Below are the steps on how to form a captive insurance company:
Decide on The Most Suitable Captive Model/Structure
Having an in-depth understanding of captive insurance is imperative. After getting basic knowledge, the next step is to choose which captive model is best. This gives you a headway to setting up your own captive insurance company.
Prepare a Captive Feasibility Study
After deciding on a suitable captive model, the next step is to carry out intensive research on the feasibility of the model. This is a crucial phase since a new company is to be established.
The feasibility study provides an outline of the model, its practicability, challenges, costs, and risk management. It is conducted to assess the chosen model's ability to meet the needs of the company. It also helps to determine the most suitable domicile with captive-enabling legislation.
Employ A Suitable Captive Manager and Team
As a newly established company, a captive needs a manager and a competent team for operations to run smoothly. Captive managers are firms or persons that are approved by the captive insurance regulators to carry out the administration and execution of the managerial function of a captive insurance company. The captive manager or representatives may participate as an executive, non-executive, or adviser on a captive's board.
Choose A Suitable Domicile
A captive domicile is defined as a state, country, or territory that issues a license to a captive insurance company and has direct supervision over the captive. It is required by law that captives are domiciled locally or internationally. There are currently over 30 states that have captive enabling legislation.
A suitable domicile should have stable legislation that enables captives to operate within their borders. Other essential factors to look out for when choosing a domicile are ease of access, overall cost, support service, and approach to regulation.
Complete and Submit a Captive Application
All required documents, including the financial disclosures, tax information, and feasibility research files, will finally be submitted to the domiciling authorities.
The domicile authorities review the documents and arrive at a final decision within 90 days or more. During the application process, captive managers can contribute to further description of the captive and its future operations. The choice of a competent captive manager will help ensure that a formation application is approved.