Creating your own captive insurance company is a tempting option for larger organisations seeking to reduce their total cost of risk
A ‘captive insurance company’ - or simply ‘captive’ - can be set up by any company, but most often it is larger companies with an international presence and a global risk profile.
In essence, the captive becomes “the insurance department” within your organisation and its subsidiaries. That means you will be underwriting risk, paying internal claims and driving risk management strategies in-house.
Just like any insurance company, you can offset the risk on the secondary market for insurance risk, known as the re-insurance market.
This is all possible by leveraging the data capabilities and expertise of a forward-thinking broker.
We can support with strategy, technology and ongoing day-to-day management, including claims handling.
Do I really need a captive?
It depends less on the size of your company and more on the size of your premium. If you have an annual premium of more than 5 million AUD, a captive becomes an interesting proposition.
Insurance underwriting is a profitable business – a captive lets you share in the profits. If you are willing to take a share in the risk, you can capture profits that otherwise would go to your insurer.
How Howden supports captives
Howden’s captive consulting teams provide independent, innovative risk consultancy and captive reinsurance broking services across the world.
Our services are available from those first tentative self-insurance steps through to running a full captive operation.
This covers all aspects of the design, implementation and on-going stewardship of an enhanced self-insurance structure.
Our expertise and resource is invaluable, at every stage
- Feasibility studies
- Setting up the captive insurance company
- Insurance product development (writing the terms you set for your internal clients)
- Strategy (including capital modelling and reinsurance)
- Operation (providing day-to-day resource, including claims handling)
- Ongoing advisory service (we’re always here for you)
You may be taking some more of the risk but you don’t want to go it alone.
Here’s how we can help at the various different stages
Captive / Cell captive pre-feasibility consulting and full feasibility studies
- Risk management consultancy
- Identifying the most appropriate self-insurance mechanisms
- Claims history analytics
- Retention structure analysis
- Programme design
- Domicile review
Captive, PCC, ICC, SAC formation consulting
- Project management and business planning
- Negotiation with regulators and managers
- Liaison with lawyers, accountants and bankers
- Captive reinsurance programme design & implementation
Product ideation, creation & implementation
- Developing bespoke insurance wordings to suit your needs
Captive business strategy development & execution
- Strategic development and execution of captive growth strategies
- Regular Captive health checks
- Review of portfolio efficiency and potential diversification
Captive operation management including:
- Compliance and regulatory services
- Underwriting services
- Policies, claims, premiums, funds, reports and accounts
- Captive fronting consulting
Ongoing advisory service
Striving for continuous improvement
- Assistance with any issues around regulatory risk transfer
- Analysis of insurable risk including implications for risk-based capital
- Implementation of risk management strategies
Timeline to a captive
The feasibility process typically takes 6 to 8 weeks. After that, it can be 4 around months before the captive is incorporated and issuing policies.
Timelines can vary. We once established a fully functioning captive in just 8 weeks, other more complex arrangements have taken a year.
As a general rule of thumb, you should allow up to 6 months from the decision to conduct a feasibility study to the day the captive issues its first policy
We serve as an independent advisor for your captive strategy
Sitting on your side of the table as a partner, we will evaluate your unique needs and propose a long-term strategy to support efficient risk management and optimal use of capital.
We will assess all solutions on offer and provide you with clear, unbiased advice.
Our primary objective: a mutually beneficial, long-term relationship.
Meet the expert
Head of Alternative Risk Management
In my role, I use data to help make new and fresh ideas possible for clients
Craig has specialised in alternative risk transfer for 21 years. Having controlled ops for more than 80 self-insurance facilities, he’s known as a leading figure in the Australian market.