Our guide

to captives
 Setting up and Types of alternative
What is a captive? Best practice We’re here to help
managing a captive risk financing

Our guide to captives Could a captive benefit

In this guide we’ll take a comprehensive
look at captives – what they are, how your business?
they work and what they could do for
Today, more and more multinational and local companies are exploring the
your business.
many benefits of captives:
Read the foreword by Emma Sansom 1 Cost control: By creating a single, holistic platform for risk management,
captives can improve cash flow management and investment returns.
A captive’s ability to provide additional capacity and to control the type
and level of risk it retains versus risk transferred to commercial insurers
is very valuable in both a hard and soft insurance market.

2 Better decisions: With a consistent overview of exposures and

risk information, you can make better informed strategic risk
management decisions.

3 Broader knowledge: A captive can help you increase awareness and

knowledge of your risks, in particular regarding governance and
compliance issues around the globe.

4 Transparency: Consolidating risks into a captive can help responding

to answer regulatory demands for high levels of transparency.
Foreword

Navigating the world of captive insurance can feel like exploring

unfamiliar and unchartered territory. At Zurich, we are here at every
step of the journey, helping our customers to plot a course
through a turbulent sea of complexity into calmer waters of
stability and certainty.
We have more than 30 years of experience to support you with
every aspect of operating a captive, and the expertise, global
structures, and processes in place, to help you to implement
cross-border captive solutions, spanning life and non-life risks.
This guide is intended to help you evaluate whether a captive
solution is right for you now or in the future, and in the context
of an ever-changing risk landscape.
If you have a captive already in place, with access to
experienced underwriters, claims technicians, and sustainable
risk management experts, we aim to support you identify how
to optimise the benefit your captive currently brings you, in
innovative and thought-provoking ways.
We hope you will find this guide interesting and informative, and
look forward to working with you to explore the many strategic
opportunities that captives can deliver to your business.

Emma Sansom
Global Head of Captives
 Setting up and Types of alternative
What is a captive? Best practice We’re here to help
managing a captive risk financing

What is a captive insurance company?

What is a captive
Are captives legitimate insurance companies?
insurance company?
What types of company have captives?
A captive insurance or reinsurance company (referred to
simply as a ‘captive’ in this guide) is an insurance or
What types of risk can captives insure?
reinsurance company set up and wholly owned by a
non-insurance company to act as a direct insurer or
Is a captive right for your business? reinsurer for its affiliates.
The primary purpose of a captive is to reduce a group’s
total cost of risk. Captives are often used as an integral part
of a group’s international insurance program, but can also
cover local risks or be used in a purely domestic structure.
In fact, as you will see from this guide, captives can take a
variety of forms and cover a variety of risks depending on
the specific goals and needs of the group.
 Setting up and Types of alternative
What is a captive? Best practice We’re here to help
managing a captive risk financing

What is a captive insurance company?

Are captives legitimate
Are captives legitimate insurance companies?
insurance companies?
What types of company have captives?
A captive is a legitimate licensed insurance or reinsurance company,
but it does often have a limited scope in that typically it will only
What types of risk can captives insure?
cover the risks of the parent company and its subsidiaries.
On the other hand, this means that the regulations a captive must
Is a captive right for your business?
comply with – which are established by the captive’s domicile – are
often less stringent than for insurance companies which also cover
risks for third parties.
It is possible in certain situations and domiciles for a captive to take
on third-party risks, but doing so usually increases the regulatory
burden it needs to comply with.
 Setting up and Types of alternative
What is a captive? Best practice We’re here to help
managing a captive risk financing

What is a captive insurance company?

What types of company
Are captives legitimate insurance companies?
have captives?
What types of company have captives?
Many different types of companies set up captives – so their
What types of risk can captives insure? motivation and objectives can vary.
Companies with captives tend to have large A commitment to improving their risk profile
Is a captive right for your business?
enough premiums to warrant the annual through strategic risk management and
cost of running a captive – typically, yearly building and benefiting from long-term
premiums over EUR 10 million make it more relationships with insurance partners.
feasible to have a captive.
Multinationals aiming to consolidate risk
While companies running captives tend exposures globally for a holistic view of risks
to be large multinationals, smaller and and transparency of risk costs and returns.
medium-sized businesses can also benefit
from captive type arrangements*. Corporations with exposures to risks that
are difficult to insure or even uninsurable.
Corporations pursuing a strategic approach
to managing their risk, exposures and cost A solid claims history and extensive formal
of risk with a willingness to increase their risk management processes in place that
share in their risk and capture underwriting ensure they have loss experience that is
profits (as opposed to simply buying better than the market, allowing them to
insurance at the lowest price). benefit from reduction in cost of risk.

A tendency towards high frequency claims

with low severity.

*Smaller and medium-sized businesses can also benefit from a captive-type arrangement through structures called
protected (or segregated) cell companies – please see the section on ‘Types of alternative risk financing’ later in this guide.
 Setting up and Types of alternative
What is a captive? Best practice We’re here to help
managing a captive risk financing

What is a captive insurance company?

What types of risk
Are captives legitimate insurance companies?
can captives insure?
What types of company have captives?
A captive can cover almost any type of risk. Another situation where a captive can be
beneficial is in adding capacity for large
What types of risk can captives insure? In fact, a captive can even cover risks for
risks – for example, supply chain, cyber and
which there is no product in the commercial
reputational risks can all exceed the capacity
market or that no insurer is willing to take on
Is a captive right for your business? available from traditional insurers.
– examples include risks relating to asbestos,
magnetic fields or adverse weather. Covering more of these risks through
a captive can also release funds for risk
In these situations the captive will still need
management efforts in these areas,
to work with an insurance company to
thereby positively reinforcing gains
establish an appropriate price for the risk
from such investments.
in order to avoid issues with tax legislation
(please see the ‘Best practice’ section for See some examples of risks that a
more on arm’s-length pricing and risks captive can cover
that are difficult to place).
Types of general insurance solutions Types of employee benefit
that can be added to a captive that can be added to a captive

Property Basic and supplemental life

Casualty Long- and short-term disability

Motor Non-qualified benefit

Financial lines (incl. Cyber Risk) Retiree medical

Marine Active medical

Speciality lines Medical stop loss

Construction Workers’ compensation

Surety Accidental death and

dismemberment
Trade credit and political risk
Business travel accident
Other
 Setting up and Types of alternative
What is a captive? Best practice We’re here to help
managing a captive risk financing

What is a captive insurance company? Is a captive right for

Are captives legitimate insurance companies?
your business?
What types of company have captives?
There are many reasons why businesses decide
to set up a captive. Here are some benefits that a
What types of risk can captives insure? captive could bring to your business.
Read more
Is a captive right for your business?
To help you identify whether a captive is an
appropriate solution for your organization,
think about the following questions.
Read more
When deciding whether or not to set up a
captive, it is important to consider the level of
commitment required.
Read more
Reasons for setting up a captive
A captive:
• builds up reserves to increase risk-bearing • provides direct access to reinsurance
capacity over time, especially for long-term markets and can offer broader coverages
risks, where internal self-funding is difficult to the group
• reduces price volatility for uninsurable risks • improves cash flow as premiums are paid
and risks which are difficult to insure or up-front and are retained within the captive
even uninsurable while claims are settled at a later stage
• shares the group’s risks, which incentivizes • creates a formalised approach to
the group to improve its risk profile through self-insurance and the funding of risks
long-term risk management strategies
• can drive and fund loss prevention activity
• may reduce costs, specifically in relation to: and capture underwriting profits resulting
– premiums paid and tax deductible loss from such risk improvements.
reserves
• functions as a central risk management
– investment income earned on premium
tool to collect high quality risk and loss
to captive and loss reserves
data to support risk insight analytics.
If you answer ‘yes’ to most of these questions,
a captive may be an attractive route to explore:
• Do you think that global insurance • Do you want a transparent and
markets overprice your organization’s centralized view of the risks each unit
insurance cost as your risk is lower than of your international organization faces?
average or assessed by underwriters?
• Do you want more control and flexibility
• Are you exposed to risks that are difficult on how to place your insurance as
or expensive to insure? prices fluctuate during the hard and
soft market cycles?
• Do you want to earn an economic return
on your organization’s risk management • Does the regulation you operate under
policies and processes (that is, make a captive beneficial?
underwriting profit)?
• Are you looking to grow through
• Are you looking to create a self-funded acquisitions and want fast access to risk
loss-sharing mechanism for working information on purchased companies?
losses that are covered by insurance?
• Does your company take a long-term
• Do you want to accept a large deductible approach to risk management and do you
while offering your business units a much value a longer term, risk and profit sharing
lower deductible (as claims are expensive partnership with your insurer?
to administer, insurance premiums are
most attractive where losses are large
but infrequent)?
Are you ready to commit to a captive?
A captive:
• requires dedication of risk-bearing capital • requires selection and partnering with a
depending on risk retention and solvency qualified service provider to access their
requirements. In some cases, additional expertise and service infrastructure
capital may be necessary
• depending on the chosen reinsurance
• incurs both set-up costs and ongoing coverage, can increase your organization’s
operating expenses exposure to losses
• requires longer-term commitment and • requires ongoing attention from senior
strategy – once a captive takes on risk, management.
required risk-bearing capital will need
to remain in place until all liabilities
are extinguished
 Setting up and Types of alternative
What is a captive? Best practice We’re here to help
managing a captive risk financing

The process and options for setting up and

managing a captive Setting up and managing a captive
Managing a captive and operating costs
Setting up a captive requires the following key requirements:

Choosing a domicile for your captive

• Stable loss experience.
• Sufficient premium volume to be ceded.
Changing your captive’s domicile • Willingness to assume own risk. Selecting a fronting/insurance
partner
• Active and comprehensive risk management.
Is it time to re-evaluate your captive? Look for a partner who can:
• Sufficient financial resources to (re)capitalize the
captive if required. • simplify management across lines
Exiting a captive of business
• Choosing a Domicile that provides a stable legal
and political environment. • solve complex insurance issues

If you decide to set up a captive for your business, • make the best use of captive’s assets
here’s an outline of a typical process to follow. • ensure the captive program is
globally compliant
Read more
• provide the technology to deliver
accurate, transparent and timely
The lifecycle of a captive
reporting to key stakeholders and
Read more decision makers
• provide both general insurance and life
insurance solutions across the world.
The process and options for setting up a captive

Feasibility study 1 Selection of domicile 2

The feasibility study will take an This should be based on the

overall look at your insurance options laid out in the feasibility
structure and help your organization study and the organization’s
to evaluate the potential of preferences.
establishing a captive in order to
optimize your cost of risk.
The study should also include a
quantitative risk analysis, which will
provide detailed insights into your
organization’s loss history and risk
profile and help you determine an
optimized captive structure.

Selection of 3 Documentation 4
management preparation and submission

This will be based on the chosen This involves the filing of necessary
structure and domicile, and the documents at the domicile of
respective costs choice with the help of selected
members of the management.
The lifecycle of a captive

Winding down Feasibility study and

Captives through our support for Captive
loss portfolio transfer formation
(LPT) capabilities

Decline Introduction

Maturity Operations

Capital requirement
assessments and
Restructuring and Quantitative Risk Analysis
re-domiciliation of Captives. (QRA). Cession of additional
Support in acquiring and risks into Captive, such as
selling Captives Life and Employee Benefits
 Setting up and Types of alternative
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managing a captive risk financing

The process and options for setting up and

managing a captive Managing a captive
Managing a captive and operating costs
and operating costs
Choosing a domicile for your captive
You may manage your captive in-house or Recent years have seen a particular
outsource its administration, depending on increase in governance requirements,
Changing your captive’s domicile your preferences and efficiencies gained. e.g. appropriate risk management,
designation of a responsible actuary
Compared with a regular company,
Is it time to re-evaluate your captive? and creation of reports.
a captive incurs additional operating
costs that are specific to the While the resulting costs are to
Exiting a captive (re)insurance industry. be considered, various solutions
(incl. varying levels of outsourcing)
are available.
Read more
Managing a captive will typically involve the following tasks

Financial management Management of the company Local regulator

• Treasury, investment and cash • Diligent management of the company and its • Maintaining insurance and/or reinsurance
management. internal processes. licenses
• Initiating and monitoring of bank • Running the company in accordance with the • Interaction with regulatory authorities and
transactions and payments. procedures and the governance that apply by law, fronting insurers.
• Continuous liquidity management. statutes or contract. • Regulatory reporting (towards local insurance
• Convening board and annual general assembly supervisory authority).
meetings. • Ensure compliance with local requirements.
• Archiving the company’s relevant data.
• Preparing meeting minutes and protocols.
• Providing management information and reports.

Accounting Audit, tax and other services

• Setting up accounting services in line with the • Perform regular internal audits
owner’s needs and local requirements. • Preparation and handling of various tax
• Operational and insurance accounting, periodical documentation.
closings (monthly, quarterly, yearly). • Preparation for regular audits and support
• Calculation of claims reserves by an actuary. of auditors.
• Payments of premiums and claims. • Provide contact person for audit, tax, commercial
register and other service companies.
• Data access to customer’s accounting system and
delivery into consolidation system. • Qualified employees with the necessary knowhow
and experience and approved by the local regulator.
• Transition from local to international standards (IFRS).
• Providing the necessary domicile and
• Preparing management information and statutory
infrastructure to run the company.
reporting.
• Contact with insurers, reinsurers, brokers.
• Review and analysis of reinsurance and retrocession
contracts, data and statistics. • Reporting by designated actuary.
 Setting up and Types of alternative
What is a captive? Best practice We’re here to help
managing a captive risk financing

The process and options for setting up and

managing a captive Choosing a domicile
Managing a captive and operating costs
for your captive
Choosing a domicile for your captive
The domicile of your captive will depend on the needs of your business
and your strategic intent for the captive. Usually the feasibility study (see
Changing your captive’s domicile ‘The process and options for setting up and managing a captive’) will
provide a shortlist of two or three options based on key selection criteria.
Is it time to re-evaluate your captive?
Some of the most common captive domiciles are:

Exiting a captive

Bermuda Luxembourg

Cayman Islands Micronesia

Guernsey Singapore

Hong Kong Switzerland

Labuan (Malaysia) USA (various states)

 Setting up and Types of alternative
What is a captive? Best practice We’re here to help
managing a captive risk financing

The process and options for setting up and

managing a captive Changing your
Managing a captive and operating costs
captive’s domicile
Choosing a domicile for your captive
Sometimes changes in a company’s Options include:
strategic direction and/or new regulations
Changing your captive’s domicile • creating a captive in a new domicile and
mean that a captive’s domicile no longer
setting the old one in run-off
has the same advantages that it did when
Is it time to re-evaluate your captive? selected. For example, increasingly • creating a captive in a new domicile and
stringent regulatory requirements for transferring the risks from the current
captives in Australia have rendered this captive to the new captive via a loss
Exiting a captive
domicile less attractive and some captives portfolio transfer (LPT)
have moved away to more flexible
• moving the existing captive to a new
domiciles (for example, Singapore)
domicile – known as redomiciliation*.
as a result.
When considering the options, it’s
In situations where the original domicile
important to evaluate the run-off and LPT
is no longer ideal but the captive itself
requirements in the current domicile as
is still an important part of the company’s
these tend to vary from country to country.
risk financing and risk management
strategy, a change of domicile could be * Most domiciles don’t provide regulations for redomiciliation.
the answer – although it’s important to
note that this can be a complex and
time-consuming process.
There are various ways to change
the domicile of a captive, with the
appropriate choice depending on
the specific circumstances.
 Setting up and Types of alternative
What is a captive? Best practice We’re here to help
managing a captive risk financing

The process and options for setting up and

managing a captive Is it time to re-evaluate
Managing a captive and operating costs
your captive?
Choosing a domicile for your captive
Your captive is an integral part of your a re-evaluation should be considered to
organization’s group structure and should optimize the benefits and ensure your
Changing your captive’s domicile reflect its needs. If you already have a overall risk retention is in line with your
captive that was set up a number of years risk appetite and strategy.
Is it time to re-evaluate your captive? ago, it may be worth re-evaluating whether
A re-evaluation may provide insight when
the existing structure fully meets your
you experience unexpected developments
organization’s current and future demands
Exiting a captive of losses in terms of severity or frequency.
regarding risk management as well as
strategic requirements. The same is true in cases where you might
have acquired a captive through the
Over time, your organization may have
acquisition of another company. The
evolved with operations in new locations
structure of the captive might have been
and/or expansion into different areas or
right for the needs of the company before
businesses, all of which can change the
its acquisition, but considering the merged
organization’s risk profile.
and integrated structure, it may not
Similarly, extending insurance and provide the full scope of benefits post-
coverages or integrating additional lines acquisition – again, a re-evaluation would
of business into an international program very likely benefit your group and align the
structure may have altered your captive structure to the new needs and
organization’s risk characteristics. While requirements.
adding these into your captive will likely
Read more
have a positive diversification effect,
Changes in legislation can be another reason Re-evaluation can be done in various forms,
to re-evaluate your captive. The Solvency II be it in individual parts – like the review of
framework has triggered many re-evaluations retention level or the composition of the risks
of European captives, due to changes in the retained in the captive – or in the form of a
capital adequacy ratio requirements based on Quantitative Risk Analysis, which is a holistic
the risks in the captive’s portfolio. Changes in re-evaluation of the captive.
the legislation of the captive domicile can
While minor reviews are generally part of the
have a significant impact on the ability of the
annual renewal process and are done on a
captive to function as intended, requiring a
continuous basis, a complete review should
re-evaluation of the captive structure and
be done less frequently – we would suggest
possibly the domicile selection.
every one to two strategy cycles if these are
Additionally, as the insurance industry is five years or more, or every two cycles if these
evolving, so is captive insurance – new are less than five years. As a central tool for
solutions and products are constantly being optimally managing risk and minimizing the
developed. A re-evaluation can help to overall cost of risk, it is important to regularly
identify if and how you can adapt and use test and re-calibrate your captive to ensure it
these new products and solutions within your is performing in an optimal manner.
risk strategy to enhance and maximize your
captive’s value.
This also applies when dynamics in risk
transfer markets shift between cycles,
i.e. hard and soft market.
 Setting up and Types of alternative
What is a captive? Best practice We’re here to help
managing a captive risk financing

The process and options for setting up and

managing a captive Exiting a captive
Managing a captive and operating costs
Should a captive owner decide that a Funding will be required throughout the
captive is no longer the best solution for life of the captive until the date when all
Choosing a domicile for your captive your business, there are a number of exit financial obligations have been transferred.
strategies available. This can be achieved through a loss
Changing your captive’s domicile portfolio transfer (LPT).
One of the characteristics of an insurance
or reinsurance company is that from the Each LPT is tailor-made and the proposed
Is it time to re-evaluate your captive? moment a risk has been assumed, the solution that provides the best fit will largely
company generally will need to be active depend on your motivations for exiting
Exiting a captive
until all financial and regulatory obligations your captive.
are fully/completely satisfied.
Read more
There are two main types of LPT

Commutation Novation
The fronting insurer agrees to A reinsurer agrees to assume
assume the captive’s remaining the captives’s remaining
historical liabilities relating to the historical liabilities relating to
exposures and underwriting years the exposures and underwriting
that they fronted for historically. years fronted by other insurance
The commutation terminates the companies, thereby replacing
respective reinsurance contracts the captive as a reinsurer to the
and usually also releases the fronting insurance company.
historical collateral retained by
the fronting insurer.
 Setting up and Types of alternative
What is a captive? Best practice We’re here to help
managing a captive risk financing

Types of alternative risk financing

Types of alternative
Single-parent reinsurance captive
risk financing
Single-parent direct insurance captive
Different solutions are possible for the financing of risks, each
resulting in a higher or lower degree of retention and/or transfer
Group reinsurance captive
of risk. Selecting the right solution for your business will have to
take into account a variety of factors:
Segregated cell company
• industry
• number of employees and turnover
• geographical spread
• strategy
• retention.
This section of the guide provides illustrations of the three most
common captive structures, plus protected (or segregated)
cell companies.
Single-parent reinsurance captive

Direct insurance Insurer Claims settlement Claimant or

Insured
(Fronting Company) Insured

Collateral
Reinsurance
(eg. LoC)

Capitalization
Captive

Dividends payments

Retrocession

Cash flow/
Collateralization
Retrocessionaire(s)
Premium payment
(Reinsurance Market) and risk transfer/Claims
payment

Here, a reinsurance company is company, which then reinsures the The captive is responsible to
formed to only reinsure the risk of a risks with the captive. If the captive one party only. The profits in
parent company and/or its affiliates, wishes to reinsure its risks it can do single-parent captives are not
which are not insurance companies. so through a retrocession – the shared and are earned by a
Insurance is provided by a fronting retrocessionaire(s) may or may not single captive owner.
be the same as the original insurer.
Single-parent direct insurance captive

Direct insurance Captive

Insured Captive
Management

Reinsurance

Reinsurer(s)

Retrocession

Cash flow/
Collateralization
Retrocessionaire(s)
Premium Flow
and Risk Transfer

Here, the captive provides the

insurance directly and will
therefore need to hold the
relevant licenses.
Group reinsurance captive

Insured 11 Direct Claims

Insured
Insured 1
(Group Captive insurance Insurer settlement Claimant or
(Group Captive
(Group Captive
Customers) (Fronting Company) Insured
Customers)
Customers)

Collateral
Reinsurance
(eg. LoC)

Capitalization
Group Captive
Cash flow/
Dividends payments Collateralization
Owner Insured 1
Premium payment
Owner Insured 2 and risk transfer/Claims
Owner Insured 3 payment

In this situation a number of companies collectively set up a captive to

reinsure their risks. Insurance is provided by a fronting company, which then
reinsures the risks with the captive. If the captive wishes to reinsure its risks
it can do through retrocession – the retrocessionaire may or not be the
same as the original insurer.
The captive is responsible to each of the owning parties and profits are
shared between them.
Protected (or “Segregated”) cell company (“PCC”)

Direct insurance
Insured Insurer

Reinsurance

Cell Cell Cell

PCC agreement
Cell Core Cell

Cash flow/
Collateralization
Cell Cell Cell
Premium Flow
and Risk Transfer

This arrangement can be suitable for organizations that want to benefit from
alternative risk financing but do not have the necessary scale to set up their
own captive. A PCC agreement can provide similar benefits to a captive,
although without the control.
 Setting up and Types of alternative
What is a captive? Best practice We’re here to help
managing a captive risk financing

Best practice
Best practice
Portfolio diversification
In this section we’ll share some insights and advice on
maximizing the benefits you can achieve from a captive
Difficult to place risks and how you can make it a central tool for your holistic
Enterprise Risk Management (ERM).
Improving risk management through a captive
To achieve this we will look at four topics:
• Optimization and portfolio diversification.
What to look for in a captive insurance partner
• Placing difficult risks.
• Improving risk management through a captive.
• What to look for in a captive insurance partner.
 Setting up and Types of alternative
What is a captive? Best practice We’re here to help
managing a captive risk financing

Best practice
Portfolio diversification
Portfolio diversification
While currently the majority of captives are single-line captives, diversifying
Difficult to place risks
into other non-correlated risks is becoming a top risk management strategy
for many organizations. Large multinational and smaller domestic
businesses alike are discovering that using a captive to manage property,
Improving risk management through a captive
casualty and employee benefit risks can deliver both financial and risk
management benefits.
What to look for in a captive insurance partner

HR risks tend to be smaller, more frequent programs into a captive, including the
and more predictable than, for example, advantage of capturing additional
property, liability and marine risks, and are underwriting profits when these programs
generally not correlated with them. are reinsured to a captive.
Combining the full range of risks within one Industry experts estimate that employee
captive therefore generally creates a less benefits comprise 30%* of total employee
volatile, smoother-performing portfolio compensation for most corporations.
with an improved risk profile and lower Simply stated, insured employee benefits
solvency requirements. are a substantial expense for an organization.
Other potential advantages include the Combining benefit policies in a captive
possibility to create tailor-made coverage program can help ensure more efficient
unavailable in the commercial market, and use of premium, providing significant
the accumulation of data that will enable financial and administrative advantages.
more accurate predictions and better Read more
management of future claims trends.
The human resources perspective
Many multinational organizations still Read more
underestimate the financial benefit of
moving their global employee benefit
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Property, BI, Machinery s S
Breakdown, NatCat Data Security & Privacy (Cyber)
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Liability/Motor Fleet Accident & Health
Product Liability Marine
Environmental (EIL) International Programs
Financial Lines Risk Engineering and more...
The human resources perspective

HR functions, which are likely to see In summary, a captive can be an

decisions about benefits such as life effective solution for both the HR
insurance as being within their domain, and risk functions by (restrictions
The benefits of
traditionally do not interact closely with may apply under applicable law): consolidation
risk functions. However, effective Consolidating life and non-life
• allowing customization of benefits
collaboration between HR and risk risks in a captive can provide
managers can deliver many potential • enabling global harmonization tangible financial and non-financial
benefits, particularly if there is buy-in of benefits benefits:
at board level and the chief financial
• providing a global data warehouse • More capital available for core
officer helps to tie the two functions
on all programs business operations (as lower
together by way of financial oversight.
• centralizing portfolio review solvency requirements may be
Bringing employee benefits into a provided by applicable law).
– claims data
captive can allow the HR function to
– types of service • Lower cost of risk.
better manage talent risk by freeing HR
– provider usage
from the financial management of risk, • More centralized cost control.
– medical diagnosis
as well as through potential cost
savings. This allows HR to focus on the • offering better control of benefit • The ability to leverage corporate
other key parts of employee benefits – programs purchasing power more
such as, what the pay structures are – in-time claims data to monitor effectively.
and what motivates employees – design effectiveness and efficiency • Vendor consolidation.
so employees should be happier.
• cost drivers • Access to reinsurance markets.
A captive can also allow an organization
• holistic benefit coverage • Proactive, strategic risk
to offer benefits that aren’t
– targeted provider and/or management.
commercially available, in order
network negotiation
to retain or attract talent.
• providing benefit enhancements.
 Setting up and Types of alternative
What is a captive? Best practice We’re here to help
managing a captive risk financing

Best practice
Difficult to place risks
Portfolio diversification
Some risks can be difficult to insure in the commercial market, either because
Difficult to place risks
of a lack of suitable products or because of a lack of appetite from insurers.
In both cases a captive can be a helpful tool, as a lack of options for
transferring these risks means they are effectively being assumed by
Improving risk management through a captive
the company anyway.
What to look for in a captive insurance partner In cases of a lack of appetite from the If there are only a few products in the market,
commercial insurance market the captive the higher price can be a beneficial scenario
can either cover the risk directly, if for the company as the captive will be able
appropriate licenses exist, or through a to take in this higher premium without
fronting partner with a full reinsurance to concern for any arm’s-length pricing issues,
the captive. This enables the company to as the market has set the price.
prepare for any possible losses in a
If there are no products available in the
reasonable and economic way.
market, the captive will usually need to
In addition there are some large risks, such engage with an insurance company to
as supply chain, which can exceed the create the product and set the price.
capacity available through traditional Otherwise arm’s-length pricing may become
insurance. In these situations the an issue that could be challenged by tax
organization is effectively retaining the risk authorities, both in the captive’s domicile
anyway, so a captive can be an attractive and in the countries in which the parent
way to supplement the available market company operates.
capacity while also providing an opportunity
This collaborative approach also enables
for funding risk improvement programs.
the captive to tap into the knowledge and
In cases of a lack of products, it can either experience of the insurance company,
be that there are very few, often expensive, which can be very helpful in determining
options in the market or none at all. the retention and creating a facility for
reinsuring the new product and previously
uninsurable risk.
 Setting up and Types of alternative
What is a captive? Best practice We’re here to help
managing a captive risk financing

Best practice
Improving risk management
Portfolio diversification
through a captive
Difficult to place risks
By serving as a focus point, a captive can be a highly effective way to develop
Improving risk management through a captive corporate risk management.
Zurich Resilience Services and tools can
What to look for in a captive insurance partner complement a captive program and help
A captive can:
it to achieve its full potential and succeed
• enable a business to identify claims in the long term.
trends and the necessity for action
Using benchmarking – both geographically
• lead benchmarking projects and against industry peers – allows a captive
• reward subsidiaries for good/ improved to focus on the areas most in need of
claims records improvement, and adopt best practices.
• centrally coordinate and track global Doing so can help to reduce the cost of risk
risk improvement initiatives by reducing claims, and increase underwriting
• reinvest its earnings in risk management profits as loss ratios improve.
and improvement initiatives Zurich Resilience Services allows a captive to
• provide strong signals to investors, take a more innovative approach to risk and
strategic partners, and insurers that the offers a greater degree of certainty and
company has a centrally coordinated flexibility in its long-term decision-making,
risk management strategy allowing it to respond quickly to changes in
a fast-moving world.
• act as a risk management and risk
financing toolbox for the CFO and
the Insurance / Risk Manager.
 Setting up and Types of alternative
What is a captive? Best practice We’re here to help
managing a captive risk financing

Best practice
What to look for in a captive
Portfolio diversification
insurance partner
Difficult to place risks
A captive insurance partner should be strong and flexible, with the breadth
Improving risk management through a captive
of expertise and services to support the specific needs of your business.
Look for a proposition that:
What to look for in a captive insurance partner
• simplifies management across lines • includes the technology to provide
of business accurate, transparent and timely
reporting that gives key stakeholders
• solves complex insurance issues
and decision makers instant access to
• makes the best use of the comprehensive and insightful data from
captive’s assets a single platform.
• increases capacity • has a global presence, local capabilities
• facilitates global compliance for and a centralized infrastructure that
your reinsurance captive program covers all the markets where you have
a presence or in which you operate.
• keeps up with changing regulatory
frameworks • provides both, broad-based general
insurance and life insurance solutions.
• reduces the cost of risk held by
the captive
 Setting up and Types of alternative
What is a captive? Best practice We’re here to help
managing a captive risk financing

We’re here to help

We’re here to help
Risk Insights Hub and the captive insights
At Zurich, we make it easier for customers and brokers to navigate
the complexities of implementing and operating a captive program.
From providing certainty, confidence and clarity around global
compliance issues, to helping you manage your risk portfolio to
maximise the return on investment from your captive, our experts
will support you at every step.
Our captive experts will be delighted to discuss any aspect of
captives with you, and tell you more about the ways we can support
you in setting up and operating a captive for your business.
Here are their contact details

Follow us:

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Website
 Setting up and Types of alternative
What is a captive? Best practice We’re here to help
managing a captive risk financing

We’re here to help

Risk Insights Hub and
Risk Insights Hub and the captive insights
the captive insights
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Zurich Captives EMEA
Jaime Puig Sagi-Vela, Spain
APAC
John Bang, Singapore
Guide [email protected] [email protected]

Contact us Duncan Bennett, Nordics Lena Liu, Hong Kong

[email protected] [email protected]
Alessandro Musetti, Italy Kevin Cai, China
[email protected] [email protected]
Jennifer Mola, France Angela Marks, Australia/New Zealand
Emma Sansom [email protected] [email protected]
Global Head of Captives
[email protected] Pieter Nyssen, Benelux LATAM
[email protected] Adriana Scherzinger, Latam
[email protected]
Virginie De Klippel, Benelux
[email protected]
Isabel Cristina Morales Guartos, Colombia
Esme Gould, UK [email protected]
[email protected]
Luis Lujano, Mexico
Nils Groebl, Germany [email protected]
[email protected]
USA
Juerg Rahm, Switzerland
Adriana Scherzinger
[email protected]
[email protected]

Canada
Jean-Pierre Paquet, Canada
[email protected]

Employee Benefits
Reto Heini, Switzerland
[email protected]
This is intended as a general description of certain types of insurance
and services available to qualified customers through subsidiaries
within the Zurich Insurance Group, as in the US, Zurich American
Insurance Company, 1299 Zurich Way, Schaumburg, IL 60196, in
Canada, Zurich Insurance Company Ltd, 100 King Street West, Suite
5500, PO Box 290, Toronto, ON M5X 1C9, and outside the US and
Canada, Zurich Insurance pic, Ballsbridge Park, Dublin 4, Ireland (and
its EEA branches), Zurich Insurance Company Ltd, Mythenquai 2, 8002
Zurich, Zurich Australian Insurance Limited, 5 Blue St., North Sydney,
NSW 2060 and further entities, as required by local jurisdiction. Certain
coverages are not available in all countries or locales. In the US, risk
engineering services are provided by The Zurich Services Corporation.

P0484232 (04/23) TCL