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Captive Overview
Captive insurance TYPES OF CAPTIVES
A primer SINGLE-PARENT, WHOLLY
• Alternative risk transfer concepts grew out of capacity shortages from 1970 into the 1990s. Insurance OWNED CAPTIVE
companies began to price risk and formulate structures that increased the amount of risk retained by their
Set up and operated by a
organizations. The result is that today we have a broad spectrum of available “insurance” options for clients, single owner or company to
ranging from more traditional fully insured programs to large-deductible policies, fronted programs, captive insure its own risk and the
insurance programs, inite insurance, and reinsurance. risk of its subsidiaries and
affiliates.
• Captives speciically have become a very large part of the alternative risk market, with hundreds of billions
in captive premiums written annually. According to the Captive Insurance Companies Association, the total
number of captives in existence in 2016 was 6,969.
RENT-A-CELL
• Captives operate with a limited insurance license, and the exact nature of what a captive can and cannot do CAPTIVES
varies by jurisdiction. Most captives are not admitted or rated by a rating agency so when an insured needs to
evidence an admitted carrier (e.g., Workers’ Compensation, Auto Liability) or an A-rated carrier (e.g., General Owner of the rent-a-cell
Liability, Property), a captive will require the participation of a fronting or commercial insurer. captive rents out individual
• Generally, a captive works in conjunction with traditional insurance in either a fronted/reinsured arrangement cells to insureds to finance
their own risk and the risk
or by insuring retained risk under the insured’s deductibles or self-insured retentions. of their subsidiaries and
affiliates within the “cell.”
GROUP
CAPTIVE
Owned by multiple unrelated
organizations (policyholders)
who pool premiums to assume
the risk.
Walden Security — Lockton Employee Beneits Practice Overview 33 Lockton Companies
Captive insurance TYPES OF CAPTIVES
A primer SINGLE-PARENT, WHOLLY
• Alternative risk transfer concepts grew out of capacity shortages from 1970 into the 1990s. Insurance OWNED CAPTIVE
companies began to price risk and formulate structures that increased the amount of risk retained by their
Set up and operated by a
organizations. The result is that today we have a broad spectrum of available “insurance” options for clients, single owner or company to
ranging from more traditional fully insured programs to large-deductible policies, fronted programs, captive insure its own risk and the
insurance programs, inite insurance, and reinsurance. risk of its subsidiaries and
affiliates.
• Captives speciically have become a very large part of the alternative risk market, with hundreds of billions
in captive premiums written annually. According to the Captive Insurance Companies Association, the total
number of captives in existence in 2016 was 6,969.
RENT-A-CELL
• Captives operate with a limited insurance license, and the exact nature of what a captive can and cannot do CAPTIVES
varies by jurisdiction. Most captives are not admitted or rated by a rating agency so when an insured needs to
evidence an admitted carrier (e.g., Workers’ Compensation, Auto Liability) or an A-rated carrier (e.g., General Owner of the rent-a-cell
Liability, Property), a captive will require the participation of a fronting or commercial insurer. captive rents out individual
• Generally, a captive works in conjunction with traditional insurance in either a fronted/reinsured arrangement cells to insureds to finance
their own risk and the risk
or by insuring retained risk under the insured’s deductibles or self-insured retentions. of their subsidiaries and
affiliates within the “cell.”
GROUP
CAPTIVE
Owned by multiple unrelated
organizations (policyholders)
who pool premiums to assume
the risk.
Walden Security — Lockton Employee Beneits Practice Overview 33 Lockton Companies
