WCF Panel Addresses Considerations for Successful Captive Formation

At the World Captive Forum, panelists Michael Domanski, partner at Honigman; Dan Peterson, director of Captive Insurance at Vermont Department of Financial Regulation; and Barry White, commercial lead at Artex, focused on off-the-shelf captives, where they discussed considerations for successful captive formation, including the review process, structure selection, and domicile choice.

Several factors were identified as critical to forming and maintaining a successful captive. The panelists talked about the captive evaluation process, which should include a risk assessment along with an actuarial and feasibility study. Various strategic aspects were addressed, such as putting multiple coverage lines into the captive, which adds the benefit of risk diversification.

When choosing a captive structure such as a single-parent captive, a rent-a-captive, or a group captive, organizations need to consider various factors, including whether to rent, own, or join an existing program.

The panelists also discussed migration within cell structures and the movement within structures over time, particularly from rent-to-own, highlighting the need for flexibility in captive management over the program's life cycle.

Key considerations in choosing the right domicile include the need to thoroughly understand and consider the organization's risk structure and chosen captive structure, as well as ease of travel to the domicile. Understanding solvency is also key, including capitalization and surplus requirements.

After formation, the panelists said it is vital that the captive is actively managed on an ongoing basis.

Furthermore, organizations looking for speed and efficiency in the regulatory process, both in terms of forming and maintaining a captive, should recognize that while regulators are becoming more experienced and efficient overall, a comprehensive review of high-quality captive applications remains time-consuming.