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.
