They are a great option for many, so we encourage you to contact us about them today!
WHAT IS A CAPTIVE?
Captives are essentially a form of self-insurance whereby the insurer is owned wholly by the insured.
- It is a long term mechanism
- It can be an insurance company or reinsurance company
- It can be a wealth management vehicle
- It is used to create or preserve shareholder value
- It is a risk management tool
WHY FORM A CAPTIVE?
The three C’s:
- Cost
- Control
- Coverage
Stacking of collateral requirements
Fronting carriers disappearing
Perceived heavy profit taking by traditional carriers
WHO SHOULD CONSIDER A CAPTIVE?
- Single companies that are paying out $1,000,000 or more in premiums
- Groups of similar companies/individuals that want to band together to share risk
- Companies with good loss ratios
- Companies with good risk management
- Companies with “difficult to place” coverages
- Companies with the wherewithal to capitalize an insurance company
TYPES OF CAPTIVES
Single Parent
- One entity owns the captive and is the sole insured.
Industrial Insured
- Multiple entities operating in the same industry with homogenous risks.
- Looks like a risk retention group but operates like a single parent captive.
Association
- Created by an association of entities.
- The association, the members of the association or some combination of the two can own the captive.
Risk Retention Group
- Multiple entities operating in the same industry with homogenous risks.
- Liability coverages only.
- Licensed in state of domicile and must be registered in all states of operations.
- No fronting required due to the fact the RRG has its own paper.
- Create by Federal Act, not available for offshore domiciles.
BENEFITS OF FORMING A CAPTIVE
- Control over insurance function
- Reduced frictional costs
- Improved net cash flow
- Direct access to the reinsurance markets for better negotiating position
- Stability in your insurance products
- Tailored coverage to meet your needs
- Fewer regulatory restrictions over self-insurance
