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