The
Captive Insurance J O U R N A L
2nd Quarter 2012
I N
T H I S
I S S U E
Page 2 Benefits of Life Insurance in a Captive
Page 3-6 2012 Conference Information and Schedule
Page 7 Captive Academy / Continuing Education Credits
Page 8 2012 Conference Featured Speaker: Dr. Patrick Hickey
Page 9-10 2012 Conference Educational Sessions
Page 11 2012 Conference Educational Form
Benefits of Life Insurance in a Captive Adding Life Insurance to a P&C Captive can result in many benefits for the captive and its owner. — By Jeffrey Altman, FSA, MAAA Bartlett Actuarial Group
Why Would a Corporation Purchase Benefits Through a Captive? Captive insurance companies are formed to insure the risks of the parent corporation (single parent captive), companies that are part of an affiliated group (group captive), members of an association (association captive) or an agent or brokerage group. The most common form of insurance coverage issued by the captive insurance companies in today’s market place is property and casualty insurance. There is a large untapped market for captive insurance companies to provide specific life insurance coverages to achieve valuable risk and financial objectives. The reasons to form a property and casualty captive insurance company are generally well known—a partial list includes obtaining insurance with reduced reliance on the commercial marketplace, a lower premium which reduces the cost of the risk, an ability to design customized insurance programs, an ability to direct the investment option, the creation of a profit center providing the company with the ability to earn an additional source of profits, and access to reinsurance and capital markets.
The same reasons and strategic benefits obtained by a P&C captive would be applicable to a life insurance transaction. Recent ERISA legislative developments, rising employee benefits, and the need for unrelated business have increased the number of the employee benefits placed in captives. The list of insurance coverages typically include retiree medical coverage, stop loss medical, group term life, disability and executive retirement plans.
Why Would a Corporation Purchase Life Insurance? The purpose of this article is to propose that another major coverage that could be added to a P&C captive is Key Man and Corporate Owned (COLI) Life Insurance. Typically, these coverages do not fall under ERISSA regulations. Key Man Policy: Policy benefit payments received by the company under a Key Man Life Insurance policy can be used to provide protection against financial loss resulting from the death of a key executive.