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Captive

Purpose

A captive reinsurance company is a reinsurance created or owned by an industrial, commercial or financial group used to reinsure exclusively all or part of the risks of the group it belongs to. Using a captive will help to face fiercely competition by saving in the purchase of traditional covers, enhancing risk management and control improvement, supporting other business strategies and optimising the whole financial policy of the mother company.

Moreover captives allow developing a more flexible tailor-made insurance system with direct access to the reinsurance market and thus cut-back insurance costs and stabilise insurance budget.

Challenges

Creating or acquiring and then managing a captive might be a tricky issue. It is needed to go through five main steps:

  • Strategic review: Setting up a captive company require to achieve actions such as understanding the market and operational processes, gaining a comprehensive understanding of the undertaking insurance profile, exploring potential solutions and involving key stakeholders (Board, CFO, CRO, etc.),
  • Feasibility studies: It is needed to assess the risk profile and other related items such as insurance structures, mid- and long-term strategy, resources, domicile, tax and financial strategy, actuarial simulation, business plan, etc. This step will define the feasibility of the project,
  • Implementation: The captive company has to be physically created,
  • On-going activities: The captive must be managed to constantly fulfill regulatory, technical, tax and solvency requirements,
  • Exit or closing: A captive might not be useful anymore when it comes to using capital most efficiently. Then its owner must either exit it or reshape it (closing or selling, restructuring, etc.).

Deloitte services offering

To achieve successfully those steps, Deloitte can help you to:

  • Review the current situation and the needs of the company to determine the best strategy,
  • Produce a consistent report containing all aspects of the chosen solution (regulatory, tax, technical factors, etc.) and scheduling the setting up of the captive company,
  • Contribute to the setting up of relevant contracts and treaties as well as to the staff training,

Learn more

  • Press article: Horizons futurs pour les entreprises captives de réassurance
    « Le secteur des entreprises captives de réassurance vit une période importante en raison des contexte économiques et réglementaires », estime Jérôme Lecoq, directeur au sein du département Audit chez Deloitte Luxembourg.

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