Though it’s been around for the last four decades, you may not be familiar with the industry known as captive insurance. In simplest terms, once you invest in an insurance policy from a company like Captive Resources, you have the ability to make decisions on what features are added/removed or how the company moves forward. You can think of it as a level up of whole insurance because you are directly part of the decision process instead of voting by proxy.
Like insurance regulated by the government, captive companies offer different structures. What works for you depends on how much you wish to invest, the risks you are willing to take, and if you’re looking for more or less influence.
The form which is considered the most “pure” is a Single Parent Captive. This type of company has a single owner to whom insurance coverage is provided. An insurance manager handles the captive while the risk manager monitors the cash flow.
The next level up, an Association Captive, is normally created by an established trade association or members of a certain industry to provide insurance coverage for its members. The ownership of the captive rests with the association as a whole or certain group members. A financial expert within the association has the prime responsibility of reviewing the captive’s assets and liabilities.
An Industry Captive goes beyond the association to link established industries to provide various insurance coverage. The stockholders of this captive generally appoint a board of directors which receives reports from the management company.
For those who wish to join a captive but are not willing to take the risk, there are Rent-a-Captive organizations. By paying a fee to the captive, the user does not have to make a full investment in order to capitalize. However, they do need to provide a form of collateral to the Rent-A-Captive so it is never at risk from underwriting losses encountered by the user.
If this all sounds confusing, it means more research is needed on your end to determine if this form of insurance is right for you. So, do your homework and speak to others in the industry before you make the leap into this world.