Choosing claims made or occurrence based coverage can have a significant impact on your captive insurance company. This choice impacts not only the way claims are handled, but also the long-term financial strategy, premium structure, and risk management philosophy of the captive. Understanding the differences between these two coverage types is essential for any organization seeking to maximize the value and control offered by a captive insurance program.
Loss portfolio transfers (LPTs) have become an essential financial tool for captive insurance companies looking to manage legacy liabilities, clarify their balance sheets, and maximize capital efficiency. By transferring reserves for known or incurred claims to a reinsurer, captives can convert uncertain future obligations into a predictable, upfront cost, all while maintaining a focus on their core underwriting activities.
Self-Procurement Taxes and Captive Insurance
In the intricate world of risk management, self-procurement taxes emerge as both a compliance hurdle and a strategic lever for businesses leveraging captive insurance. These state-level taxes—applied to premiums paid to unauthorized insurers—create financial considerations, particularly for captives operating across jurisdictional lines.
A Texas based property management/development company turned to Captives Insure (“C.I.”) for an alternative means of procuring their General Liability and Property coverage. Even with excellent claims history and risk management efforts, the commercial market was unwilling to give them the credit they deserve and administered rate increases and higher retentions.
One of the largest U.S. based specialty construction and infrastructure companies works with C.I. to procure excess liability coverage. Taking a $5m xs $15m quota share position, this client will retain over $2.5m within their captive and still satisfy all lender requirements. With a historical loss ratio of 0% in this layer, this insured is now able to take control of their insurance program and gain underwriting profit that was a sunk cost in the commercial market previously.
A large international industrial client approached C.I. to perform a comprehensive Enterprise Risk Assessment to uncover any risks their business may be exposed to. Their primary concern being the exposure to international trade credit risk to protect the insured businesses from losses related to buyers’ non-payment of commercial debts.
A nearly loss-free Texas-based industrial client with both domestic and international exposures worked with C.I. to provide a captive solution for their property exposures. Even with excellent loss history and proper risk management strategies in place, the standard market still imposed rate increases year over year.
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