Captive Structures

Captive Structures

How do different types of captives work?

No two companies are exactly alike, and that includes their risk profiles. That's why, in addition to offering traditional, fully-insured plans or self-funded programs, we offer alternative programs and captives.

Captives enable organizations to assume some or all of their risk. And while each type of captive works a bit differently, in most cases, a captive insurance company will assume the same level of risk that the member companies are comfortable assuming. In addition, the captive company also purchases specific (per occurrence protection) and aggregate excess (aggregate protection) insurance to protect the member companies' assets.

PERMA primarily offers three types of property and casualty captives: Single Parent Captives, Segregated Cell (rental captives) and Group Captives. Below is a brief explanation about each:

Single Parent Captive - A single parent captive, also known as a pure captive, is designed for any company that insures the risk of a parent company and its subsidiaries/affiliates and, in some cases, third-party businesses as well. In this captive, the parent company will capitalize the captive insurance company in compliance with the domicile in which it is incorporated. A single parent captive is typically best suited for companies with premiums in excess of $3 million that can write most business lines. See the diagram below for a visual of how a Single Parent Captive works.

 How a Single Parent Captive Works

Segregated Cell (Rental Captive) - A Segregated Cell captive enables organizations to "participate" in an existing captive created by an insurance company or investors. Rather than forming their own captive, organizations rent the capital/surplus of an existing captive. This type of captive can be accessed either by a group of companies or an individual organization. Ideal rental captive candidates have premiums in excess of $1.5 million.

Group Captive - A Group Captive (including an association) is comprised of a group of non-related organizations who join together to form their own insurance company. The group can be either homogeneous (insuring only similar types of business' risk) or heterogeneous (insuring a wide range of risks). Group Captives allow organizations to take advantage of the natural spread of risk associated with joining other well-run companies in a risk pool.  Coverage usually includes casualty lines. As a side note, Risk Retention Groups (liability coverage only) are often considered forms of group captives. Premiums in excess of $3 million are typically required for a start-up group captive. See the diagram below for a visual of how a Group Captive typically works.

How a Group Captive Works