Captives-Overview

Many companies have turned to captives to reduce costs, enhance risk management, gain greater control over their insurance and directly access the reinsurance market. Today, captives are established to insure a wide variety of risks. Practically every risk underwritten by a commercial insurer can be provided by captive insurers.

The Horseshoe Group’s experienced professionals will ensure that your captive is setup and managed with the optimum level of service. We have the skills in all aspects of captive management and our focus is on our clients. We work to ensure that our clients have control over their insurance costs.

Through a combination of insurance management and advisory skills, the Horseshoe Group is able to render a broad array of services and effectively deliver superior insurance management to our clients, which is second to none in Bermuda.

There are different types of captives. Below are a few of the most common ones:

  • Single Parent Captive - an insurance or reinsurance company formed primarily to insure the risks of its non-insurance parent company or affiliates.
  • Association Captive - a company owned by a trade, industry or service group for the benefit of its members.
  • Group Captive - a company, jointly owned by a group of companies, created to provide a vehicle to meet a common insurance need.
  • Agency Captive - a company owned by a seperate insurance company or brokerage firm so they may reinsure a portion of their clients’ risks through that company.

The principal advantages of forming a captive are:

  • Flexibility in policy design, premium payment timing, and claims management
  • Direct access to the reinsurance market not normally accessible to non-insurance entities
  • Participation in underwriting profits
  • Accrual of investment income on outstanding claims
  • Improved risk management and retention
  • Cost stabilization
  • Condition of covers unavailable or overpriced on the conventional market
  • Ability to perform detailed investigations on a case by case basis to match the best risk management strategies and facilities in line with the requirements of the group concerned.

Following are the different regulatory classes of captives in Bermuda:

Class One Insurer

Single parent captives, namely, insurance companies owned by one or more affiliates of a group provided that the captive insurer underwrites only the risks of their owners and affiliates of their owners. Minimum capital and surplus is $120,000. Except in specific circumstances, there is no requirement that reserves have to be certified by an actuary.

Class Two Insurer

Single parent and multi-owner captives. In this context, multi owner captives are insurance companies owned by two or more unrelated entities provided that the captive insurer underwrites only the risks of their owners and affiliates of the owners, or the risks related to or arising out of the business or operations of their owners and affiliates. Single parent and multi-owner captives in this class may write no more than 20 percent of net premiums from risks which are not related to, or arising out of, the business or operations of their owners and affiliates. Minimum capital and surplus is $250,000. Reserves must be certified by an actuary at least every three years (under specific circumstances, reserves have to be certified yearly).

Class Three Insurer

Captives not in Class 1 or 2. The minimum capital and surplus requirement is $1,000,000 and the actuarial certification requirement is yearly. It includes a large number of firms with a wide range of characteristics, from captives writing a limited amount of third-party business to large purely commercial re/insurers. There are now further sub-categories within the Class 3 group, based on their respective risk profiles. Risk-based supervision of these firms has been refined, to ensure they receive the level of oversight that is appropriate to the nature of their business.