Captive Insurance Company

Part I: Executive Summary
This paper is about the discussion of how to set up a captive insurance for an Australian conglomerate which has more than $10 billion annual revenue and operates its business in Australia, Asia and Europe. The captive insurance can help this company a lot both in financial aspect and risk management aspect as it is completely controlled by its owner. There are four possible domiciles that are listed and we are going to choose the best one through analyzing the benefits and disadvantage of each domicile. The characteristics of a captive insurance are discussed in this paper and because of the location of domiciles (three of them are out of Australia), the DOFI regulation’s effect on the decision is also evaluated in case that offshore captive insurance would have some restrictions on operating business in local area. The most suitable domicile we finally decided is Bermuda because of its tax system as well as its good reputation and regulation on captive insurance company.
This paper aims to pass on some basic concepts about captive insurance and how to choose the domicile, also problems related to this such as DOFI regulation’s effect on decision and “admitted vs non-admitted insurance company” are discussed through all six parts.

Part II: What is captive insurance company?

Before we start setting up a so called captive insurance company, we should know what a captive insurance company is. A captive is an insurance company that provides insurance to its owners while it is controlled by the owner itself. In fact, a captive serves as a premium funding vehicle for ensuring that the cost of risk of the whole organization could be controlled at a designated level by the parent. A captive may be owned by a corporation or an association, domiciled onshore or offshore, and has the option of writing the business of unrelated parties. (Saad. H, 2009)
A firm choose to set up a captive insurance is because it can brings two major benefits....