Atlas Insurance PCC
Why set up a Captive Cell?

Why set up a Captive Cell?

1.  To reduce the Cost of Insurance

  • Avoiding contributing to insurer costs
  • Retain Investment Income
  • Claims reserves until required
  • Retain profits
  • Accessing the reinsurance market
  • Lowering costs by eliminating the acceptable risk through higher deductibles
  • Reaching a more accurate degree of experience rating

2.  To Respond to times of reduced capacity in the Insurance Market and ensure long term availability

  • Captives and cells are not cyclical or volatile but are based on own loss experience and provide greater stability and continuity.
  • Taking responsibility for own insurance requirements addresses the need for long-term risk protection. Traditional markets have been known to restrict the availability of capacity and cover when faced with new global risks.
  • Accessing the reinsurance market directly also addresses concerns about insurer security due to reinsurers higher ratings

3.  As part of a Business Strategy

  • An organization may select what risks to retain and what to cede
  • To centralise risk management of the group
  • Underwriting & Risk control: the parent’s loss experience is reflected in Underwriting results with easier risk information flow
  • Captives can help in the long term funding of many otherwise uninsurable risks
  • Captives can also help in the long term funding of many otherwise uninsurable risks
  • Simplified and tailor-made group insurance policies
  • Inflexibility of conventional wordings in the insurance market could be eliminated – e.g. claims made wordings
  • Access to reinsurance markets
  • Lower costs per unit of cover
  • Control over amount of risk retained or reinsured
  • Offer cover with a substantial deductible on excess of loss basis
  • Maintain control over the acquisition and use of risk-associated services like loss adjusting and risk surveying
  • Taxation benefits – tax deductibility of premiums.
  • Underwriting and Investment Profit could be built up and reserves created (taxed only when declared as dividend) allowing higher retention.
  • Development as a profit centre – Customer business, investment income and reduced expenses