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THE CAPTIVE AS AN ALTERNATIVE

(pg 3)

 

 

One of the many factors that companies must consider in deciding where to seek a license is the minimum premium, capital and surplus requirements of the licensing jurisdiction. For companies or groups who may be unwilling or unable to satisfy these requirements at the outset, it may be desirable to consider a so-called rent-a-captive organized by others. Also, if cash flow is an issue, a captive generally can be capitalized with a letter of credit and it may be possible for the captive to make loans back to its parent.

 

Finally, a captive should not be considered unless it will be viable when the insurance business cycle eventually returns to a soft market. In addition, the initial organizational costs and the annual operating costs can be substantial. Those single parent and group captives that have survived from previous hard markets have done so only because they made economic sense and provided risk management and claims control advantages under all market conditions. Captives promise long-term benefits in terms of stable insurance costs and coverage, and the ability to take control of your insurance destiny, but only for companies prepared to make long-term commitments.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

F. Darrell Lindsey
U.S. State Licensed Agent/Broker
U.S. Corporate Enterprise Risk Management Consultant (ERM)
U.S. State Approved Captive/RRG/Self Insured Manager
U.S. Approved Self-Funded Health & W. C. Plan Manager

 

 

 

 

 

 

 

 

 

 

 

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