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"You
have been very persistent in
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in the Bahamas
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I'd recommend
it to anyone".
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from England, now in Bermuda
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what a great
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Thank you for
everything!" Rena, in
Cayman from Canada
"I'm having a fantastic time".
Helen, British Virgin Islands
"Thanks for all
your help. I'm
delighted to be going!"
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Bermuda
"I
just wanted to thank you for setting
me up here. I'm really
enjoying it. It's great!" Rebecca,
moved from South Africa to Grand Cayman
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Overview of cash flows
Note that the information
shown on this page is much more detailed than you will be expected to
know for any jobs in the offshore insurance or
auditing sectors. Clearly, however, any insight you gain from reviewing this
page will be useful background
knowledge.
A) Insurance captives: cash flows
overview
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The parent, via a fronting
company, pays its insurance premiums to its subsidiary captive, which
has access to the reinsurance market where lower-cost insurance rates can be
obtained
-
The captive will decide how much of
the claims risk to absorb for itself and will accordingly store some of
the premiums received in its loss fund. This loss fund invests such cash received in
the stock market, earning investment income that is retained in the
captive's loss fund
-
For the claims risk it does not wish
to absorb in this way, it will purchase reinsurance cover of its own on the open
market via unrelated reinsurers
-
As and when retained claims are incurred by the
parent company, these are settled using resources from the captive's
loss fund as planned
-
By carefully controlling risk absorbed
and claims paid, any profits that the captive makes can be returned to
the parent company
B) Insurance rent-a-captives: cash
flows overview
-
Cash
flows for rent-a-captives are very similar to captives, the main
difference being that instead of a dedicated subsidiary company being
set up for each participant, a management company will set up a
rent-a-captive company in which anyone can participate. In effect,
each participant owns a virtual slice of the captive, with ring-fenced
loss funds, investment income and claims paid etc
-
The management company will charge a
fee to each of the participants, via the rent-a-captive, for the service
provided
-
Any profits that the rent-a-captive
vehicle earns can be returned to the participators as virtual dividends
>
Click here for
more on the offshore regulatory
environment in Bermuda
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As noted above,
don't get hung up on the detail of these financial vehicles at this stage.
For interviews, companies will definitely not expect you to have anything
like this level
of knowledge!
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