Product Update

Captive Insurance Companies Discussed in Construction Risk Management


This release of Construction Risk Management includes an updated discussion of captive insurance companies.

A captive insurance company is an entity created primarily to insure the exposures of its parent organization(s). Captives are generally formed with the goals of reducing the parent company's ultimate cost of risk by controlling losses, minimizing expenses and taxes, and escaping the influence of loss subsidization that is present in traditional insurance. Although interest in captives always peaks during a hard insurance market (when commercial insurance premiums are rising and capacity is scarce), the time to be doing the work is before a hard market begins, as it can take several years to form, capitalize, and begin writing business through a captive.

"Captive Insurance Companies" outlines the advantages and disadvantages of forming a captive, prerequisites for captive formation, the fronting process used by captives to gain services and/or access to excess markets, and considerations for selecting a captive domicile.

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