ART
Alternative Risk Transfer
Captive
Cover the risks of your group through your
own insurance company. In this way, you participate to a greater extent in a favourable
claims history, earn investment income on the
premiums, gain access to the international
reinsurance market and attain risk transparency within your group. Take advantage of our
know-how in the field of structuring, implementing and managing captive solutions.
Captive
A captive is an insurance company wholly owned by a company not involved in the
insurance sector that provides cover for risks of the group to which it belongs.
Direct Insurance Captive
A direct insurance captive fulfils the same role as a direct insurer. It underwrites the policyholder’s
risks directly, which in this case are risks of the group.
Reinsurance Captive
A reinsurance captive assumes a defined share of the group’s risks from the direct insurer in
return for a premium. It therefore acts as reinsurer to the direct insurer and can in turn purchase
reinsurance cover.
Concept of a Reinsurance Captive:
Customer
Insurer
Reinsurance
Captive
Captive management
e.g. Dividend payments
Retrocession
Premiums
Claims
Retrocessionaire
Captive Management
The management of a captive includes administration, reporting, cash and investment management, purchase of reinsurance cover and dealing with the local authorities. Although the captive
can be managed either by the captive itself or by the parent company, it is usually placed with
specialised captive management companies.
Zurich offers captive management services in Bermuda, Cayman Islands, Luxembourg and
Switzerland.
Advantages of a Captive
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Participation in good loss history
Investment income from ceded premiums and reserves
Stabilisation of insurance costs
Central and global risk management
Extended cover for uninsured or uninsurable risks
Access to the reinsurance market via the captive
Increased cash flow
Requirements for Setting up a Captive
1. Favourable claims history within the group (ratio between claims incurred and premiums paid)
2. Active risk management integrated into the financial management function
3. Willingness to assume a considerable share of own risks
4. Sufficient premium volume
(minimum annual premium to be ceded to the captive = CHF 1,000,000.–)
5. Demonstrated financial strength of the policyholder
6. Favourable feasibility study results
Structure of an International Insurance Programme:
Switzerland
Policyholder
with insured risks
Canada
Finland
Germany
Argentina
Direct insurer
Direct insurer
Direct insurer
Direct insurer
✚
Direct insurance broker
Local level
Direct insurer
Master Policy Programme pooling
managed by Zurich
Programme level
Reinsurance level
Retrocession
Captive
Retrocessionaire
Other reinsurance
Captive Companies throughout the World
At the moment there are about 4400 captives worldwide, a third of which are based in Bermuda.
Major locations within the EU are Dublin and Luxembourg. The diagram gives an overview
of the distribution of the captives between the various locations. Favourable laws governing
companies, supervision and taxation, which have been passed in certain European states in recent
years, have made these countries attractive locations for captives. This applies in particular
to Switzerland.
Captives in Selected Locations:
Luxembourg 273
Ireland 178
Guernsey 370
Bermuda 1405
Vermont 381
Barbados 237
Cayman 535
Others 906
Isle of Man 173
Worldwide: 4458 captives
(status in 2000; source: Best’s Captive Directory 2001)
Our Services
Risk management
Feasibility studies
International insurance programmes / fronting
Incorporation and licensing of captives
Captive management
Reinsurance coverage
Run-off and liquidation of captives
Zurich
Continental Europe Corporate
Center of Excellence ART
Austrasse 46
8045 Zurich
Phone +41 01 628 82 82
Fax +41 01 628 87 70
www.zurichbusiness.com/art
Status: 08/2002
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