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Airmic regularly carries out research, and publishes the results in the form of reports, guides and benchmarking documents.

EXPLAINED: Captives and understanding captives

1. Executive Summary

airmic 3rd June 2016

In an increasingly dynamic, constantly evolving and volatile marketplace and risk environment, the need to manage risk is critical.

A Captive is a risk transfer mechanism in the form of an insurance or reinsurance vehicle, typically owned by a business, which, through insurance products, assists the business in the management of its risks. The captive insurance company has become an increasingly prominent risk control mechanism in the medium to long-term strategic planning of organisations ranging from large multinationals to medium-sized enterprises, spanning virtually every industry sector and international territory.

Fuelled by an expanding number of jurisdictions authorising captives, the number of domiciles actively competing for the right to regulate captives and favourable developments that clarify and broaden the rules for risk shifting, risk distribution and product qualification, the trend of market expansion in captives is likely to continue.

This guide will take you through the life-cycle of a captive from initial concept through to the benefit and uses and finally to exit strategies. It is intended to be used by Airmic members starting out on their career in the profession, or for those who may be new to this subject to share with their business colleagues in areas such as procurement, finance, human resources and internal audit.

The following topics will be covered:

  • What is a captive?
  • What are the most popular locations? Which industry sectors?
  • What are the different types of captives
  • Why do organisations create captives?
  • Setting up a captive?
  • Captive m,anagement and governance
  • Developments in the use captives and emerging trends

This is by no means a definitive guide, however we hope it will go some way to answer these questions and to help in your understanding of the world of captives and how they may work for your organisation.

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