Can your own captive deny your claim?
A single parent captive will not, and a shared one still applies the policy
The answer splits on structure. In a single parent captive the owner adjusts its own claims, and Queen cannot imagine an owner denying its own claim, which is why he says it definitionally provides the most coverage. In a group captive or a risk retention group, claims are claims: membership does not create cover the policy does not contain.
The single parent case is the strong one, but Queen puts a condition on it. The advantage holds where the claim was contemplated by the actuary and the policy covers it. Ownership decides who adjusts the claim; it does not conjure cover for an exposure nobody priced.
That is why he treats the drafting as the real work. The smart play with a single parent captive is to make the wording broad enough that virtually any contemplated risk for that organisation falls inside it, which is a decision taken when the policy is written rather than when the claim arrives.
Key takeaways
In a single parent captive the owner adjusts its own claims, which is why Queen says it provides the broadest coverage.
That advantage is conditional on the exposure having been contemplated by the actuary and covered by the wording.
In a group captive or risk retention group the policy terms still govern, because other members carry the cost.
Shared structures behave differently, and the reason is that other members' money is at stake. In a group captive or a risk retention group you still have to play by the rules: a claim outside the insuring agreement is declined the way it would be anywhere else.
From the conversation
Matt Queen
Captive Insurance Attorney and MGA Executive, Author of Modern Captive Insurance
“for a single parent captive, I can't imagine why you would ever deny your own claim.”
Transcript
Read the full transcript 4 turns
Matt QueenSo
Hostthere's no issue. There's the captive -- the policies issued by a captive, a group captive, an ROG, a fronted group captive, any of these actors. Those policies can be more complete than what you're buying from your name-brand carrier in a fixed cost of risk model. Is that correct? Well
Matt Queen, for a single parent captive, I can't imagine why you would ever deny your own claim. So, yeah, I think, definitely speaking, the single parent captive provides the most coverage. Now, this all presupposes that the type of claim that we're talking about was generally contemplated by the actuary, the insurance policy generally covers it. But, yes, of course, you're going to process all of your own claims. Now, if you're in a group captive or an ROG, then, you know, claims are claims. So
Matt Queen, you know, if you submit a claim for, you know, some wild thing and it's not contemplated by the insurance agreement, you don't just get coverage just because you have a captive or you're a member of a group. So, you still have to play by the rules. But the first point I was making with single parent captives, the smart play there is to ensure that the insurance coverage is broad enough such that virtually any contemplated risk relative to that organization would be covered. So
The views expressed are those of the featured guest, drawn from a recorded conversation, and reflect their own professional experience. Nothing on this page is insurance, tax, legal, or investment advice. Consult your own advisors about your specific situation.
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