General Article

What Type of Captive Are You?

What type of Captive are you? It sounds like a strange question, but it’s an important one to answer. The information you provide can determine what type of captive insurance program your company participates in.

Need More Info on Captives?

Captives are insurance programs based and run within businesses. Instead of dealing with large, commercial companies, captives are funded and managed by the policyholders. What programs they offer and the premiums established are directly decided on instead of by proxy.

Type of Captives

There are numerous types of captives available in today’s market. The one you choose depends on your businesses available capital and way it’s managed. The most common of these is a Single Captive. This is a pure group that insures only the risks of the parent and its affiliates — the policyholders.

Micro captives are for small to mid-sized businesses. They are only taxed on the premiums and not the return of investments if their underwriting is under $2.2 million.

A Group Captive includes similar businesses that decide to join together under one policy manager.

And then there’s a Special Purpose Captive for those businesses that don’t fit the above entries to benefit from a captive structure.

Different Types, Same Design

While these captives are different, the way they work is the same. Policyholders invest in the company and, in turn, have a vote on how the captive is run. At the end of each quarter, dividends are paid out from their initial investments.

How do you Know What Captive You Are?

If you’re still unsure, the first thing to do is speak with a firm that deals with the captive market. Specifically, groups like Captive Resources that have serviced the industry for several decades.

They will review your capital and current investments. From there, they can point you to the right captive program. Then, it’s a process of certification, board and program selections, and education on how the captive will operate for the organization.

In the end, you’ll definitely know what type of Captive you are destined to be.