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CAPTIVE/RRG INSURANCE COMPANY FAQ’s How large does a company have to be in order to form a captive? This depends on the coverage(s) and limits of insurance to be written through the captive. In general, to form a single parent captive, a company’s annual insurance premium should be a minimum of $750,000. However, just about any size company can be part of an association captive. Why do companies form captives? The reasons for forming a captive are varied. Some of the common reasons cited include: A. Greater availability of insurance coverage(s) at a reasonable cost or any cost. B. Use of a captive may have significant tax advantages. C. Greater control of their insurance needs. D. Better service for their insurance exposure. A captive can tailor its insurance program to meet its own specific situation. This can involve better loss control, better underwriting and more control over the handling and settlement of claims. E. Ability to obtain broader coverage(s). F. In genera, the ability to have greater stability in the cost of insurance. G. Potential for improved cash flow. The premium collected by the captive earns investment income which accrues for the benefit of the captive owner(s). H. Direct access to the reinsurance market. I. More immediate reward for controlling the cost of claims. Usually the “most important”. NEXT PAGE
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