O’Brien Planning Group Captive Insurance Captive Insurance

A captive insurance company is created for the purpose of writing property and casualty insurance policies to insure the risks of one or more businesses. There are additional benefits to creating a captive, but they should be ancillary to the primary purpose of risk management.

O’Brien Planning Group Captive Insurance
O’Brien Planning Group Captive Insurance

Some of the reasons that a business may create a captive include: 

  • Underwriting Profit
    A captive insurance company allows the parent company to recapture underwriting profit that historically has been lost to the commercial insurance market.Rather than a third party benefiting from these profits, the business can benefit. Note that, technically, the party that owns the captive is the one that receives any profits, so if the captive is a subsidiary captive, the business receives the profits. Otherwise, whichever party owns the captive (e.g., parent company’s owners, parent company’s executives, a trust) receives the profits.

  • Provide Coverage Not Otherwise Available
    Captives can provide coverage for unique or specific risks that are not transferrable in the retail market. Policies issued by the captive can be custom-designed to meet the needs of the parent company. In addition, a captive can provide coverage that the commercial market is unable or unwilling to provide at a reasonable cost or even to provide at all.

  • Access to Fronting and Reinsurance
    Captives are often able to access the reinsurance market to provide increased limits and protect surplus. They can also partner with traditional carriers to issue policies that require ‘admitted’ or ‘A’ rated paper.

  • Asset Protection / Risk Management
    Cash reserves held on the balance sheet of the parent company are subject to claims and lawsuits of general creditors. Having reserves set aside in a licensed, regulated entity helps ensure that the company stays in control of its assets