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CAPTIVE INSURANCE COMPANY FORMATION PROCESS
Determining whether a Captive Insurance Company is the right fit for a business starts with a review of the business’s current insurance program and risk appetite. Then, a formal Feasibility Study is conducted. A Feasibility Study helps define the objections of the Captive, documents the purpose for its formation, and is used by the principals of the underlying business to make a decision on moving
forward, and by regulators to determine approval of the Captive’s license.
The Feasibility Study will analyze the current insurance policies of a business and the risks faced by that business. The study will identify (1) risks that are not being covered by any insurance, which can more effectively be covered through a policy from a Captive (b) risks for which the current commercial insurance policy can be completely replaced through a Captive and (c) risks where the Captive can offer coverage for a current deductible amount or can even allow the business to take on a larger deducible, and obtain coverage for the deducible amount through the Captive. The study will contain multi-year pro-forma financials for the Captive, including projections for ultimate loss, premiums and investment income.
Following the completion of the Feasibility Study and a decision by the business to move forward with the establishment of a Captive, the choice of domicile needs to be considered. Captives can be established in numerous offshore jurisdictions or in one of the thirty-four states, the District of Columbia and three U.S. Territories that currently allow licensing of Captives. Even if a business’s home state does not provide for the licensing of Captives, the business can establish a Captive in a different state.
PIM will guide you through the Feasibility Study process, we will assist you in selecting the appropriate domicile, obtaining the licensing of the captive in that domicile and running the Captive. For additional information or any questions you may have, please feel free to Contact Us.
