What is captive reinsurance?
What is a Captive Reinsurance Company? Captive Reinsurance Company – a reinsurance company that is formed and licensed under Chapter 628, F.S. and is wholly owned by a qualifying reinsurance parent company. A captive reinsurance company must be a stock corporation and may not directly insure risks.
What is the difference between a captive and reinsurance?
A direct writing insurer issues insurance policies to its insureds. A captive insurer operating as a direct insurer insures the risks of the group and purchases reinsurance on the commercial reinsurance market. This reinsurance is not designed to deal with high-frequency or low-severity loss occurrences.
What is captive underwriting?
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 profits.
What is an example of a captive insurer?
For example, British Petroleum wisely set up a captive insurance company (Jupiter Insurance Ltd.) to provide environmental insurance to its operating units, and the moneys from its captive were used to fund in substantial part the Gulf cleanup.
How do captive insurers make money?
Earn investment income: Captives can earn investment income on their loss and unearned premium reserves. A guaranteed cost policy purchased from a commercial insurer would not provide this additional income to the insured.
How does a captive insurer work?
Definition. A “captive insurance company” is a subsidiary owned by one or more parent organizations established primarily to insure the exposures of its owner(s). The captive assumes a portion of the risks insured, and the balance is assumed by another insurance company known as a “reinsurance” company.
How many types of reinsurance are there?
two
There are two basic types of reinsurance arrangements: facultative reinsurance and treaty reinsurance.
Why is it called captive insurance?
Issue: In its simplest form, a captive is a wholly owned subsidiary created to provide insurance to its non-insurance parent company (or companies). Captives are essentially a form of self-insurance whereby the insurer is owned wholly by the insured.
How many captives are in the US?
3,400 captives
Counting all states with captive statutes, the United States has become the world’s largest domicile. Indeed, with close to 3,400 captives licensed in its states, the United States, by far, outranks Bermuda, which reported 711 captives in 2018 and the Cayman Islands with 703.
Why are captives offshore?
The motives for using an offshore captive may include tax planning. Regulatory differences between onshore and offshore have become significantly less as the offshore captive industry has matured.
Why do companies use captive insurance?
The Purpose of a Captive To be very clear, the purpose of an insurance company and, therefore, a captive is to pay losses (your own losses) and to afford you (the owner) more control over your risk and any losses that do occur. Put another way, captives are an alternative risk transfer mechanism used to finance risk.
What is the largest reinsurance company?
Munich Reinsurance Company
Top 50 Global Reinsurance Groups
| Ranking | Reinsurance Company Name | Combined Ratios (3) |
|---|---|---|
| 1 | Munich Reinsurance Company | 105.6% |
| 2 | Swiss Re Ltd. | 109% |
| 3 | Hannover Rück S.E.4 4 | 101.9% |
| 4 | SCOR S.E. | 100.2% |
Why are captives formed?
What is the difference between a captive and reinsurer?
Where the captive is the reinsurer, it is generally the captive sponsor that wants to retain a significant portion of the risk and (more importantly) the premium but does not want to go through the expense and time of incorporating a captive direct writing insurance company.
What is a captive insurer?
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 profits. These points do not clearly distinguish the captive insurer from a mutual insurance company.
What is a group captive reinsurance pool?
This type of heterogeneous group captive may be a reinsurance pool, formed to create underwriting capacity through the pooling of risk. A reinsurance pool does not provide direct insurance. It reinsures either the captives of its owners or the admitted insurers that issue policies to the pool’s owners.
What is a reinsurer?
What is ‘Reinsurer’. A reinsurer is a company that provides financial protection to insurance companies.