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WHY CONSIDER A CAPTIVE

Captives are a means for insureds to reduce their reliance on the commercial insurance market and provide stable long-term risk financing.

Group or affinity captives are formed by homogenous risk groups when the commercial insurance market is unable or unwilling to provide appropriate protection. Typically this occurs when:

• There’s an availability crisis and the commercial market cannot confidently evaluate the risk involved – for example: the terrorism immediately after 9/11
• The prospect of a major loss might be minimal, yet the consequence could be catastrophic – for example: nuclear pools
• A specialist focus delivers cost savings through focused risk management and loss prevention – for example: doctor-owned Mutuals
• Policyholders are disadvantaged by the commercial market classifying them within a broader group with more hazardous exposures – for example: not-for-profit organizations or commercial entities

Homogenous risk groups should consider the quality of product and service that the commercial insurance market really provides, and determine if they are insulated from an availability crisis or need additional cover.

Captive advantages include:

• Informed risk understanding and selection
• Significant and realizable cost savings
• Credible data, appropriate economic pricing
• Self financing, risk management and loss prevention
• Focused claims expertise
• Profits reinvested or returned to policyholders
• Continuity of available capital