Virtual captives are being utilised by many companies as an alternative option to more traditional captive structures. In our latest Long Read, Luke assesses the pros and cons of virtual captives, and in what instances companies may use them. In practice, a virtual captive is as an insurance contract that provides many of the benefits of a pure captive without the need to go through the – sometimes long winded and capital intensive – process of formation. “Essentially, you draft a contract that outlines the terms – such as what percentage of losses or premiums will be allocated to each party, and how the flow of funds will work,” Judah Max Dobrinsky, director of risk finance at XN Captive, tells Captive Intelligence. “The contract specifies how everything will attach, how risks will be shared, and how funds will move between parties, however the risk is typically retained on the fronting carriers balance sheet. “It's a more flexible, less formalised approach to the captive model, but it operates on the same fundamental principles.” This article also features comments from Thomas Keist, Glenn Ford Ellis CMIRM, Grant Maxwell, and Vittorio Pozzo. #captiveintelligence #captiveinsurance https://lnkd.in/gUE5FEkw
Interesting insights on virtual captives, Luke. This approach indeed offers a fascinating alternative to traditional captive structures, balancing flexibility and efficiency. 💡 Thomas, Glenn, Grant, and Vittorio's perspectives add great depth to this discussion. Connecting with you would be fantastic to explore these concepts further and understand their real-world applications. Would love to connect!
Great insights, Thomas Keist! It's fantastic to have you as a partner in the Alternative Risk Transfer space. This article is definitely worth a read.
Non-Executive Director of captives, MGA, commercial insurers & reinsurers. And opinionated ex-captive guru!
3wIt’s interesting how concepts such as virtual captives come into vogue every decade or so. Tightening of accounting and tax rules have resulted in the evolution of the model away from its original role as off balance sheet financing. The article didn’t address the virtual captives model whereby the insured retains the “premium”, either on its balance sheet or establishing a captive bank account into which funds representing premium and claims falling in the self retention layer are held and paid out.