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Investing for Captive Insurance Companies

 

Captive Operations and Services | Stephen Nedwicki | Vice President | Comerica Bank

 

Investing for a captive insurance company revolves around the level of risk the captive is willing to take, according to Stephen Nedwicki, vice president and institutional investment strategist with the institutional services group at Comerica Bank.

  • A company that wants very low risk will invest in bank deposit products, money market funds, and certificates of deposit.
  • A captive insurer that wants to earn a little bit higher yield and return on its investments may utilize US Treasury bonds and bills, municipal bonds, and high-quality corporate bonds.
  • A captive that is mature and has surplus cash may also invest in stocks.

Stocks add additional risk to the overall portfolio, but over time, historically stocks have been able to outperform bonds. Investments may also be restricted by the bank that is offering letters of credit to the captive and may also be restricted by the beneficiary of a Regulation 114 trust.