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Collateral for Captive Insurers

martin ellis-SF
January 08, 2018

A new Captive Thought Leader Video featuring Martin Ellis, manager of Comerica Bank's Global and Captive Insurance Group, and titled, "Collateral for Captive Insurers," has recently been added to the Captive.com library.   

Mr. Ellis discusses how captive insurers must provide collateral to their insurers on fronted programs. The main types of collateral are letters of credit (LOC) and reinsurance trusts.

A letter of credit is a one-page document issued by the bank to the front for a fixed dollar amount. The front presents it to the bank at any time to settle the captive's unpaid claims. An LOC is more expensive than a reinsurance trust; however, the investments are more flexible, and the higher investment income may offset the extra cost. 

A reinsurance trust is a three-party agreement among the captive, the front, and the bank. It is governed by Regulation 114 of the Insurance Department of the State of New York. Investments are restricted to cash, US governments, and highly rated bonds. A trust is cheaper than an LOC but with less investment income. 

This section of the site currently features 59 short educational videos by 13 captive insurance experts. Among the topics covered in the 1-3-minute videos are micro-captives, tax issues, captive feasibility, captive domicile selection, choosing an auditor, captive management, group captives, healthcare captives, risk pooling, common myths about captives, how to manage a captive efficiently, what makes a captive successful, and benefits in captives.

Along with Mr. Ellis, the captive insurance experts featured in the videos include the following.

  • John Alberici, chairman, Alberici Corporation
  • Gary Bowers, tax partner, Johnson Lambert
  • Jeremy Colombik, president, Management Services International
  • Martin Eveleigh, chairman, Atlas Insurance Management
  • Alan Fleming, chairman, Airmic
  • Debbie Liebeskind, actuary, Human Resources, Towers Watson
  • Michael Maglaras, principal, Michael Maglaras & Company
  • Steven McElhiney, president & CEO, EWI Re, Inc.
  • Michael O'Neill, president & CEO, American Contractors Insurance Group
  • Hugh Rosenbaum, retired principal, Towers Watson
  • Bruce Wright, partner, Eversheds Sutherland (US)
  • Brady Young, president & CEO, Strategic Risk Solutions

Each of these captive insurance thought leaders has decades of broad experience with captive insurance companies, and they freely share their expertise in the videos. Their combined knowledge constitutes a wealth of information on captive insurance fundamentals that will be especially valuable to newcomers to captive insurance. By watching one or two of these informative videos each day for a month, you will hone your knowledge of captive insurance fundamentals and trends.

There is no cost to view the videos, and you will find them in the Captive Thought Leader Videos section of Captive.com. More videos will be added in the future.

(Mr. Ellis is shown above.)

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