SponsoredCaptive

August 05, 2014
From John Salisbury and John Foehl

A sponsored captive is created by a legal entity that is not an insured of the sponsored captive. A sponsored captive is not created by its insureds.

The insureds of a sponsored captive have no ownership interest in or control of the sponsored captive. The insureds whose risks are underwritten by the captive are called the participants. Sponsored captives are referred to as "rent-a-captives" in some domiciles. Sponsored captives may be required to pay an access fee but do not require insureds to pay in capital in return for ownership of the captive.

A sponsored captive may be structured to have legally separate underwriting accounts. These are called segregated cells. In a segregated cell captive the participant is usually only exposed to the risk of its own undrewriting performance.

In Vermont, the sponsor has to be a licensed insurance company, reinsurance company or captive insurance company, and RRG's cannot be sponsors or participants in a sponsored captive.

Sponsor - the legal entity that contributes capital to form a sponsored or association captive.

Participant - the insured whose risks are underwritten by a sponsored captive.