White Paper

5 Red Flags that A Captive Is Headed Down the Wrong Path — and Suggestions for How to Change Course

Two of Vermont's leading captive regulators share common warning signs and some ways to prevent your captive from veering too far off course.

White Paper Summary

More companies are exploring captives as an alternative to traditional insurance. As premiums keep rising in the commercial market and risks evolve in the post-COVID world, risk managers are looking for more affordable and sustainable ways to control and stabilize their total cost of risk.

According to Marsh’s 2020 Captive Landscape Report, commercial insurance rates rose by an average of 19% in Q2 of 2020, the largest increase since 2012. As a result, 59% of captive owners said they planned to add more lines of coverage, increase retentions in their captive or form an additional captive. Captives offer a greater degree of control over risk mitigation strategies and financial flexibility that can help companies better cope with periods of uncertainty. Captives play a unique and important role in providing owners the ability to respond to market challenges and prepare for emerging risks, thus creating solutions for both short- and long-term strategic planning.

If you determine that forming a captive is the right choice for your company, no matter the type of captive, there are some red flags to be aware of that could be an indication of trouble in the future. The key is to catch them early, and better yet, prevent them from the start.

To learn more about State of Vermont, please visit their website.

The State of Vermont, known as the “Gold Standard” of captive domiciles, is the leading onshore captive insurance domicile, with over 1,000 licensed captive insurance companies, including 48 of the Fortune 100 and 18 of the companies that make up the Dow 30.

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The R&I Editorial Team can be reached at [email protected]