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Introduction
There may be several advantages to a Group, particularly a Group which has an existing business in the Isle of Man, considering the self-management of its Captive.
This could be achieved by the Isle of Man operation taking over the management of the captive or by the recruitment by the captive of its own staff. Those functions where specialist expertise may be required can be outsourced to Castletown Insurance Services Limited.
The benefits of self-management
There are several benefits that could be achieved by the self-management of a captive:
- Control. Self-management provides greater control over the operation of the Captive, ensuring internal compliance with group reporting. It also enables management to gain an in-depth appreciation of the critical issues relating to this important part of the risk management function of the group. The Officers of the Captive could be appointed from the existing Officers of the Isle of Man operation.
- Cost Savings. Existing resources in the Isle of Man may be able to undertake the key management functions of the captive, resulting in possible cost savings in the captive management fee, and the more efficient use of resources in the existing business.
- Effective Management. By having an in-house manager, delays in collecting premiums or insurance rebates or commissions could be reduced. This may be achieved in two ways: first due to improved in-house communications, and second by being both the manager and the “client”, which may encourage the Market to settle amounts due to the Captive more promptly.
- Quality Control. This could be ensured by self-management, as many of the tasks would be undertaken by part of the group, which adheres to group administration, compliance and accounting practices.
- Growth. If in the future, the group made acquisitions or was merged with entities that also had a captive, this second captive could be brought under the same management, achieving saving on two sets of management fees.
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What functions could be undertaken by the Captive and which would be outsourced?
The Board of the captive will appoint a General Manager from within the current Isle of Man operation who will take overall responsibility for the running of the Captive. Alternatively, a suitable General Manager could be recruited by the Captive.
By retaining several key functions in-house, effective use could be made of existing resources. The cost saving that could be achieved would depend on which functions are retained, and which are outsourced. We would estimate that a saving of between 30-50% of a typical management fee could be achieved if the Isle of Man operation undertook significant management tasks.
The services required by a Captive can be summarised under the following broad headings:
- Licensing
- Directors and Company Secretary
- Underwriting and claims services
- Accounting/ Treasury
- Board Meetings
- Corporate secretarial
- Corporate Governance/Compliance
- Development proposals
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See Insurance Management Services for more information.
A number of these functions can be carried out in-house by the General Manager and his/her team, with a professional captive manager (Service Provider) working with the Isle of Man operation to provide the remaining functions.
A suitable Service Provider: Castletown Insurance Services Limited
As much of the rationale of self-management is due to control and independence, selecting a manager that can ensure these benefits are achieved is essential.
Castletown Insurance Services Limited have experience in providing services to a number of self-managed captives.
The services are tailored to the specific requirements of the Captive and can include secondment of staff to the Captive and the provision of an office facility.
Business Continuity Support Service
Castletown Insurance Services also offer a business continuity support service to Captives that operate on a full self-managed basis who wish to have a “back-up” service to provide business continuity on a short to medium term basis if their own business is interrupted due to unforeseen events.
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