STRUCTURE AND FORMATION OF A CAPTIVE

 

A typical captive insurance company is a wholly owned subsidiary of an industrial, commercial or government organisation which exists to insure all, or a selection of, the risks of that organisation and its affiliates.

 

Captives may be owned by one organisation (a single parent captive) or by a number of different bodies (group or association captives). There would normally be a common link of some kind between the owners of a group captive that could also be organised as a mutual insurer where the ownership is vested with the policyholders.  Other vehicles that may be used are ‘rent-a-captive’ or segregated portfolio companies.

 

Blenheim will be pleased to advise upon corporate structure of the captive taking into accounts the classes of risk insured, relationship of owners, insured and other stakeholders, voting, investment, solvency, return of capital, marketability, taxation and compliance with laws of the territory and in the country of domicile and residence of the parties.

 

FEASIBILITY STUDY

 

The captive owner will commence with a feasibility or risk analysis study which takes into account:

 

·         Existing risk programme and planned changes

·         Financial history

·         Policy requirements and identification of problems

·         Self insured and alternative risk financing options

·         Cost analysis and financial projections

 

Once the feasibility study has been completed and the desirability of the captive determined then the review will need to be incorporated into a formal business plan for the captive.

 

BUSINESS PLAN

 

The business plan is the key document in describing the structure, operations, risk programme and financial projections of the captive and will form the basis of application for an insurance licence.  It is important that the business plan includes consideration of:

 

·         General Description

·         Marketing

·         Structure and Technical

·         Investment Policy

·         Financial Projections

 

FORMATION OF THE CAPTIVE INSURANCE COMPANY

 

The constitutional documents must be drafted to ensure compliance with the laws of the territory and any requirements of the Insurance Act.   The name will be cleared for use as an insurance company with the Director of Insurance Business and the Registrar of Companies and can be reserved during the licencing process.  The Memorandum and Articles of Association constitute the legal entity together with the Certificate of Incorporation.

 

CAPTIVE AGREEMENTS AND POLICIES

The captive must appoint a resident insurance manager, in addition functionaries such as investment manager, banker, accountant, auditor, actuary, legal advisor may be required. In addition to the level of remuneration these key agreements will determine the precise duties of each professional including record keeping, transactional process, accounting ensuring solvency, issuance and redemption of policies, claims handling and other administration required by the captive.

 

The captive will issue insurance policies, in accordance with the laws of the BVI and the jurisdiction in which the insured in resident or domiciled, covering in detail the nature, wording, coverage, limits, premium, claims procedure and insured.

 

We shall be pleased to assist with the preparation of the document necessary to establish the captive and to arrange for legal review.

 

REGULATORY APPROVAL AND FORMATION

 

Once the captive business plan, constitutional documents, policies and agreements are finalized the fund can make application for a licence.   The licence process is typically 2-4 weeks.  Due to the efficiency of the Companies Registry incorporation of the captive can be achieved in a day.   Blenheim provides a turnkey service in order to address all the matters required to make licence and establish the captive.