What is a captive insurance company

Captives are privately owned insurance companies that are established specifically to underwrite the risks of their owners or affiliated companies. These entities are often formed to customize insurance coverage based on unique requirements and to provide cost-effective risk management solutions. By retaining control over underwriting, claims management, and other operational aspects, captives enable their owners to reduce insurance premiums, manage risks more efficiently, and gain direct access to reinsurance markets.

1. They operate as a self-insurance mechanism, enabling the insured party to assume and manage risks directly instead of transferring them to traditional third-party insurers. This approach allows greater flexibility in designing policies and claims handling procedures to meet specific needs, cultivating long-term financial benefits and operational consistency.

2. Captives are structurally similar to Risk Retention Groups (RRGs), though often differ in regulatory compliance and ownership structure. RRGs are primarily regulated by federal law, whereas captives adhere to the regulatory frameworks established by the domicile in which they are licensed. These distinctions affect their governance, operational scope, and the specific risks they can underwrite.

3. The policies underwritten by captive insurers are not fully earned upfront. This means that premiums paid are allocated over the coverage period, reflecting the ongoing risk assumption and allowing for better financial and actuarial management throughout the policy term.

4. Typically, captive insurance policies are not externally financed due to the inherent conflict of interest present in the setup. Since captive insurance operates as a self-insurance mechanism, premium financing would necessitate lending funds to the insured, which they would then utilize to pay their own captive. This arrangement generally does not align with traditional premium finance models and policies.

5. If the agency in question has specific suppliers or vendors they collaborate with under captive policies, a detailed review can be conducted to explore compatibility. For instance, verifying potential relationships through internal platforms such as Honor can provide clarity and suggest actionable next steps to determine collaboration feasibility.

How to use Ascend to invoice for captive policies

Ascend considers captives to be "wholesalers" for the purpose of billing. You should add the captive as a wholesaler if it does not already exist in our system.

From there, you can create a program as you normally would.

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