Keep your captive options open: rent rather than own

“You may not have the luxury of perhaps two or three months to set up your captive for your renewal.”

• Speed: you can sign that lease and move in.
• Flexibility and commitment: you won’t buy an apartment if you think you’ll be needing to move again shortly.
• Low cost to get in: one month down and you’re in. No big deposit or capital commitment.
• Speed and cost to get out: no attorney and real estate fees when you are ready to move out; you can leave when you’re ready without undue expense.

• You are ready to make a long-term commitment, have researched the neighbourhoods and are ready to establish a long-term base.
• You want to have the freedom to customise your living space and be free of any restrictions that a landlord may impose on you.

• Easy in, easy out. It’s a fast and low-cost access to the insurance vehicle with the flexibility to exit as your needs suit you.
• Commitment flexibility. The insurance market is cyclical. If the interest is short term, perhaps for the next 12 or 24 months, with an uncertain commitment to retain risk when the marketplace becomes more competitive, renting should be considered.
• Renting allows you to exit without penalty, while an owned facility will require ongoing cost and maintenance until you dissolve your ownership.
• Sometimes speed matters, and you may not have the luxury of perhaps two or three months to set up your captive for your renewal and instead need to gain access to that vehicle within two to three weeks. In the absence of the need to undergo company formation, a rented captive provides quick access.
• Speed is not an uncommon need in current trading conditions for renewals requiring access to an alternative risk mechanism when the agent has exhausted more standard market options.
• Zero capitalisation. If you form an insurance company, you need to capitalise it according to the rules of the jurisdiction in which it is formed. Since these facilities are already established, licensed and capitalised by the facility owner, there typically is no initial capitalisation requirement for new cell renters—the company is already capitalised.
• Renters will, of course, be required to fund their cell appropriately with premium and security as required by their issuing carrier, facility provider and/or domicile regulator.
• Lower operating costs. Annual operating costs are typically lower for rent-a-captives than for your own company simply due to economies of scale. Renting fees are often in the +/- $50,000 annual fee range, versus ownership which typically costs in the +/- $100,000 range. Why? The facility has audit, legal, domicile and similar overheads being performed for the overall facility with costs spread across multiple cell renters.
• No formation costs. There is no formation involved, so there will be savings of anywhere between $20,000 and $100,000, depending on the type of captive.