Miller & Associates work with Thomas Miller a specialist Captive Manager who has assisted many organisations throughout the world to form captives. They have offices in all the main captive locations including Guernsey, Isle of Man, Bermuda and Singapore.
The formation and use of a Captive (either a Pure Captive, or a Protected Cell Captive) might enable clients to pursue a significantly different strategy to that currently employed. The benefits of a multi-class Captive Reinsurance Package include:
| • | Additional leverage to the clients purchasing power. |
| • | The provision of a single master policy wording encompassing all classes. |
| • | Removal or minimisation of gaps in cover between the classes. |
| • | Smoothing the adverse loss experience on any particular policy. |
Whilst many organisations are of an adequate size, and generate sufficient premium volume, to move directly to their own captive insurance company, Miller & Associates believe that there is a general reluctance from Australian businesses to enter into transactions which will prove difficult to unwind should they prove unsuccessful.
Previously, the advantages of a captive insurance approach could be obtained by entering into a financial insurance arrangement known as a rent-a-captive, with reduced disadvantages.
A rent-a-captive was an effective way of gaining access to the advantages of a captive without establishing the legal, financial and corporate structure.
There was however significant concern that under certain circumstances the troubles of one rent-a-captive member could impact on the other members of the same scheme. As a result many corporations were unwilling to enter into such arrangements.
For this reason, Miller & Associates recommend that clients investigate the possibility of establishing a Protected Cell Captive (PCC).
In particular it enables clients to build up reserves over a period of time to protect not only against risks self-insured at present but risks that become uninsurable in the future. This concept also enables our clients to directly access the reinsurance market which represents the most secure and most economical providers of insurance protection in the long term.
The PCC concept also offers an opportunity to enjoy the benefits of a rent-a-captive without the potential for the problems of one member affecting others.
The PCC was conceived and has developed in Guernsey as a result of the Guernsey authorities passing legislation to enable this concept to have a solid legislative base. Subsequently, PCC or equivalent legislation has been enacted in Bermuda and the Isle of Man.
It enables self insurance to be retained across all lines of exposure to risks including some risks not traditionally insured up to a maximum level in any single year. It then enables access to the reinsurance market on a multi-line aggregate basis also through the PCC.
Insurance coverage in excess of those levels would be effected with the traditional reinsurance market at the most economic insurance market allowing the organisation to acquire its total insurance needs from the wholesale market rather than the retail market.
The possible savings arising out of such a programme, given a reasonable claims experience is significant.
Miller & Associates would be pleased to discuss this concept specifically, and other alternative risk transfer alternatives at any time.
For further details, please download the following paper we have prepared in pdf (Adobe Acrobat Reader is required to view this file):
Captive Insurance Companies An Australian Perspective Interested parties are also referred to the Thomas Miller website at www.thomasmiller.com