Today there are over 7,000 captive insurance companies registered and licensed in more than 70 domiciles around the world.

The alternative insurance market, which includes captive insurance companies, has been rapidly expanding with many domiciles experiencing double-digit growth in 2021. It comes as no surprise that many companies today are facing a variety of challenges that may affect their bottom line.

Companies that are financially sound, with sufficient insurance premium and a focus on risk management, and that are driven by an interest in financing assumed risk positions, are ideal candidates to consider a captive.

The primary drivers for companies to evaluate the effectiveness of a captive insurance company as part of their enterprise risk management program include the following:

  • Increased premiums and reduced capacity due to a hardening market
  • Lack of control over risk management and claims handling
  • Lack of availability of certain coverages in the traditional commercial insurance market
  • Increased retentions

What Is Captive Insurance?

A captive insurance company is an entity formed to insure or reinsure the risks of its parent organization. With a long-term commitment to an alternative risk transfer vehicle, a captive serves as a formalized loss retention mechanism designed to enhance the parent company’s risk management program and/or enhance the corporate bottom line. While captives are highly regulated entities that are required to operate as insurance companies, they also offer flexibility that is not always available through the traditional commercial insurance markets.

To ensure compliance and success, captives are licensed in a domicile, administered, and monitored by an infrastructure of controls, governance and expertise. Captive insurance provides organizations several advantages over traditional insurance, including:

  • Increased flexibility to meet unique insurance needs or cover uninsurable exposures
  • Improved risk management control
  • Improved claims handling and control
  • Diminished impact of market volatility
  • Serve as facilitator of risk management programs
  • Stabilization of operating cost and improved cash flow
  • Access to investment income from unearned premiums
  • Direct access to reinsurance markets
  • The opportunity to develop a customized insurance program

Expert Analysis and Exceptional Service

With more than 110 years of combined alternative risk transfer experience, NFP’s Risk and Insurance Strategy Collective (RISC) offers exceptional service and will assist clients in determining if a captive insurance company is right for them.

No two captives are the same. By working closely with our clients, RISC will tailor a solution that is specific to the needs of the organization.

Our team will structure, implement, operate and service their captive in the most cost-effective way possible. In the preliminary stages of captive engagement, our insurance and risk management experts work together with actuaries and financial stakeholders to compile and analyze all relevant data. We examine such factors as premium rates, reserve adequacy, capitalization requirements, participation requirements and source of funding for the proposed captive insurer. We offer services that span the entirety of the captive process:

  1. Pre-feasibility and evaluation of current and proposed programs
  2. Formal feasibility studies
  3. Captive formation and implementation
  4. Business plan development
  5. Ongoing captive management
  6. Strategic review of existing captive programs

Flexible, Cost-Effective Insurance

As the commercial market continues to harden and clients are being forced into placements that are not ideal, alternative risk solutions become more appealing. Implementing a captive insurance company not only allows for creative problem-solving but also the opportunity to accommodate rapidly changing coverage needs that exceed anything available commercially. RISC has the capabilities and forward thinking to create solutions that solve the unique problems our clients are facing. With guidance from our team, we will consult and develop alternative risk options with companies across all industries and locations to assure their enterprise risk management and risk financing objectives are met. Alternative risk solutions play a pivotal role within the insurance marketplace, and we develop state-of-the-art solutions to meet the present and future needs of our clients.