Self-insurer

A self - insurer or self- insurance company ( English Captive Insurance Company or also English Captive for short ; from English captive for "caught" or "tied up") is an in-house insurance company that serves the parent company to hedge its own insurance risks as part of self -insurance .

General

Typically, self -insurance companies belong to large, mostly multinational corporations , as this is where the company is most likely to achieve the required size for the company's own insurance portfolio. When using a Protected Cell Company or Series LLC , access is also possible for small businesses .

Subdivision

Self-insurers can be subdivided according to the type of group integration and the variation in the areas of application:

A pure self-insurer ( English pure single captive ) is the self-insurer of a single group that also only assumes the risks of this group.
In a joint captive insurance ( english mutual captive ), various companies are joining forces to make cover more than one operated jointly own insurance companies their risks.
Are similarly constructed industrial captive insurance ( English industry captives ).
A partial captive insurance ( English broad captive risks of foreign companies are covered), so that the transition to a traditional insurance company is fluent.

The sub-division of the self-insurers according to the insurance business they conduct results in two groups: The self-insurers assume the risks of the group directly and usually pass on part of the risk to reinsurers . Depending on the financial strength of the parent company itself, high deductibles are sometimes agreed; often only major losses are covered. In contrast, own reinsurers assume a reinsurance risk that remains from the risks of the group that are borne by a normal primary insurer. The own reinsurer, in turn, may retrocede parts of the assumed risk to other reinsurers outside the group (so-called retrocessionaires ). In the case of own reinsurers, insurance premiums are saved through high deductibles and risk reduction , and part of the premium flows back into the group via the assignment of the primary insurer to the own insurer.

Properties and special features

The registered office of the self-insurance company is often chosen in the USA , Malta , Cyprus , Liechtenstein and small states known as “tax havens” (weak regulation and low tax rates). The national taxation rules are very different, for example 0.3% sales tax for small captives and 0.1% for large captives in the US state of Delaware . The founding requirements are also very different and range from a minimum capital in the British Virgin Islands of 10,000 US dollars to 1,000,000 CHF in Liechtenstein. An example from the USA: In New York the minimum capital is 100,000 US dollars .

Since both the insurance premiums and the claims payments remain in the group, on the surface the risk is only redistributed within the group, so that no profit can be seen for the company from operating self-insurance. However, advantages for the group can result from several aspects. In this way, self-insurers enable skilful juggling with the different international tax laws and regulations. In addition, captives give the group access to the reinsurance market, so that more targeted risks can be passed on to reinsurers than would be the case with a third-party insurance solution for the group. By way of alternative risk transfer , self- insurance companies can serve to shift group risks to special vehicles that have access to the reinsurance market.

The self-insurer can also exploit advantages for the group as a competence center for successful claims management (example: by operating fire prevention measures for the company buildings). If it is possible to reduce the risks given to the self-insurer, the latter does not have to spend much on claims settlement; the insurance premiums not used to settle the damage remain in the group.

The self-insurers differ from the special purpose insurance companies in that they - as an insurance company - can also cover risks as a primary insurer. The special purpose insurance companies are not permitted to operate the insurance business (Sections 5 ff. VAG ).

As an insurance company, self-insurers within the European Union are subject to European insurance supervision under Solvency II and the respective national regulations of insurance supervision law. Although self-insurers usually have a smaller premium volume and a significantly smaller group of insured parties than conventional insurance companies, the European legislator has not provided for any regulatory exceptions or basic relief for self-insurers. In the case of smaller groups in particular, the effort involved in fulfilling the regulatory reporting and publication obligations can outweigh the advantages of using a group's own direct insurer as described above.

literature

D. Farny: Versicherungsbetriebslehre , 4th edition, Karlsruhe 2006, ISBN 3-89952-205-2
P. Bawcutt: Captive Insurance Companies: Establishment, Operation and Management , London 1997, ISBN 978-1856091305
Swiss Re, sigma No. 1/2003 Alternative Risk Transfer - An inventory , Zurich 2003, PDF, 343 kB
P. Wöhrmann, Ch. Bürer: Instrument of alternative risk financing . In: Swiss Insurance . tape 7 , 2001 ( risknet.de (PDF; 659 kB)).
P. Wöhrmann: The alternative risk financing as part of a holistic corporate risk management, in: The challenge of risk management. Identification, evaluation and control of industrial risks , Gabler Verlag, Wiesbaden 2002, Reinhold Hölscher / Ralph Elfgen (eds.), ISBN 978-3409118316
P. Wöhrmann: Risk management as a strategic investment: The alternative risk transfer as a means of realizing optimal insurance costs . In: Stefan Odenthal, Gerald Wissel (eds.): Strategic investments in companies: How to create value, retain customers and manage risks . Gabler, Wiesbaden 2004, ISBN 978-3-409-12313-6 .
Einiko Franz: "Captives - a location determination", in: Betriebsberater 2011, pp. 3037–3047.
P. Woehrmann / A. Ruof: "What to look for in an insurer's captive proposition", in: Captive Review Magazine, October 2013, p. 44 f.
P. Wöhrmann / Roman Gächter: "Innovative developments: Challenges for large European companies with captives with regard to the implementation of Solvency II", in: Trendmonitor, HSG, February 2014
P. Wöhrmann: Change of strategy for captives, in: Versicherungswirtschaft, April 2014, pp. 31–34
P. Woehrmann / Ch. Betz: Risk Insight Studies: Segment-specific benchmarking for captive underwriting optimization, in: IVW-HSG Trendmonitor, Issue No. 2, 2016, pp. 29–33
P. Woehrmann / M. Christen: Asset & Liability Management: A new priority for captive owners under Solvency II, in: Trendmonitor, HSG, December 2015, pp. 38–42
P. Woehrmann / T. Cunningham: Efficiency and Profitability, in: Captive Review - Global Program Report, edition October 2015, pp. 14-15
P. Woehrmann / M. Christen: ALM / Harnessing untapped value, in: Solvcency 2 Report 2015, Captive Review, edition July, P. 10-11

Web links