A captive insurer is an insurance company that is wholly owned and controlled by its insureds. Its primary purpose is to insure the risks of its owners, and its insureds benefit from the captive insurer's underwriting profits.

Captive insurers generally fall into two categories:

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• Pure Captives: These are 100% owned, directly or indirectly, by their insureds. Since the Insured owns the captive, these are sometime referred to as “Equity Captives.”
• Sponsored Captives: These are owned and controlled by parties like Impel who are unrelated to the insureds.

A sponsored captive is not formed by its insureds, who are referred to as participants. Unlike pure captives, a sponsored captive does not necessarily pool its insureds’ risks. Many sponsored captives do not require insureds to contribute capital but instead charge an access fee. At Impel, this is referred to as “Captive-as-a-Service” or “CaaS”

Choosing the right captive structure depends on your business’s size, risk profile, and strategic goals:

• Equity Captive: An insurance company created to insure only its parent company and affiliated businesses. Ideal for large organizations seeking full risk control and confidentiality.

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Impel Offerings:

• Single Parent Captive: A cost-effective alternative where businesses participate in a sponsored captive rather than creating their own, making it an ideal choice for growing mid-sized and large companies. Its affordability and lower capital requirements. With the right premium-to-loss ratio, businesses can maximize savings and control risk efficiently.

• Group Captive: Owned by its insured members, this structure allows a collective group to self-insure, providing greater cost stability and risk-sharing.

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Each structure has its advantages, and selecting the best fit depends on your industry, risk appetite, and financial objectives. An Impel representative or Impel registered broker can assist you in choosing the correct structure.

A captive operates similarly to traditional insurance but offers greater flexibility and cost efficiency. Key operational aspects include:

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1. Policy Issuance & Risk Management: The captive provides insurance coverage tailored to the “cell-captive” company’s needs.
2. Claims Processing: The captive manages and pays claims, following applicable regulatory requirements.
3. Profit Retention: Unlike traditional insurers that retain underwriting profits, the Impel captive will distribute profits back to its “cell-captive” company.
4. Reinsurance Agreements: Impel Captive as a Service uses reinsurance to mitigate catastrophic risks beyond deductible levels.

Captive insurance can be used to cover both traditional and emerging risks. Major coverage lines include:

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• Traditional Risks: All-risk property, casualty, automotive liability, workers’ compensation, general liability, and product liability.
• Emerging Risks: Cyber liability, medical stop-loss, voluntary benefits, and directors & officers (D&O) liability.

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Protected Cell Captives provide flexibility in managing third-party risks and diversifying coverage options.

While “Single Parent” Captives offer several advantages, businesses should consider the following challenges:

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• Capital Commitments: A parent company must allocate capital to support the captive’s business plan, as required by regulatory authorities. These funds remain within the company and can generate the same return as direct operational investments.
• Regulatory Compliance: Must adhere to domicile-specific legal requirements.
• Operating Costs: Initial setup. The ongoing management expenses, such as feasibility studies, captive administration, reporting, and governance are withdrawn from the premium with the remainder available to cover losses.
• Potential Losses: As with any insurance structure, captives bear financial risks related to claims and market conditions.

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Impel’s Captive as a Service allows businesses to forego formation expense, operating cost and oversight while still gaining control over policy cost, tailoring policy,  claims management, loss control, and financial flexibility when compared to traditional insurance.