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The COVID-19 Pandemic: Opportunities and Implications for Captive Insurance

The COVID-19 Pandemic: Opportunities and Implications for Captive Insurance

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The COVID-19 Pandemic: Opportunities and Implications for Captive Insurance explores the challenges presented by today's business and economic upheaval, as well as the hardening insurance market, and what it means for the captive insurance industry.

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Efficiency Is a Primary Benefit of Cell Structures, Says Panel at World Captive Forum

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February 14, 2017

One of the primary benefits of cell captive arrangements, as opposed to forming a wholly-owned captive insurance company, is efficiency, according to a panel of experts at the World Captive Forum that was held at the end of January. The panel was comprised of Les Boughner, chairman of Advantage Insurance Management LLC; Ken Kotch, principal and national practice leader at Ryan LLC; and Eric L. Severson, president and CEO of Ascent Medical Management, Inc., a cell participant. The session was moderated by Nick Frost, president of R&Q Quest Management Services Ltd.

There are both administrative and operational efficiencies. It is much less time consuming for clients to get into a cell captive as compared to starting a class 1 captive, explained Ken Kotch. He compared it to buying a condominium instead of building a custom home. Much of the initial work, such as capitalizing the core and obtaining the licenses, is already taken care of by the sponsor. The sponsor is also responsible for audits and other regulatory items. Operational efficiencies and related cost savings result from the sponsor arranging for audits and other services to be provided for all the cells in the structure rather than each cell arranging its own.

While these efficiencies are a major benefit, shortcuts should not be taken by cell participants in the management of their cells. The management workload isn’t reduced in a cell, stipulated Les Boughner. In other words, the governance and management activities are the same as with class 1 captives. Additionally, the tax issues for a cell captive are the same as with any other captive insurer. 

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