Captives

Captives are wholly owned insurance subsidiaries usually formed offshore to underwrite and carry, generally in part, the risks of their parent or sponsor. They are offshore because the legislation is designed for captives rather than the wider insurance market.

In general the legislation is less onerous and simpler because the captive is insuring its own parent’s risk rather than a third party. Depending upon the requirements (and regulation for compulsory classes) captives can be either insurers or re-insurers.

A common approach is for a captive to underwrite a finite amount of risk in the form of a programme deductible or quota share participation capped in the annual aggregate. This risk can be written directly or is often ceded via a fronting company – usually the lead insurer in the relevant class.

Captives are commonly used by insurance buyers for the following reasons:

  • Large insurance spend – advantage can be gained by utilizing a bespoke rating approach, depending on the performance of the business, as opposed to the insurance markets view of the performance of the industry which can ignore positive individual features. Also for large premium spend captives can provide expense ratios significantly lower that traditional insurance companies thereby making premiums work harder.
  • Investment income – the opportunity to accrue interest on premiums paid to the captive. This can be significant.
  • Control – throughout the insurance cycle captives are in a much better position to provide consistency in price, terms, cover and availability of capacity.
  • Capital/Coverage leverage – solvency regulations allow effective use of capital in a captive.
  • Contact Us

    Name (required)
    Preferred Contact Number
    Email (required)
    Preferred Method of Contact
    How can we help?

    Please leave this field empty.

  • About

    Established in 1972, Thomas Carroll is a multi discipline risk consultancy covering business and personal insurance, financial services, health, safety and employment law.
    Read More
  • Mailing List

    Sign up here for exclusive information from Thomas Carroll.
  • Connect With Us

  • Existing Customers

RT @TPRgovuk Even if you only have one member of staff, you will have #autoenrolment duties #EarlyBiz e1.m.tt/a/kvxvkjbb.h… pic.twitter.com/YTGE…

About 4 hours ago

Follow Thomas Carroll on Twitter
Thomas Carroll Logo Small Thomas Carroll voted among the UK's 100 best companies to work for in the Sunday Times