Rent-a-Captives (All classes)

A Rent-a-Captive is an arrangement whereby a capital base is accessed by a third party that wishes to form a captive but without the cost or time involved in having to incorporate a separate entity.

Often a Rent-a-Captive is the first step towards the formation of a single parent, group or association captive as these can be formed over a period of time whilst the owners are developing the captive's business through a rent-a-captive arrangement but with much less cost. Rent-a-captives usually earn fees based on the volume of income being ceded, typically around 2.00%-4.00% of premium ceded subject to a minimum amount of around $15,000 per year. One of the key issues to a rent-a-captive owner or manger is to ensure that the capital base is not at risk from a poor loss ratio of any of its users. This can only be accomplished by ensuring that there is no financial risk to the rent-a-captive from any of its users. In order to achieve this the captive owner is required to purchase a combination of specific and aggregate reinsurance as well as to provide collateral to bridge the difference between the net premium to the captive and the point at which the aggregate cover applies, commonly known as the "Gap".

Protected Cell Captives Protected Cell captives are similar to Rent-a-Captives except that the capital and assets for each user are protected from one another by law.