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Captive reinsurance programs: assumed risk, fronting and collateral

In a captive reinsurance program, the captive does not issue the underlying policies. A licensed insurer issues them and reinsures part of the risk to the captive, so the captive assumes risk from that insurer instead of insuring the business directly.

Programs in which a captive reinsures risk from the licensed insurer that issues the policies.

1 active provider

How are these providers ranked?

Direct insurance or assumed reinsurance?

The key distinction is who owes the policyholder. When a captive writes directly, it issues the policy and pays claims to the insured. In a reinsurance program, the issuing insurer owes the policyholder, and the captive owes the issuing insurer under a reinsurance agreement.

QuestionCaptive writes directlyCaptive reinsures an issuing insurer
Who issues the policyThe captiveA licensed insurer (the fronting or ceding insurer)
Who the policyholder claims againstThe captiveThe issuing insurer
The captive’s obligationTo the insuredTo the issuing insurer, under the reinsurance agreement
CollateralNot owed to an issuing insurerUsually required by the issuing insurer
Rules that applyThe captive’s domicileThe issuing insurer’s state rules and the captive’s domicile

Whether the issuing insurer can take credit for reinsurance from a captive depends on state credit-for-reinsurance rules. Under the NAIC model law, credit depends on the reinsurer's status, such as being licensed or accredited in the state, or on security such as cash, securities, a letter of credit or a trust. Counsel and an actuary should review the reinsurance agreement and collateral terms. For how the parties fit together, read fronting arrangements explained; for captives that write cover directly, see captive insurance. How providers in the listing below are included and ordered is explained in the Bastivo methodology.

Benefits and limitations

Potential benefits

  • Lets a captive take part in cover that must be issued by a licensed insurer.
  • The issuing insurer handles policy issuance and, often, claims and regulatory filings.
  • The captive can retain a defined layer while the issuing insurer keeps or places the rest.
  • Gives the insured policies that counterparties or regulators accept where a captive's own policy would not be.

Key considerations and limitations

  • The issuing insurer stays liable to policyholders, so it usually requires collateral from the captive.
  • Fronting fees and collateral add cost and tie up capital.
  • The captive depends on the issuing insurer's claims handling and data.
  • Collateral, claims-control and termination terms need careful review.

Is this relevant to me?

When it may be worth exploring

  • Cover must be issued by a licensed insurer, but you want to retain the risk.
  • You can provide the security the issuing insurer requires.
  • You have a captive, or are forming one, with capacity to assume this business.

When it may not fit

  • A policy issued directly by your captive would be accepted for the risk.
  • Collateral would strain liquidity.
  • You need full control over claims handling.

How Captive Reinsurance Program is usually implemented

  1. Step 1: Identify which coverages must be issued by a licensed insurer.
  2. Step 2: Approach issuing insurers and compare fees, collateral and claims terms.
  3. Step 3: Agree the reinsurance agreement and the layer the captive assumes.
  4. Step 4: Provide the security the issuing insurer needs to take credit for the reinsurance, such as a letter of credit or trust.
  5. Step 5: Set claims reporting, audit and data-sharing arrangements.
  6. Step 6: Review collateral and terms at each renewal.

Providers for Captive Reinsurance Program

1 company

Oct 20, 2026How are these providers ranked?

Risk Services, LLC

Unclaimed
No reviews yetriskservcos.com1605 Main Street, Suite 800, Sarasota, Florida 34236, United States
  • Risk Consulting
  • Captive Feasibility Studies
  • Underwriting
  • Regulatory Compliance
  • Captive Management Services
  • Captive Accounting
  • +1 more

Risk Services, LLC is a full-service captive insurance manager providing formation, licensing, accounting, financial reporting, regulatory compliance, underwriting, policyholder administration, reinsurance intermediary and fronting support services.

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