August 05, 2014

krwlogosmlResponse by Monte Jahnke, a captive.com Legal Expert from Kerr, Russell and Weber, PLC:

On shore holding companies, typically limited liability entities or LLCs, can serve many strategic purposes. Some serve as the focal point of control for group or association programs participating in rent-a-captive structures. There the LLC holds the participation relationship with the rent-a-captive’s segregated cell or account in behalf of the participating members of the LLC. The members in turn are separately underwritten by intermediary insurers such as fronting carriers.

Similarly, with group programs, a holding company which owns an offshore captive can serve important administrative support functions on shore while all of the insuring relationships are left to the captive’s off-shore and reinsurance relationships. This can be particularly helpful in directly written programs where the captive insurer’s operations and insurance transactions must remain off-shore providing only indemnification for losses. Claims administration in such programs is the responsibility of the insureds. For multiple insureds, an on shore holding company can facilitate administration and the necessary on shore contracting relationships but must avoid any activity which equates to conducting the business of insurance.

Affiliated groups may also wish to offer non-captive insurance or claim administration benefits. Holding companies serve a central role in their behalf to contract for such goods and services. Holding companies can retain ownership of assets unrelated to insurance needs and can insulate them from off shore regulations or restrictions.