- A closely held insurance company that is owned and controlled by its insured members
- A licensed insurance company
- Formed to insure or reinsure the risks of its owners
- Regulated under special federal legislation
- May be headquartered onshore in a selected state or offshore
- Generally licensed in only one domicile or state but permitted to operate in all states
- Summary Plan Documents reviewed to protect the employer and the captive
- A stop loss policy issued by an A+ rated carrier (Berkley)
- A participation agreement between the captive owner (subscriber) and the captive
- A program agreement outlining the terms and conditions of the program
- A reinsurance agreement between the “fronting carrier” (Berkley) and the captive (CHIC)
- Other related documents
- Also known as “non premium funding” (NPF), the funds that are required to secure the captive financially were the captive to have a year where claims exceeded the premiums.
- Members who leave the captive at year-end (September 30) do forfeit any premium refund (dividend), but would be eligible to receive back any remaining funds in the collateral layer after all of members claims are paid.
- Cost reduction and more predictable cost management is the main benefit such as controlling stop-loss premiums and to add the benefit of sharing in the profits, if any that the captive earns and not just the insurance company. Also, group thinking by the members who own the captive find Best Practices to control claims and provide healthy practices for mitigating risks.
- The Subscriber Advisory Committee (SAC) will have authority to recommend that members that do not comply with healthy practices and have an on-going trend of poor experience can be removed from the captive.
- Not this captive. Your maximum liability is your premium and your non-premium funding or collateral for any given policy period.
- Your self-insured plan remains covered by stop loss insurance by an A+ rated carrier for claims above the specific/aggregate deductible(s). The pooled captive layer risk is capped to losses equaling captive premium + collateral. In the worst-case scenario of a “bad year”, the entire collateral layer would be spent on claims. The captive’s reinsurance would be liable for any claims above this amount.
A licensed insurance company that is paid a premium for providing services to the captive. Services may include:
- An “A” rated insurance company issuing the captive’s reinsurance policy and performing reinsurance functions for the captive.
- Complying with any regulatory requirements under state laws and paying premium taxes or other fees on behalf of the captive.