What type of insurance exposure works well in a captive?

• Individual Accounts
  Rent-A-Captives can benefit individual insured accounts currently paying at least $1,000,000 annually in premiums. The Rent-A-Captive may serve as a reinsurer of the policy-issuing carrier or issue policies directly to the insured.
• Deductible Reimbursement Policy
  A captive insurance company is a worthwhile risk financing tool where an insurance company issues a policy in which the insured takes a large deductible of at least $250,000.00. In this circumstance, the captive may issue a policy directly to the insured for the deductible layer. The insured then funds the deductible layer with a combination of premium and collateral and realizes both the insurance cost and tax benefit associated with financing insurance exposures through the captive insurance facility.
• Group or Association Programs
  Typically an affinity or homogeneous group of small and medium sized companies band together with a desire to control their own insurance coverages, service providers and expense. Coverages provided within the captive typically include workers compensation, commercial general liability and automobile liability/physical damage. The group's buying power in the service provider and reinsurance marketplace is typically enhanced.
• Fully Funded Insurance Products
  A company may encounter difficulty in obtaining coverage for a particular insurance exposure or may only be able to obtain coverage at an exhorbitant premium that is out of line with the company's understanding of the exposure. In such cases, the company may seek to retain the exposure itself and fund the aggregate limit of its policy with a combination of cash and letter of credit. A captive insurer often serves as the funding mechanism for this type of arrangement.

What is a single-parent captive?

A person establishes a "single parent captive" to insure its own risks and the risks of its subsidiaries and affiliates. Single-parent captives that insure only affiliated risks are termed "pure" captives. Single-parent captives are typically formed by companies already paying at least a million dollars in premiums annually.

What is a group captive?

These captives are owned by multiple, non-related organizations (i.e. policyholders). The captive is usually sponsored by a trade group such as homebuilders, franchisees, group medical practices or hospitals, or other professional or industrial groups. Associations often cite captives as a valuable benefit of membership and use them to attract and retain members. Roundstone Insurance LTD. offers a turn-key solution to these clients.

What is an Agency captive?

These captives are owned by insurance brokers or agents and insure some portion of the insurance sold by its agency or broker shareholders. Roundstone Insurance LTD. offers organizational and strategic services to agencies and brokers that realize the value in becoming risk partners with their clientele.

What is a Rent-A-Captive?

A Rent-A-Captive is a licensed insurance company which provides investors, whether they be individual investors or groups of associated investors, an opportunity to participate in the results of insurance programs and the investment income they produce.

When does a Rent-A-Captive make the most sense?

If a client cannot justify the time and cost of forming its own captive insurance company, the client can still gain most of a captive's advantages by "renting" an existing captive like Roundstone Insurance, Ltd. (www.RoundstoneInsurance.bm ). In addition to the advantages provided by any captive insurance facility, rent-a-captives provide additional benefits including:

• Lower capitalization requirements;
• More efficient administration ;
• Structure design flexibility;
• Speed of start-up;
• Easy exit.

What is a segregated account?

A segregated account under the Bermuda Segregated Accounts Companies Act 2000 is a statutory division within one legal corporate entity of assets and liabilities from every other segregated account within that same entity so that there is no way that one account can attach to the assets and liabilities of another account. The key difference offered by a segregated account company is the statutory or legal separation of assets and liabilities in addition to the segregation of assets through the captive insurance program's contractual documentation.

Do a lot of companies self insure or use a captive as part of their risk management strategy?

Estimates of the size of the alternative market vary, but clearly self insurance in some form or another plays a significant role in the insurance marketplace. Industry experts set the size of the alternative risk transfer market at $18 billion in annual premiums, compared to $12 billion estimated for conventional insurance companies. Other estimates suggest that four in 10 medical professionals have turned to alternative risk transfer sources for their insurance coverage.