Captive Insurance

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Captive Insurance A captive insurer is generally defined as an insurance company that is wholly owned and controlled by its insureds; its primary purpose is to insure the risks of its owners, and its insureds benefit from the captive insurer's underwriting. They are typically established to meet the unique risk-management needs of the owners or members. Examples: A companies creates an insurance company as one of it's subsidiaries to cover its risk. The companies in this case is the insured. The benefits from the underwriter profits of the risk covered by the Insurer who is it subsidiary. The advantage of captive Insurance to a business is that it can substantially lower insurance costs in comparison to premiums paid to a commercial insurer and the captive can provide coverage that is unattainable or inadequate in the private market. In addition to the opportunity to obtain more specialized coverage for the company’s risks, the parent company can achieve better control over claims decisions. Drawbacks include overhead expenses, compliance issues, and the potential to be underinsured. Some regulators stress that each captive must adhere to the three tenets referenced in the definition of captive these tenets are: -The arrangement involves the existence of an insurance risk. -There is both risk shifting and risk distribution. -The arrangement is for insurance in its commonly accepted sense. This is just one smart way of doing business. Nowadays many giant companies are setting up captive Insurance companies. #benewinsurance #insurtech #inclusiveinsurance #insurance #reinsurance #takaful

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