Frequently Asked Questions
Find answers to some of the questions we frequently receive about Captives.
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The assessment should not focus solely on potential savings, but also on the value of greater control over risks and insurance costs. A captive is typically most relevant when an organisation has significant insurance costs, a relatively stable risk profile and access to its own claims and risk data.
Nordisk Aktuarservice often helps clarify the basis for decision-making through analyses of claims data and risk profiles, as well as financial scenarios showing whether a captive is an attractive solution.
A captive can contribute to more stable insurance costs, greater transparency and better insight into the organisation’s risks. It can also provide an opportunity to tailor cover and deductibles to the organisation’s own risk profile rather than relying on standard market solutions. For many organisations, the value lies as much in improved risk management and decision-making as in potential savings.
Captives are often most relevant to organisations with significant insurance costs, recurring or predictable risks, and a desire for greater control over risk financing.
One example might be a large manufacturing company experiencing many similar claims year after year. In this situation, a captive can create a stronger link between prevention, risk management and overall insurance costs.
A captive is not necessarily the right solution for every organisation. If insurance costs are limited, risks are highly unpredictable, or the organisation does not wish to allocate resources to operations, governance and reporting, other solutions may be more appropriate. It is therefore important to consider both the expected benefits and the requirements associated with establishing and operating a captive.
Before establishing a captive, the organisation should have clarity on:
- Risk profile and claims history
- Capital requirements
- Expected costs and benefits
- Governance and allocation of responsibilities
- Resources for ongoing operations
- Overall objectives for the captive solution
The better these matters are understood in advance, the stronger the basis for decision-making will be.
Establishing a captive typically involves:
- Analysis of risks, claims data and insurance costs
- Assessment of commercial and financial benefits
- Determination of structure, capitalisation and governance
- Dialogue with the relevant authorities and other stakeholders
- Implementation and commencement of operations
The process varies from one organisation to another depending on size, risk profile and level of ambition.
A captive often provides more detailed insight into the organisation’s risks and claims patterns. Analysis of the organisation’s own claims data can reveal patterns that may previously have been obscured by traditional insurance reporting. This insight can make it easier to identify areas where preventive measures can reduce both risk and costs, while providing a stronger basis for prioritising risk management initiatives and investments.
For captives subject to insurance regulation, this insight can also support work relating to risk management, Solvency II, reinsurance and capital management, thereby supporting decisions in these areas.
Value should be assessed over several years, as the benefits often emerge gradually through improved risk management, fewer claims and more efficient management of insurance risks. The assessment can be based on the organisation’s overall objectives for the captive solution:
Is the organisation gaining better insight into its own risks, more stable insurance costs and a stronger basis for decisions on risk management and insurance strategy?