What is a Captive?
At its most basic, a captive insurance company is an insurance company licensed under specific insurance laws which are available in certain jurisdictions (including the Cayman Islands) and which has as its main purpose the insuring or financing of the risks of its owners, which may be a single shareholder or group of participant shareholders.
Captive insurance allows shareholders to self-insure for certain future losses, whilst improving their cash flow and managing the cost of insurance rather than using third party insurance providers.
Reasons for Forming a Captive
To minimize costs by the elimination of a large percentage of traditional insurance company overhead.
To retain profits that would otherwise have to be paid to commercial insurers in the form of premiums in excess of the amounts repaid to cover losses.
To have freedom over investment into which the premiums of the captive may be made.
To reduce risk by selecting only quality insureds known to each other (as in the case of some medical malpractice association captives).
To insure risks which would otherwise be uninsurable or cost prohibitive and to design custom policies.
Access to the re-insurance market.
The reduction of Government regulations and restrictions by seeking out a favourable jurisdiction for the registration of the company.
The reduction of taxes by domiciling the company in a low tax jurisdiction. Cash flow planning as the captive has the use and benefit of the premiums.
Timing of premium can be determined to suit the parent’s cash flow requirements.
To find out more about captive insurance in the Cayman Islands and how IMS can assist you, please email us at email@example.com.
Captive Insurance, Private Clients and Board Member
Tel: +1 (345) 814 2857
The starting point for forming a captive insurance company involves a feasibility study, analysing the insurance program of the organisation, including status and costs, and ascertaining whether it would be beneficial to instead use a captive structure.
We can guide you through the feasibility exercise, the negotiation of fronting and re-insurance arrangements (if appropriate). We can also prepare the insurance licence application and liaise with and submit the licence application to the insurance division of the Cayman Islands Monetary Authority (CIMA), and thereafter form and manage of the captive structure.
The licensing process takes approximately 30 days and incorporation of the captive entity normally takes 3 business days from the submission of all necessary documents to the Registrar of Companies in the Cayman Islands and is generally done once the insurance licence has been approved in principle.
IMS was established in 1974 and has been establishing and managing captive insurers since 1976. We have built a solid reputation in the captive insurance arena and specialise in medical malpractice (MedMal) captives, but can assist with other industry captives.
Our total independence from all service providers, insurers and third parties means that we are able to draw upon our extensive network of industry connections, including lawyers, reinsurers, service providers and other invaluable contacts in the insurance industry.
IMS can provide general management services in relation to your Cayman captive insurance company. In particular, we:
Provide and maintain the company’s principal and registered office in the Cayman Islands.
Assist with board meeting arrangements, including preparation of agendas and board packs.
Provide meeting facilities in the Cayman Islands.
If required, provide directors and officers to the captive company and attend and vote at board meetings, acting at all times in the best interests of the company (subject to requirements of policy documents etc.).
Liaise with and/or appoint underwriters, actuaries, legal and tax advisers as required.
Ensure that matters are dealt with to the highest service standards, including prompt responses to questions and queries and providing fast advice in relation to operational matters.
Types of Captives
The most common types of Captive in Cayman are:
1. Association Captive – insures the risks of the members of a trade or other association.
2. Single Captive – insures only its parent or associated companies’ risks.
3. Group Captive – insures the risks of a group of companies that may not be associated with each other.
4. SPC or ICC Captive – special types of company which do not take on the risk themselves, but instead form individual ‘cells’. These structures are often used where an organisation might not be large enough to justify establishing its own fully-fledged captive, since each cell’s assets and liabilities are segregated from other cells and each cell can insure different risks.