What is a captive?
A captive is an insurance company created and wholly owned by one or more non-insurance companies to insure the risks of its owners (example: a group of renewable companies could form a captive). Captives are a form of self-insurance (with full reinsurance protection) whereby the insurer is owned wholly by the insured. They are typically established to meet the risk management and insurance needs of the owners or members. A main reason many businesses form a captive program is to earn underwriting profits and investment income based on their individual company’s performance.
Why change to a captive from the standard marketplace (Guaranteed Cost program)?
By becoming a member in a captive, the insured has much greater control over their insurance program, including having more input into the claim handling decisions, better loss prevention services and paying premium more in line with your own results, not what the insurance marketplace dictates. Through highly selective underwriting criteria, only the best insureds are allowed into the captive, creating a superior risk pool.
Are captives widely used now? By whom?
There are approximately 10,000 captives in operation globally. About 80% of the S&P 500 companies utilize captives. More and more middle market companies are discovering the many benefits of captive ownership and leaving the standard marketplace.
How does group captive insurance work?
A group captive is formed by multiple companies of similar size or industry joining together to insure the risks of their members. Because of this, they can form a large enough risk pool to provide year-to-year stability in claims through risk sharing among members. A fronting carrier provides the polity issuance and reinsurance. The captive manager/program manager handles the day to day aspects of running the captive including the underwriting and coordination of claims handling and loss control.
What is stop-loss reinsurance?
It’s what limits the captive’s risk. The Renewable Energy Captive has both specific and aggregate stop loss protection. Specific stop loss coverage limits liability for each claim, while aggregate stop loss coverage assumes liability for the total claims cost that exceeds a specified amount in any one year. The combinationof these two coverage limits the members risk and fully securitizes the captive.
Can one policy year affect other years?
No. Each year stands alone, so a “bad” year is isolated and does not affect prior or future years.
What happens if I choose to leave the Renewable Energy Captive program?
We differ from many other programs and self-insured groups in that your underwriting profits and investment income are not reduced or delayed if you decide to leave the program. You will receive your fair share of the annual distributions along with current program members.
Will I earn profits and dividends?
Underwriting profits will be returned in the form of a dividend if a member individually, and the captive collectively, achieves lower losses than were originally fund into the captive.
Will joining the Renewable Energy Captive affect my workers’ compensation experience modification?
No. AIG is your carrier in the eyes of the state insurance regulators and rating organizations. They make all of the necessary filings, pay taxes and guarantee fund assessments on your behalf. As a result you will continue to have an experienced modification factor.
Where is the captive located?
The captive itself is housed in a “segregated cell” captive named Atlantic Gateway International Ltd. (AGIL). AGIL is managed by York ARS and is domiciled in Bermuda. The captive is available through York Alternative Risk and other selected insurance brokers across the U.S. It is managed by York ARS. AIG is our carrier partner.
Will a captive be right for my business?
Captives are ideal for high quality companies that have superior management, a focus on safety and that have achieved historical loss ratios that are lower than the industry average. A captive is also a long term strategy, not a short term decision to jump into and out of each year.
Are all the captive members from the same industry?
Yes. The Renewable Energy Captive members are all in the renewable energy industry.
How do you select the participating companies?
Each prospective member undergoes a thorough underwriting review, including an analysis of exposures and risk characteristics to determine eligibility. They must also have a strong risk management focus and a loss history lower than industry averages.
What are my responsibilities as a captive owner?
The Renewable Energy Captive has experienced professionals who manage all of the daily aspects of the captive. Captive owners elect and may serve as directors, participating in development of program management policies. Owners must also participate in the REnergy Captive safety program; attend safety meetings and claims reviews. The owners are also asked to attend quarterly and/or annual captive meetings offshore.
Each owner/shareholder has one vote, so they have a “voice” in making decisions for the program.
How does the Renewable Energy Captive protect against bad loss performance?
Through initial screenings of prospective members and very aggressive and sophisticated loss control programs, the Renewable Energy Captive works to keep each owner’s losses to a minimum. Each owner signs an agreement promising to fully comply with all loss control policies and recommendations.
What are the start-up costs and capital?
Each participating company posts collateral of a specific amount, depending on the premium size for that company. Collateral is in the form of cash or a bank Letter of Credit. Is there an initial capital cost $_____________
What is the life span of a captive?
A captive may last as long as it continues to meet the needs of the participating members. Many are still in existence after 30+ years.
Who manages my money and where does it go?
The Renewable Energy Captive premiums are paid to York Alternative Risk Solutions, which manages the program. York pays reinsurance premiums to AIG. Up to 60% of premium is deposited in a claims trust fund. The remainder pays for ongoing expenses of administration and taxes. York is the overall program manager and controller, and is responsible for the financial integrity of the program. Members receive detailed financial reporting on a quarterly basis.
What is the Minimum and Target Premium Size?
Minimum premium is $150,000 for all lines combined (GL, Auto and WC),and the target premium size ranges from $250,000 to $2,000,000.
What Coverages are available?
Workers’ Compensation, General Liability and Auto Liability.
What is the target market?
Our focus is on Commercial, Utility Scale, (and, on a limited basis, Residential), Solar and Wind Operations including Contractors, Developers, Owners and Integrators. The program will also target Manufacturers of Panels, Inverters, Trackers, Wind Turbines, Storage, Geothermal, and Hydro, as well as Recycling Plants and service providers to those operations. It will also include Developers and Owners of Power Plants.
What information does the Renewable Energy Captive need from me?
Five-year loss history, five-year exposure history, five-year premium history, copies of current policies.