A “captive” is a licensed insurance company utilized to insure a wide range of risks depending on business needs. Many businesses begin with coverages such as the deductible or self-insured portions of general liability, auto, casualty, property and workers compensation losses, but often expand coverages to include unique risks such as management liability, environmental liability, terrorism, cyber, professional liability, and extended warranty claims. Risks can be first-party or third ...
What are the risks of a captive insurance company?
Some risks could result in substantial expenses for the captive insurance company that are unaffordable. These sizable risks could lead to bankruptcy. Single events are less likely to bankrupt a large private insurer because of a diversified pool of risk they hold.
How to start a captive insurance business with technology?
For captive insurers, this will require that both the board and management become conversant with the technology. Use this first step as a springboard to become more comfortable with the concept. 2. Start small and develop a proof of concept to determine the viability of the project.
How does captive insurance work for a parent company?
Step 1: Parent company has diverse insurance needs and forms a captive insurance company to cover their risks. Step 2: The captive insurance company covers parents risks and the parent pays premiums into the captive. Some risks may require reinsurance from the wider insurance market.