There are many reasons why companies form captives. But in a large number of instances a priamry motivating reason is what they believe to be a lack of “competitive” rates in the traditional insurance market. Everybody’s idea of “competitive” is different as most buyers of almost any product believe they are paying too much for it. And with insurance being in the “public good” and the ability to pay claims (especially to third parties) deemed to be an area to be guaranteed (think AIG’s credit default swaps) the regulators want to be sure insurers of all types (including captives) are solvent. And for those captives formed to deal with what they think are less than competitive insurance pricing, their very reason for being (trying to reduce insurance premiums) runs directly at odds with the regulators desire to be sure they are solvent and adequately funded. Anybody who has been in this business for any amount of time have seen their fair share of captives not make it. Watching this unfold over the next couple of years will be fun.
could this be a great thing for the US though? with solvency II pushing more captives back to the US shouldn’t regulators view this more as a chance to get additional tax revenue rather than a way to up their regulations? solvency for captives is vital and must be closely watched, but is it accurate to think that the solvency of a captive is not as “vital” as a larger commercial insurer? really good article, something to keep an eye on in the future.
No Regulatory interference! Ever! I’m sure I can twist the words of the Constitution to benefit the right of all people to keep all government regulations out of the business of corporations (a.k.a tax evaders) We all know the corporate (tax evaders) owners (a.k.a job creators) can self-police and it will work out just fine! GO MITT ROMNEY!
There are many reasons why companies form captives. But in a large number of instances a priamry motivating reason is what they believe to be a lack of “competitive” rates in the traditional insurance market. Everybody’s idea of “competitive” is different as most buyers of almost any product believe they are paying too much for it. And with insurance being in the “public good” and the ability to pay claims (especially to third parties) deemed to be an area to be guaranteed (think AIG’s credit default swaps) the regulators want to be sure insurers of all types (including captives) are solvent. And for those captives formed to deal with what they think are less than competitive insurance pricing, their very reason for being (trying to reduce insurance premiums) runs directly at odds with the regulators desire to be sure they are solvent and adequately funded. Anybody who has been in this business for any amount of time have seen their fair share of captives not make it. Watching this unfold over the next couple of years will be fun.
could this be a great thing for the US though? with solvency II pushing more captives back to the US shouldn’t regulators view this more as a chance to get additional tax revenue rather than a way to up their regulations? solvency for captives is vital and must be closely watched, but is it accurate to think that the solvency of a captive is not as “vital” as a larger commercial insurer? really good article, something to keep an eye on in the future.
Another opportunity for those on the ball….
No Regulatory interference! Ever! I’m sure I can twist the words of the Constitution to benefit the right of all people to keep all government regulations out of the business of corporations (a.k.a tax evaders) We all know the corporate (tax evaders) owners (a.k.a job creators) can self-police and it will work out just fine! GO MITT ROMNEY!