Lowering costs by eliminating the acceptable risk through higher deductibles
Reaching a more accurate degree of experience rating
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
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