Frequently Asked Questions

The risks assumed for IEB captives are short tail (within each financial year) meaning that accounting is provided on a financial year basis as opposed to underwriting year. The low catastrophe risk elements in EB business means that they are easily definable and will be defined within your company’s existing HR policies. Another difference is that the local fronting of the policies is more complex for EB programs due to the need for local service.

The advantages can be split into two categories, Financial and Governance.

• Financial
  • Ability to monitor and dramatically reduce the local structural costs of your plans
  • Improved cash flow to each of your business units at a local level
  • Enhanced corporate and local budgeting process due to year to year predictability of insurance premiums
  • Stable source of income for your captive. Additionally for US licensed insurers/ reinsurers it is seen as a stable source of unrelated income
  • Maintain the investment income and asset gains within the company
  • Diversify risks assumed by the captive
• Governance
  • Transparency
    • Superior corporate governance
    • Head office awareness of global exposures
  • Timely and detailed global reporting
  • Ability to set up programs in countries/regions where typically they are not available
  • Enhanced corporate knowledge of local programs
    • Detailed knowledge of program terms and conditions
  • Current year (quarterly) reporting
    • Multinational pooling reporting is typically 18 months after plan year commences and not accurate
  • Centralized data for their global employee benefit costs
  • Ability to benchmark local benefit obligations and ensure that they meet with Corporate guidelines regarding approval limits/scope of cover

From Granite’s expertise in the captive insurance market we have proven that captive programs have always beaten the market price. When underwriting programs we aim to maintain a ‘break even’ philosophy, meaning that premiums paid should equal the claims plus administration. This leads to the question, “Why can’t local units change every year to get a cheaper quote from competing local market?” The answer is five-fold; disruption to your local employees, budgeting uncertainty and volatility, market fatigue, loss of control on claims and employee health programs, and the loss of the relationships that you can develop with local carriers that your employees enjoy.

Programs for inclusion in your IEB Captive can be employer or employee paid and include but are not limited to; Life Insurance, Medical/Healthcare, Disability covers, Income Protection and Personal Accident covers.

There are many advantages to choosing the IEB captive arrangement over other traditional forms of pooling and self insurance;

• Significantly reduced employee benefit cost
• Enhanced knowledge and control of local programs
• Benefit promise to employee unchanged
• Budgeting predictability
• Reduces premium volatility
• Superior corporate governance
• Central knowledge and control
• FAS reporting
• Excellent stable source of captive business
• Captive metrics and IRR
• Enhances relationship between HR and Finance divisions

There are several reasons to form a captive or cell captive. A few of these are;

• Recapture of underwriting profit and investment income
• Broader coverage and coverage for difficult or uninsurable risks
• Flexibility in program design
• Better access to reinsurance markets
• Reduced insurance program costs

• Bermuda is commonly referred to as ‘The World’s Risk Capital’.
• Bermuda has the largest domicile of active captive insurance companies in the world due primarily to the practical regulatory environment, well established legislation, mature investment environment and the level of service extended to captives.
• There are many well known international companies, major insurance and reinsurance companies which currently have offices in Bermuda.
• Bermuda’s location in the Atlantic Ocean gives easy access to many US and European companies.

While cell captives offer the benefits associated with that of a wholly owned captive, factors which distinguish the cell captives are:

• No requirement for a capital commitment
• Reduced operating costs
• Faster start up
• Each participant must secure the risk 100% with premium, posted collateral and often contractual indemnification
• Programs are segregated: Each participant benefits only from its own experience, and does not suffer or benefit from experience of others
• No need to run-off a legal entity in the event an alternative risk financing method is chosen in the future

Bermuda has positioned itself at the helm of the Captive Insurance industry. Supported by regulators, captive managers, and service providers who are all leaders in their fields.

Click on the here to access The Bermuda Monetary Authority’s website;

The Bermuda Monetary Authority under the Insurance Act of 1978

Depending on which class of insurance you fall in the Bermuda Statutory Financial Statements are due to the Bermuda Monetary Authority on a yearly basis.

Click on the following link to The Bermuda Monetary Authority’s website; http://www.bma.bm/insurance/licensing/SitePages/Home.aspx

As of July 2013 there are 1,330 Insurers Registered with The Bermuda Monetary (information obtained from www.bma.bm)

Internal - Risk Manager, Legal Department, Treasury Department, Custodian

External - Insurance Manager, External Attorney, Local Bankers, Bermuda Monetary Authority, Auditors, Actuary