Page 36 - Walden Security
P. 36
Captive Overview
Rent-A-Cell captives
For companies that do not want to form their own captive (or intermediary step) but do not want to enter into a risk-sharing arrangement, they can “rent” a
cell in an existing captive company. A rent-a-cell captive is set up with separate cells where owners rent a cell and use that as their captive.
Cell captives are similar to wholly owned/single-parent captives in that the risk retained in the captive can be isolated to just parental risk.
Collects the
STOP LOSS premium and cedes
CLIENT
Specific stop CARRIER: HCC approximately 60% to
loss policy the captive
SUBSIDY 1
SUBSIDY 2 Reinsures $175,000 excess CELL CELL CELL CELL
A
of specific
B
C
D
SUBSIDY 3
Participation agreement
GENERAL ACCOUNT
• Client “rents” a cell within facility by purchasing preferred share or entering into a participation agreement
• Minimizes capitalization requirement
• Lower operating costs (HCC proposed using their speciic state rent-a-captive for no charge)
• HCC cell rental captive only an option if HCC is stop loss carrier
• Limits ability to use captive for other risks
Walden Security — Lockton Employee Beneits Practice Overview 36 Lockton Companies
Rent-A-Cell captives
For companies that do not want to form their own captive (or intermediary step) but do not want to enter into a risk-sharing arrangement, they can “rent” a
cell in an existing captive company. A rent-a-cell captive is set up with separate cells where owners rent a cell and use that as their captive.
Cell captives are similar to wholly owned/single-parent captives in that the risk retained in the captive can be isolated to just parental risk.
Collects the
STOP LOSS premium and cedes
CLIENT
Specific stop CARRIER: HCC approximately 60% to
loss policy the captive
SUBSIDY 1
SUBSIDY 2 Reinsures $175,000 excess CELL CELL CELL CELL
A
of specific
B
C
D
SUBSIDY 3
Participation agreement
GENERAL ACCOUNT
• Client “rents” a cell within facility by purchasing preferred share or entering into a participation agreement
• Minimizes capitalization requirement
• Lower operating costs (HCC proposed using their speciic state rent-a-captive for no charge)
• HCC cell rental captive only an option if HCC is stop loss carrier
• Limits ability to use captive for other risks
Walden Security — Lockton Employee Beneits Practice Overview 36 Lockton Companies
