A Broker-Captive is a captive insurance company which is set-up by an insurance intermediary or MGA to:
- Gain greater control over the whole of the insurance process:
- Retain an equitable share of the underwriting profit generated by its book of business:
- Create its own independent, dedicated source of underwriting capacity, thereby providing stable, long-term continuity of support to its business and policyholders;
- Access the reinsurance market on its own account (with such access being independent of its traditional insurers and capacity providers);
- Develop insurance products and rating models tailored to the specific needs of its customers.
A Broker-Captive does not have to change the way in which an intermediary does business. Instead, it is capable of “sitting behind the scenes” to generate underwriting profits without the need for active intervention. A typical Broker-Captive would not provide direct cover to an intermediary’s clients, who remain insured by a conventional commercial insurance company or Lloyd’s insurer with all the security and brand recognition that this entails.
A Broker-Captive has the potential to earn an insurance intermediary more in underwriting profit than the intermediary earns in commission. Unlike conventional profit commissions, there are no “strings attached”. A Broker-Captive is a vehicle which is owned by the intermediary and operates solely for that intermediary’s benefit.
Most Broker-Captives are self-funding and set-up costs should be recouped from first year profits. The Broker-Captive should be structured to ensure that the intermediary’s capital investment is limited to whatever the intermediary can afford, with the risk of loss being remote – even to the most risk averse client.
We would be pleased to discuss how a Broker-Captive insurance company could be structured to deliver advantages for your own organisation.