CAPTIVE STRUCTURES
T
he hallmark of captive insurance has always been its creativity. What started life as a simple concept—a non- insurance company owning an insurance company that provides risk mitigation services only to its parent
or group of companies—has developed into a range of products satisfying a range of different needs in the risk financing arena.
Single-parent captives The first captive companies were the most basic. They are known as single-parent or pure captives. Direct subsidiaries of large, global corporations, their business is underwriting or reinsuring exclusively the parent company’s risks. Those usually include the risks of fellow subsidiaries within a single group structure.
The largest of the early captives, many with oil company parents, required full-time staff, some of whom were experienced in the international insurance markets. Others were managed externally, by captive management firms or, initially, legal specialists. As the understanding of risk management has spread across the financial markets, this model retains its attractions for some of those new to the idea of self-insurance who are looking to maintain a tighter grip on their insurance costs.
Single-parent captives may choose to write third party business as an adjunct and for tax purposes. The decision is usually made at the parent company level.
The term pure captive now sounds as dated as would, say, a Model-T Ford to the motor industry, but it is from the pure captive that the family of options sprang.
Brother/sister captives Extending the family metaphor, brother/sister captives—also known more simply as sister captives—are captive insurers that share common ownership but, usually, write different types of business, operate in different geographic areas or otherwise write business that the owners prefer to keep separate from other lines.
Association captives The association captive is a logical extension of the basic captive model. Instead of a single parent, the association captive is owned by an organisation with multiple owners, who share a common interest.
CICA | Forty years of captive leadership
29
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70 |
Page 71 |
Page 72 |
Page 73 |
Page 74 |
Page 75 |
Page 76 |
Page 77 |
Page 78 |
Page 79 |
Page 80 |
Page 81 |
Page 82 |
Page 83 |
Page 84 |
Page 85 |
Page 86 |
Page 87 |
Page 88 |
Page 89 |
Page 90 |
Page 91 |
Page 92 |
Page 93 |
Page 94 |
Page 95 |
Page 96 |
Page 97 |
Page 98 |
Page 99 |
Page 100 |
Page 101 |
Page 102 |
Page 103 |
Page 104 |
Page 105 |
Page 106 |
Page 107 |
Page 108 |
Page 109 |
Page 110 |
Page 111 |
Page 112 |
Page 113 |
Page 114 |
Page 115 |
Page 116 |
Page 117 |
Page 118 |
Page 119 |
Page 120 |
Page 121 |
Page 122 |
Page 123 |
Page 124 |
Page 125 |
Page 126 |
Page 127 |
Page 128 |
Page 129 |
Page 130 |
Page 131 |
Page 132