What is involved in forming a captive?

Step I. Research and Gather Information

• Gather underwriting information
• Incorporate underwriting information into a financial model to determine proposed captive’s financial viability
• Review all financing options
• Obtain commitment of management
• Know objectives
• Determine level of risk retention
• Have sufficient premium volume

Step II. Due Diligence and Decision Making

• Engage outside consultant/manager and actuary to develop financial models that will provide suggested retention limits and capitalization requirements
• Begin preparing thorough feasibility study
• Develop business plan to include marketing, financial, and operational sections
• Determine qualified underwriting partners and begin discussions (if applicable)
• Have initial meeting with regulator(s)

Step III. Organization and Licensing

• Complete and file captive’s license application with Kentucky
• Key Elements
• Contract with captive management company
• Complete licensing application
• Formation documents
• Feasibility study and business plan
• Proforma financial statements 
• Reinsurance documents or commitments (if applicable)
• Incorporate and capitalize captive

Step IV. Begin Operations

• Capitalize
• Company receives certificate of authority
• Begin business