Category Archives: Captive Insurance
Tips On Deciding To Offshore Or Outsource Operations
Businesses are made up of both benefits and risks, and offshoring outsource operations is not an exception. Caution is needed in acquiring outsourced services, and there is even a much greater risk in delving into offshore captive centers for your company. Before diving straight into action in getting offshored services, you might want to spend more time thinking on it again.
Choosing Between Setting Up an Offshore Captive Center and Outsourcing Services
Remember that there is a difference between setting up a captive center and acquiring outsourcing services. Having your own offshore captive center would require you to spend lots of time and money to build and set it up. This is also a strategy that is meant to be for long-term operations. If what you require, however, are services that will not be taking a long time to complete, such as creating a program or software for your company, then it is greatly recommended that you just get the services of an outsourcing personnel. There are pros and cons to both of these strategies. Be aware of them and think clearly which one will best serve your business.
Make Sure You Have Disaster-Recovery and Backup Plans
It’s always better to be safe than sorry. That’s why whenever you venture into something new in business, it’s always recommended to have a backup plan. Of course, there will still be risks in business. But if there is a chance that you can minimize mistakes and avoid any future disasters, then do so. Fortuitous and unstoppable events like natural disasters are also not unheard of to affect businesses when they happen. Storms, flooding, earthquakes and other natural calamities should be prepared for. This is especially true when your offshore captive center will be set up in the Asia-Pacific region where typhoons and natural disasters have been known to occur.
Captive Insurance
The term “captive” comes from Frederic M. Reiss, the “father of captive insurance”, who brought his concept into practice for an industrial client at Ohio in the 1950′s.
A captive is a type of an insurance company that protects the risks of its owners. Basically, it is owned and controlled by its insured’s, although they sometimes insure risks of the company’s clients as well. It has similar tasks to traditional insurance companies, such as; buying reinsurance, invests premiums, issuing policies and pays claim.
There are several common types of captive insurance. One is the Pure Captive or the Single Parent Captive, which is formed primarily to insure parent or affiliated companies. Another type is the association captive, owned by a trade, industry or group for the benefit of its members. Agency captives, is a company owned by an agency or a brokerage that insures a portion of their client’s risks through the agency or brokerage. Rental captives, which provide ‘captive’ facilities to others with a fee, while protecting itself from losses under individual programs. It is also formed to contract policyholders to insure the risks of such policyholders.
Captive Insurance is restricted to writing coverage such as auto liability, general and professional liability, commercial property and employer’s liability. In a captive application, there is little information needed:
- Checklist of Application
- Summary of the business plan
- Application fee of $500 and certificate fee of $300
- Feasibility study or detailed plan of operation
- Articles of incorporation and participation or shareholder agreements
- Biographical affidavits for the officers, directors and legal counsel
Generally, in law and economics, insurance is a form of risk management. It is a transfer of risk from one entity to another, in exchange for a premium, and can be a guarantee to prevent a possible devastating loss.
