Captive Programmes
Global Fronting & Captive Management Programmes
There are times when companies face challenges that the traditional insurance or financial markets may not address effectively. Capacity may be limited. Significant risk retention may be required. The exposure may not be covered. Market conditions may be volatile. There may be a need for locally issued insurance policies. These are just a few examples of the challenges our global fronting programmes can help meet.
We help companies address non-traditional exposures by providing highly customised fronting programmes that apply insurance and/or capital market strategies. In addition, we provide captive management and consulting services regarding the feasibility, formation and management of captives, and offer cell captive facilities.
We partner with each client to understand its objectives, identify and analyse its risks and custom-design a programme to support its business strategy. Clients can choose from a wide range of innovative programmes that offer varying levels of risk retention and/or risk financing. Our programmes extend to all types of exposures and industries—providing solutions that deliver our expertise and global capabilities.
Captive Management Services
AIG provides a complete range of captive management and consulting services including the structuring, formation, and overall management of captives with a unique understanding of each domicile’s regulatory requirements and local business practices.
In addition, we manage AIG’s own sponsored captives which are domiciled in Vermont and Guernsey. The sponsored captive is a form of “rent-a-captive” and offers a flexible alternative risk solution for clients, with the added benefit of a lower cost structure and reduced capital requirements compared to a standalone captive.
Our integration with AIG’s global fronting and alternative solutions teams enables us to provide a seamless, one-stop risk management solution for our clients.
What makes AIG the right captive manager for you?
- With AIG’s global footprint, we have the ability to set up and manage your captive in virtually any domicile or jurisdiction around the world.
- We provide in-depth expertise and capabilities through our full range of captive services, which include formation and management, feasibility studies, operational reviews, accounting and regulatory compliance, and redomiciliation analysis.
- As part of a group of insurance companies, we bring substantial local knowledge and practical experience of insurance regulation and effective capital management to optimise the use of a captive in a way that no other captive management firm can offer.
- We offer a convenient and secure online portal where captive clients can easily post and share corporate, financial, and regulatory documents, as well as access AIG’s extensive library of risk management information and safety training programmes.
Potential benefits of a captive structure
- Enhanced control over the insurance programme structure
- Ability to address risks not covered by traditional insurance or financial products
- Opportunity to benefit from positive loss experience
- Supports programmes to provide proof of insurance
- Reduced volatility of rate, capacity, and coverage
- Tax efficiencies
- Facilitates cost-efficient access to reinsurance market
Feasibility and Operational Reviews
Whether you are looking to form a new captive or optimize your existing captive programme, our consulting team can provide you with expert knowledge and guidance.
A captive feasibility study will provide you with:
- Role of captives in today’s insurance market
- Advantages and disadvantages of a captive
- Analysis of proposed retentions and retained coverages assumed by the captive
- Five year financial projections including balance sheets and income statements
- Structure, formation, and operation of captive insurance company
Domicile comparison with recommendation, including regulatory requirements
An operational review will provide you with:
- Current insurance programme evaluation and comparison to business plan
- Operations analysis including a detailed examination of internal controls and data processing
- A review of the captive’s regulatory framework and compliance with governing regulations
- An appraisal of the captive’s third party service providers
Programme Structures
Captives
- An insurance or reinsurance company formed primarily to insure its owner(s) and affiliated companies
- A client "rents" a segregated cell within a sponsored captive facility, thereby receiving many of the benefits of a captive without the cost and capital commitment required of a wholly owned captive.
- We provide a complete range of services regarding the feasibility, structuring, formation, and management of captives with a unique understanding of each domicile’s regulatory requirements and local business practices.
- The client funds the policy limit and any residual balance is returned at the end of the programme.
- A policy in which the client retains risk within a defined layer by agreeing to indemnify the insurer for all losses paid within that layer.
Features and Benefits
- Exploring the retention of significant elements of risk to benefit from positive loss experience
- Experiencing an above average risk profile that is not properly reflected in the market prices for traditional insurance
- Pursuing more efficient access to the reinsurance markets
- Looking to expand the use of an existing captive or PCC to insure all or part of a risk
- Requiring evidence of insurance for regulatory, disclosure, marketing, trading, or counterparty needs
- Facing a specific problem for which there is no clear risk transfer solution
- Seeking greater certainty and flexibility on cover and premium through varying market cycles
- Facing significantly increased retentions or premiums
- Facing high attachment points due to poor loss experience or market conditions
- Unable to arrange the extent of cover they prefer due to unfavourable industry-wide claims trends
- Encountering market conditions or changing underwriting capacity that limit the ability to transfer risk
- Experiencing inefficiencies with their multinational programmes/operations
- Making improvements in loss control efforts that have not yet materialised in historic data
- Seeking to realise potential tax efficiencies
- Over 50 years of providing global fronting solutions using AIG’s network of owned operations in over 90 countries, supported wherever required by local insurance partners
- A market leader providing non-traditional insurance and reinsurance solutions
- A team culture bringing together underwriters, actuaries, lawyers, accountants, financial officers, regulatory and operational specialists to create unique, holistic solutions
- Technical expertise to cover risks for which there is no conventional insurance market
- A history of partnership with clients that enables us to really understand their business needs and provide optimum risk transfer and risk financing solutions
- Superior servicing and claims handling, reporting, and management
- Full access to AIG’s multinational policy issuing capabilities and expertise controlling multi-currency cash flows
- Access to the resources of the AIG organisation, including significant risk-bearing and risk financing capacity
- Ability to insure virtually all lines of business
- Extensive product customisation ability
- Regional fronting expertise and ability to meet local regulatory requirements
- Full range of captive management and protected cell services
Case Studies
The following case studies provide examples of the ways in which Global Risk Solutions can help clients address challenging exposures by providing highly customised, innovative programmes that apply insurance and/or capital market strategies. Our programmes can be designed for almost any exposure and are not limited to any particular class of risks.
- Closing a Captive
- Evidence of Insurance
- Freeing Up Capital
- Increased Retentions or Premiums
- Mergers, Acquisitions and Divestitures
- Multinational Programs or Operations
- Non-Traditional or Emerging Risks
- Potential Benefit from Positive Loss Experience
- Reduce, Remove or Transfer Liabilities
- Traditional Coverage Unavailable, Inefficient or Volatile