We provide advice and services to associations, industry groups, companies and individuals that could benefit from a captive insurance program, including risk retention groups and insurance trusts. Our lawyers can answer your questions, guide you through the analysis of whether a captive insurance program would benefit your activities, review and select the appropriate jurisdiction to meet your needs, and help you create and manage your captive insurance entity.
What is a captive insurance company?
A captive insurance company is your own personal insurance company. Captive insurance companies are created to finance risks of its stakeholders. The market has been steadily growing for these entities since the 1980s; indeed, the captive insurance industry has been identified as one of the fastest growing industries in the country at the moment and has seen explosive growth over the last few years in particular. Presently, Delaware and 14 other domiciles in the United States have enacted laws to establish captive insurance companies, although each jurisdiction offers its own particular features that may be attractive to a particular client.
How does captive insurance differ from self-insurance?
Many entities use some degree of self-insurance, whether to cover deductibles or reduce premium costs. A captive insurance company allows the owner to manage the potential losses of self-insurance in a more sophisticated way.
Can captive insurance be used along with third-party insurance?
Yes, captive insurance can be effectively used in conjunction with traditional insurance. In such circumstances, entities will identify any risks they face that are not covered by their standard policies or that can't be covered at an acceptable premium cost, but that would result in material losses if they occur. Captive insurance provides a solution that allows the entity to finance those risks effectively, resulting in a more predictable, smooth financial outlook for the entity. In some situations captive insurance can be used as a full replacement for traditional insurance.
What are the benefits of captive insurance?
In addition to the advantages a company receives from having its own captive insurance company to finance its risks and achieve the company's business purpose, captive insurance companies provide the owner additional benefits. They offer business owners more control over expenses, losses, claims handling and overall risk management. In effect, running your own insurance company allows you to maximize the use of your premiums that would otherwise just provide profit to a third-party insurer.
What is an Insurance Trust?
An insurance trust is a form of captive insurance company that is often used in the nonprofit world. It is established by, but operated separately from, the sponsoring organization to provide insurance products and coverage to members of the organization. Insurance trusts have the advantage of protecting the organization and its officers and directors from liability for the trust's insurance activities, and may limit an organization's exposure to UBIT. In addition, for 501(c)3 organizations, an insurance trust may be useful in limiting the organization's exposure to charges that it is not organized and operated exclusively for charitable activities.
Many entities that would benefit from having their own captive insurance programs don't yet know about the concept or understand the advantages of captive insurance. Our captive insurance lawyers can answer your questions and help you set up and manage your captive insurance entity. Our firm has been proactive in learning and mastering this rapidly developing field as a means to best serve our corporate clients. One member of the group has a Certificate in Captive Insurance Risk Management and others serve on the boards of, or are counsel to, captive insurance companies.