Captive Formation and Management
Most businesses seeking a captive solution engage the services of a captive manager. There are many skilled captive managers available. Clear communication from a Captive Manager should be understandable to most laypeople, free of insurance jargon. Clear expectations about the frequency of communication from the captive manager need to be set, as well as expected response time when the client communicates with the captive manager. Although a complete response may take time to research, it is important for the captive manager to acknowledge client communications. Comprehensive due diligence prior to hiring a captive manager is crucial. This process sets the stage for the success of a business owner’s insurance company. It is imperative that there is good business chemistry before starting the captive voyage. Carefully screening potential captive managers is both a science and an art.
The process of choosing a captive manager should start with the same fundamental experience and skill set needed in any business partner. Now that a captive manager is selected, it is time assess risk via a feasibility study. Actuaries conduct the study which identifies and measures risk of a business. History of claims from commercial insurance policies are analyzed, as past claims are usually an indication of future claims. The exception to this rule is when claims are greatly reduced or eliminated after specific risk management steps are implemented. If a business has a series of similar claims, and failed at curtailing this type of claim, a captive is probably not a good business decision.
Domicile refers to jurisdiction, which is a state or country under which the captive holds its’ insurance company license. Selection of domicile is based on many factors. The state department of insurance is the boss of the captive.Finally, the captive manager prepares and submits captive insurance applications to the Department of Insurance for the domicile. Captive management refers to the day to day operations which include regulatory, tax filings, underwriting and claims processing, underwriting, compliance, claims processing, along with regulatory and tax changes.
Suites of services offered by captive managers can be extensive and designed to encompass all services. While other managers offer an ala carte menu. Since Captive Managers serve as the Captain of the captive ship, it is important to find the right one.
Expert captive insurance managers provide a seasoned team of captive professionals that provide back-office support for existing captives which includes Actuaries, CPAs, Attorneys, Account Managers and more. Back-office tasks such as staying in compliance, maintaining insurance department filings, creating claims processing procedures and many accounting tasks can be out-sourced to a Captive Manager. Skilled captive managers are an appropriate term for services provided by a Captive Manager.
The captive manager provides a team to reduce, and potentially, eliminate most headaches many captive owners endure. Engaging a captive manager for back-office support of an existing captive means there are no delays as a result of an illness, family emergency, holiday or vacation. When captive owners choose Back-office management from a captive manager, there are multiple professionals who can take care of needs, now. Back-office Captive Management enables the owner to manage his or her business instead of being in the captive management business.