For organisations with a thorough understanding of their own risk profile and a relatively good loss experience, captive insurance can be an effective risk financing mechanism. Benefits can include more control, more flexibility, enhanced risk protection, improved cash flow and ultimately, a reduced cost of risk.
A captive insurance company or “captive” is an insurance company created and owned by an organisation outside the insurance industry, which insures the risks of its parent or other subsidiaries. In other words, it’s like having your own private insurance company (an insurance company that is held “captive” to your own organisation).
Over the last 20 years, captives have become a well-established mechanism used by medium-to-large organizations to finance risk in a cost-effective way. Today there are over 4,000 captive insurance companies throughout the world.
Reduce insurance premiums or the cost of risk
Your captive will accrue the profit that would otherwise have been passed to your insurer, and administrative charges can be eliminated.
Stabilise insurance costs
By reducing reliance on the traditional insurance market.
Obtain affordable cover for unusual or complex risks
By gaining access to the reinsurance market through your captive insurer.
Generate additional revenue
By underwriting insurance offered as an add-on to your core product or service. For example, an electronics retailer may sell extended warrant insurance at the point of sale.
Improve insurance coverage
By being able to issue bespoke policies ensuring no gaps in cover.
Improve cash flow
By retaining the funding for losses within the corporate group, as well as earning investment income on the accumulated contributions and loss reserves (which would otherwise go to the traditional insurance company).
Robus can support you and manage the entire process, from company set-up and licensing through to ongoing management. Our teams in Guernsey and Gibraltar/Malta have considerable experience in the formation and management of insurance companies.
For those considering bearing insurance risk for the first time, we recommend a Feasibility Study to ascertain whether this would be strategically and financially beneficial and to provide analysis of the different structures and domiciles available. We will be honest in our assessments, outlining your options along with the various costs and benefits in an unbiased way.