We offer Rent-a-Captive solutions for clients through our owned and managed vehicles (Isosceles) in Barbados, Bermuda, Guernsey and the United States. Our first Isosceles company was esta blished over 20 years ago.
An organisation may not have the means or need to establish a wholly owned Captive insurance company. Instead the organisation effectively rents a Captive, enabling it to manage its risks through a Captive programme without establishing a subsidiary insurance company.
Rent-a-Captives operate through Cell companies where the Cells provide a legal separation of the Cells assets and liabilities from those of other Cells in the facility. Rent-a-Captives are often used for bespoke insurance contracts and can help an organisation gain access to reinsurance markets. They can also bridge the gap between insurance solutions and capital markets - otherwise known as capital market risk transformation.
What does a successful captive look like?
The choice of domicile is arguably one of the most important factors in the creation of a Captive and the proliferation of domiciles around the world can make the evaluation process a daunting one.
Captives are almost always domiciled outside the territory of the parent organisation, principally because the insurance regulation in the parent domicile has been drawn up in order to protect the public when purchasing insurance from the commercial insurance market - a level of regulation which would be inappropriate for most Captives.
Ultimately, the ability of a Captive to successfully meet its objectives is based on a combination of:
- Cost Efficiency: Minimisation of operating expenses and local domicile income taxes
- Administrative Effectiveness: Efficient, professional services to the Captive supporting the insurance and risk management programs of the parent company ensuring legal ad tax certainty, as well as invaluable risk management data. This can be used to improve your risk profile, decrease losses, and to leverage the insurance market to demonstrate your commitment to risk management
- Underwriting Performance: Sufficiently strong retained premiums, consistent with a good claims record, can give you a share in underwriting profit as well as generate additional investment income.
The choice of Captive domicile is relevant to ensuring cost efficiency and administrative effectiveness. The following tables set out these factors:
Cost efficiency: Domicile Selection factors
| Taxation Framework
|| Consideration of domicile’s taxation regime for Captives
|| Income taxation incurred outside of the parent country represents a cost and ideally should be reviewed
| Capitalisation & Solvency Requirements
|| Establishment of a Captive requires capital investment. The amount is determined by domicile regulations
||Capitalisation & solvency requirements should be kept to a reasonable/prudent level
| Operating Expenses
|| Relative competitiveness of various operating expenses of running a Captive in that domicile
|| The operating expenses should be kept to a reasonable minimum to support the financial success of the Captive.
Administrative effectiveness: Domicile selection factors
||Proximity of the domicile of the Captive to the parent is important, in particular common working hours and ease of transportation links
||A Captive located within easy access of the parent will facilitate closer integration with the on-going insurance management of the Captive
||Depth of professional Captive management infrastructure including Captive managers, auditors and legal services
||The existence of a wide selection of professionals ensures that Captive can avail of the best practice services. The Captive should be located in a wellregarded location, with a strong reputation for prudent and transparent business practices
||Existence of a developed Captive insurance regulatory framework; Relatively easy to understand and implement; Consistent with the unique needs of Captives; Prudently implemented by the local regulatory authority
||Both the regulatory framework and the working approach of the local regulator should be prudent, business like and widely recognised as having international best practice standards.
Choosing a Domicile
While there are many Captive domiciles around the world, the actual decision regarding the location of the Captive typically comes down to a choice between a small number of candidates. This is due to the fact that the twin objectives of (i) cost efficiency and (ii) administrative effectiveness reduce the field of candidates to a much smaller group.