There was a time when captive insurance was the
preserve of large international organisations. However,
innovation in the sector has meant that this is now more
accessible for small to medium-sized enterprises.
A captive, in its purest form, is a company set up by its
owners primarily to insure the risks of its parent and/or
subsidiaries. This can offer several advantages in comparison
with insuring through the commercial market:
The insuring of unusual or catastrophic risks or multiple
Avoid paying large overheads and profit margins
Premiums relate to the insured's previous claims
Direct access to the wholesale reinsurance market
Benefit from the investment return on retained
The retention within the group of the excess of net
premiums over claims
Taxation efficiencies the payment of insurance premium is
deductible in arriving at profits and receipt is at the
group's offshore captive
Improved risk management and understanding of the cost of
In the past, some small to medium sized firms have found
that the benefits of a captive, given the likely volume of
business, can be outweighed by the start-up and on-going
Participating in a rent-a-captive scheme offers the
advantage of sharing such expenses.
Firms are cautious about proceeding in such a manner using a
conventional company, as all of the assets and liabilities are
linked and therefore there is a risk that the failure of one
insurance programme will lead to the loss of assets relating to
To address this, Guernsey pioneered the Protected Cell
Company (PCC) a company made up of a core and individual cells,
where the legal segregation ensures that no claim against one
cell will be covered by the funds furnished by another.
Guernsey has now also introduced the innovative Incorporated
Cell Company (ICC). An ICC, like a PCC, has cells but they are
separately incorporated and distinct legal entities, offering
an added layer of protection in the separation of assets and
The use of a third-party cell company rather than a
full-blown captive has distinct benefits which for small to
medium sized businesses in particular makes captive insurance
Lower Operating Costs Savings from
reduced reporting requirements and shared costs
Less Management Time Reduction in the
amount of executive time required by the cell owner,
primarily because attendance is not required at quarterly PCC
Quicker And Cheaper To Set Up And Exit
Setting up and closing down a PCC cell does not require the
same legal processes required to incorporate or wind up a
No Minimum Capital There is a need to
cover the minimum margin of solvency and the risk gap but
this may be less than the £100,000 minimum required for
a separate captive
Less Tax Using a PCC can avoid being
subject to Controlled Foreign Company legislation
Such are the potential benefits of captive insurance for all
sizes of company that a client's risk management
strategy could be considered somewhat deficient in scope and
responsibility if it does not involve the use or at least
consideration of some form of captive insurance.
Since the PRIIPs Regulation was published on 9 December 2014, the concept of a multi-option product has been one of the most discussed topics among the manufacturers of insurance-based investment products.
Directors & Officers Insurance (D&O) is a relatively new
branch of insurance in the United Arab Emirates (UAE) market.
Accordingly, issues such as allocation of costs have not yet been
considered by UAE or Dubai International Financial Centre (DIFC)
The MFSA issued a consultation document proposing the introduction of external auditing requirements for certain quantitative reporting templates that will form part of the Solvency Financial Condition Report.
From August 12 2016 when the UK's Insurance Act 2015 takes effect there will be differences affecting business (ie non-consumer) policies issued in Isle of Man and those issued in UK, including renewals.
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