(as
published in the Western Business Journal, Fall, 2007)
The State of Montana is quickly becoming a leader in the captive insurance industry. Driven by the increased cost of traditional insurance, as well as difficulties in obtaining certain types of coverage, many companies are turning to captive insurance as a solution to addressing their risk management needs. The State of Montana has now licensed over thirty captive insurance companies, and the number continues to grow.
What is captive insurance? In its most basic form, a captive insurance company is an insurance company that only insures all or part of the risks of its parent company. Since captive insurance companies were first formed, the industry has greatly expanded, looking for innovative ways to address the risk management needs of its insurers and insureds. Captives now come in many forms – from single parent captives, to association captives, to industrial insured captives, to cell captives, and risk retention groups. Depending upon the complexity of the company insuring the risks, as well as the companies to be insured, captives can take on many different forms and serve varied purposes.
What are some of the purposes of captive insurance? Captive insurance companies may be formed for many different reasons. These include: to address increased commercial insurance costs and limitations on the availability of coverage, to create investment income, to better enhance a company’s ability to manage its own risk, and to minimize and defer taxes.
Captive insurance companies in Montana must be approved and licensed by the Montana State Auditor’s Office. This requires the captive insurance company to submit an application documenting sufficient capital assets, as well as, in part, an actuarial report, a business plan, an investment plan, and other required certifications. The Montana Insurance Commissioner must approve the application, including all of the supporting documentation, prior to the captive insurance company conducting business.
There are numerous complex issues involved in forming and operating a captive insurance company. It is important for businesses to consult with qualified attorneys and captive management companies to decide if a captive insurance company is right for you. The attorneys at Moulton, Bellingham , Longo & Mather, P.C. are available to assist in this process. They can address the legal and regulatory issues that you will face in forming a captive insurance company, including creation of the appropriate business entities, as well as direct you to qualified and knowledgeable captive managers, actuaries, and financial experts to assist in the ongoing management of your captive insurance company.| Return to Publication List |
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