Forming your first captive insurance company can seem to be a daunting task at first. With the right partners and resources we can eliminate the guesswork and confidently ensure the process is completed painlessly and efficiently. Captives.Insure (C.I.) has extensive experience forming hundreds of captives and will guide you through each step listed below.
Feasibility Study
The first step in forming a captive insurance company is to conduct a feasibility study. This study should:
The feasibility study is typically performed by an actuary and is often required by regulators before approving a captive license. It provides a comprehensive analysis to determine if forming a captive makes financial and strategic sense for your organization. Captives.Insure will provide the initial indications on whether a captive is viable at the very beginning for no cost. Once you determine a captive is the right arrangement for your business, we will coordinate all of the service providers to finalize the feasibility study and work with you every step of the way.
Select a Domicile
Captives can be domiciled onshore in the U.S. or offshore in international jurisdictions. Key factors to consider when selecting a domicile include:
Popular U.S. domiciles include Tennessee, Vermont, Utah, South Carolina, and North Carolina. Common offshore domiciles include Bermuda, Cayman Islands, and Guernsey. Work with your advisors to select the optimal domicile for your needs.
Develop a Business Plan
A detailed business plan is required as part of the captive application process. Key elements include:
The business plan should demonstrate the captive's ability to meet regulatory requirements and operate as a viable insurance company. Captives.Insure will develop the initial business plan simultaneously with our underwriting and actuarial work to give you the all the information you will need prior to making the decision to jump into a captive insurance arrangement. Our indications will detail exactly the premium needed to properly fund the captive to satisfy regulatory requirements, the reinsurance premium assumed back into the captive, the expected losses and expenses associated with the transaction and ultimately the money left over as underwriting profit at the end of the year and subsequent years.
Capitalize and Incorporate the Captive
Once the domicile is selected, you'll need to:
Minimum capital requirements vary by domicile and the type of captive, typically ranging from $250,000 to $1 million or more. The capital requirement under Captives.Insure’s facilities can be as low as only $25,000.
Apply for an Insurance License
Submit a formal application to the domicile's regulatory body, typically including:
The regulator will review the application and may request additional information before approving the captive license.
Implement Operations
Once licensed, key steps to launch captive operations include:
Ongoing Compliance and Operations
To maintain regulatory compliance and optimize performance, captives must:
Captives are typically managed day-to-day by a professional captive management firm, with oversight from the parent company's board of directors. Captives.Insure will guide you through the service providers and provide a turn-key solution where the captive manager, tax, audit, and actuarial firms will be introduced and included in the financial projections.
Tax Considerations
Captives taxed as U.S. insurance companies must file federal income tax returns. Key tax issues include:
Work closely with tax advisors to ensure compliance and optimize the tax efficiency of your captive structure.
Optimize and Expand
As the captive matures, look for opportunities to:
Regular strategic reviews can help ensure your captive continues to meet your risk management objectives. Forming and operating a captive insurance company is a complex undertaking that requires careful planning and ongoing management. However, for many organizations, captives can be a powerful tool to reduce insurance costs, access coverage not available in commercial markets, and improve overall risk management. Working with experienced service providers is critical to navigate the regulatory, financial, and operational complexities of captive insurance.
CONCLUSION
Captives.Insure is an award winning captive insurance consulting and underwriting firm that will guide you through the entire captive formation process from start to finish, taking out the guesswork and allowing the insured business to take control of their insurance program and stop burning money in the standard market.
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