Syosset, New York-based construction services firm, RC Structures, Inc. recently established Connecticut’s 10th licensed captive insurer, RCX Insurance Company, according to a February 12, 2016 Insurance Journal article.
Captives are insurance companies wholly owned and controlled by a parent company to insure the parent’s risks. They generally allow the parent more freedom to tailor its insurance policies and premiums to meet its specific needs and circumstances.
In addition, captives may offer companies certain economic benefits. For example, a company that pays insurance premiums to an established insurer may instead choose to start a captive. The company (now called the ‘parent company’) then pays premiums to the captive instead of to the insurer. The parent company, because it owns the captive, has more control over the financial instruments offered and used by the captive, including the insurance contract, premium price, dividend policy, and investment strategy.
PA 08-127 allowed captive insurers to form in the state, but it wasn’t until after a 2011 statutory change that the first captives set up shop in the state. Connecticut licensed its first two captives in 2012. However, the practice of establishing captive insurers may have started much sooner in Connecticut. According to the Connecticut Captive Insurance Association, an industry trade association, “there is strong evidence” that the first captive in the country was the Mutual Assurance Company of the City of Norwich, Connecticut, formed in 1795 by textile manufacturers!
According to the Insurance Information Institute, Connecticut had the 22nd most captives of any state in 2014, at seven. Vermont, which leads the nation in captive insurers, had 587. The rankings do not consider the size of the captives.