8 August 2018Analysis

FIIC looks to form captive insuring investments and capital loans

Small businesses often struggle to find capital, and an insurance solution that ensures investment and loans are protected will help support this market and nurture more innovation and growth in the sector.

This is according James France, chairman and CEO of Financial Investors Insurance Corporation (FIIC), who is looking to form a new captive insurance company to insure investments and capital loans.

Speaking to Captive International at the VCIA annual conference in Burlington, Vermont, France explained that the captive will be protecting the investor or lender from a venture failure they’ve invested their money into.

“By creating this captive we’re providing a tool never before used to act as a investment grade asset for lenders to be comfortable. We will ensure the source of the money and the company will pay the premium," he said.

France claimed that, in 2014, more than 257,000 small businesses made commercial loan requests in the US but some 97 percent were rejected, meaning only the top 3 percent of small businesses are able to find capital.

“We have 34 million companies in the US represented by small businesses (typically with 100 employees or less). They traditionally don’t have revenue above $5 million dollars, so it’s difficult to find easy capital,” he said.

France compares uses the Federal Deposit Insurance Corporation as an analogy.

“The FDIC insures depositors in to the bank up to $250,000 dollars per account. If the bank were to fail, the FDIC steps in and replaces the depositor’s funds. It started in 1933, and what that did was increase customers’ confidence in the banking industry,” he added.

“Creating confidence in small businesses by insuring the investments of small business will have the same impact toward growing those businesses in the US.”

The captive structure FIIC is currently looking to form is a full risk retention group.