Alberta Captive
Insurance Manager
Alberta Captive
Insurance Manager
David W. Huber Professional Corporation is a captive insurance manager licensed in Alberta. We pride ourselves on the experience, knowledge and passion we bring to the captives/reciprocals we manage. Providing more than financial statements; we are a resource for overall captive operations including alternative risk programs, government regulation, tax and corporate services.
Alberta’s regulatory framework enabling captive insurance companies became effective July 1, 2022. While captive insurance companies are often incorporated in offshore jurisdictions such as Barbados, Bermuda and the Cayman Islands, for the last 25 years British Columbia has had legislation permitting the formation of captives domiciled in that province.
What is captive insurance?
A "captive insurer" is generally defined as an insurance company that is wholly owned and controlled by its insureds; its primary purpose is to insure the risks of its owners, and its insureds benefit from the captive insurer's underwriting profits.
Captive insurance allows you to form your own regulated insurance company turning an expense into a profit center for your business. A captive insurance solution is appropriate for an organisation willing to retain and insure their own risk while having adequate premium levels to support the operations and expenses of a captive. A captive is not the right fit for every business. In general terms if your organisation has better than average loss ratios and a strong balance sheet, it may benefit from captive insurance.
Captive Insurance Legislation in Alberta
Alberta’s regulatory framework enabling captive insurance companies became effective July 1, 2022. While captive insurance companies are often incorporated in offshore jurisdictions such as Barbados, Bermuda and the Cayman Islands, for the last 25 years British Columbia has had legislation permitting the formation of captives domiciled in that province.
Alberta’s introduction of a captive insurance regime comes as a number of Alberta-based businesses, including those in the energy, agriculture, forestry and manufacturing sectors have struggled to obtain insurance in the current market. Captive insurance companies can be set up by entities in any sector of the economy seeking alternative insurance coverage.
Benefits of Setting Up Captive Insurance
Captive insurance is a useful strategic tool to assist in risk management. It can help lower insurance premiums, alleviate market pressures, provide access to a global reinsurance market, balance and bridge risk appetites within a corporate group or association, and provide insureds with immediate benefit from risk-reducing behaviours. However, captive insurance is not for everyone. For example, Captives are a long term solution and it should not be seen as a response to a short-term concern (e.g. such as a spike in premium)
Is setting up a captive beneficial? We can help you decide!
Having decades of experience and knowledge of the captive insurance market in addition to our in-house tax expertise, we are able to analyse the benefits your organisation would gain from setting up a captive. The goal of a captive is to lower your ultimate cost of insurance. This is generally done by taking on predicable layers of insurance and reinsuring the unpredictable layers.
Types of Insurance Captives
A captive insurance company originally insured only the risks of its owner or parent company and, hence, was “captive” to it as it was its only source of business. The term has since become used for any insurance company set up in a captive domicile and not regulated as a traditional commercial insurance company.
Single-Parent Captive
A single-parent captive is owned and controlled by a single-parent organisation, company, partnership, trust, or individual. The captive insures the owner and other related entities. A single-parent captive is the simplest and most common structure typically used by hospitals (or other not-for-profit organisations) or large and mid-size privately owned for-profit organisations where ownership consolidates to one or a small number of individuals.
Group Captive
A group captive is a popular captive solution for a group of unrelated individuals or organisations which come together to form a captive. This solution is very popular with small and mid-size organisations whose individual premiums can’t support the ongoing operational costs, but when pooled with other premiums, can provide both economies of scale and the potential for greater risk distribution to spread risk amongst all the captive’s owners. The risk in a group captive is generally homogenous, though, not necessarily.
Association Captive
An association captive is similar to a group captive except it’s sponsored or owned by an association itself versus individual association members. For example: An association representing local grocery store owners could own a captive, which would be considered an association captive. Alternatively, the members of the association could directly own part of a group captive without involving the entire association. Given the inherent nature of an association, the risk in the captive is generally homogenous.
Segregated Portfolio Company
A segregated portfolio company (SPC) is a legal structure in the Cayman Islands and many domiciles and offers similar segregated cell, incorporated cell, etc. legislation. The benefit of an SPC is the ability to silo different insurance programs in different cells such that the assets and liabilities of one program are legally separate from the assets of another program.
An agency captive can be set up as an SPC, where each individual client is placed into its own cell. A hospital captive can be formed as an SPC, where a not-for-profit business and a for-profit business are each placed into separate cells. As a result, the risks are not comingled.
Role of Captive Manager
As an independent captive insurance manager, we can help in the following areas:
Under the Alberta Captive Insurance Licensing Guide (Interim)1, captive managers must have the competence and experience suitable to manage the captive.
Reporting to the Board of Directors, the Captive Manager will have a wide range of responsibilities and duties, including:
• Forming and Licensing your Insurance Captive
• Acting as Corporate Secretary for the Captive;
• Posting accounting transactions and maintaining accounting records;
• Ongoing supervision;
• Financial reporting;
• Treasury management;
• Regulatory compliance.
The Captive Manager will guide you through the entire process of setting up a captive. This includes helping you document the business purpose of the captive (business plan), explore the captive’s feasibility, understand the tax consequences and ongoing reporting requirements under the captive legislation.
As Attorney in Fact (Corporate Secretary), the Captive Manager will be an officer of the Captive and in that capacity will be able to:
1) Sign documents previously approved by the Board of Directors;
2) Record minutes of the Director’s and Shareholder’s meetings;
3) Ensure the minute book is up to date;
4) File the annual return with the Registrar of Companies;
5) Help prepare the Board packages for the Director’s/Shareholder’s meetings;
6) Maintain the Books & Records of the Company.
7) Receive official correspondence on behalf of the Company.
The Captive Manager will maintain its prescribed records in accordance with the Alberta Captive Insurance Companies Regulation (“CICR”). Under Section 8(1) of the Regulation, the following records are required by the Minister:
a) its organizational documents;
b) its licence and the particulars of any terms or conditions imposed on its licence;
c) the minutes of meetings and resolutions of participating shareholders;
d) the minutes of meetings and resolutions of the Directors and any committee of the Directors;
e) the name, address and date of appointment of the auditor;
f) the Directors register;
g) central securities register;
h) a copy of the current financial statements of the Company;
i) a copy of the Company’s investment procedures and policies.
The Books & Records of the Company will be held by the Captive Manager at its principal place of business within Alberta. The Captive Manager will ensure the Captive’s Books & Records are accessible and open to examination by the parent company, the Directors and creditors of the Company, and the Minister at any time. The Captive Manager will be available to answer any questions from the Directors, parent company or Minister pertaining to the financial position of the Captive.
The Captive Manager will be responsible for ensuring there is a functioning business continuity (disaster recovery) plan to ensure protection of the Books & Records.
The Captive Manager will ensure all accounting transactions are posted in accordance with Canadian GAAP (IFRS) and the financial statements are prepared in accordance with the prescribed financial reporting standards.
i. that will enable the Minister to determine the Company’s financial position and confirm compliance with the Captive Insurance Companies Act and regulations;
ii. that set out the Company’s investments;
iii. with accounts, in the form and manner determined by the Minister, in respect of participating policies;
iv. that set out the amount owing to the Company by each customer of or claimant under a policy issued by it, and the nature of its liabilities to the customer or claimant.
The Captive Manager will be responsible for recording of transactions in the accounting records and has the experience and training to perform this role accurately.
The Captive Manager will provide the ongoing supervision for the day to day operations of the Captive and will be the primary liaison with the other service providers, the Directors, and the Minister. The Captive Manager will review all the transactions to ensure compliance with the Criminal Code of Canada and the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (see compliance section).
The Captive Manager will provide ongoing supervision to ensure that the proposed Captive is adequately capitalized at all times, the investments are performing as expected, the program is in compliance with all provisions in the insurance contracts, and that the Captive is always in compliance with all applicable regulations in the Captive Insurance Companies Act.
In accordance with Section 36 of the Captive Insurance Companies Act, the Minister will be informed prior to any changes to the Company’s business plan. This includes changes to organizational documents, material changes in the Company’s financial condition, notice of change of Directors, Officers, auditor, or actuary, investment policy changes, or any other change to the business plan. The captive manager will obtain the prior consent from the Minister for all changes to the business plan.
The Captive Manager will report the financial results to the Directors at the quarterly Board meetings and help the Directors analyse and understand the Company’s financial results. The Captive Manager will send a monthly report outlining all bank transactions through the Captive account.
The Captive Manager will create working papers for the auditors and will be primary liaison with the auditors to ensure that the audited financials are prepared in accordance with the prescribed financial reporting standards and filed with the Minister within 180 days of year end. The Captive Manager will ensure an annual return is filed within 60 days after the end of the calendar year.
The Captive Manager will be responsible for planning, advising and executing financial strategies to meet the Company’s objectives and financial obligations. Effective treasury planning will help the Captive to comply with regulatory requirements and to maximize investment returns. In general, the Captive Manager and two Directors will be bank signatories to allow the Captive to make payments when due and ensure that all transactions are adequately reviewed.
The Board of Directors has oversight responsibility for ensuring that the Captive operates in compliance with key legislative / regulatory requirements, including the:
a) Captive Insurance Companies Act;
b) Criminal Code of Canada;
c) Proceeds of Crime (Money Laundering) and Terrorist Financing Act.
The Captive Manager will provide the primary management control and compliance-related supervision for the Captive. The Captive Manager requires specific anti-money laundering training as it pertains to captive insurance to ensure regulatory compliance.
The Captive Manager will be responsible for ensuring compliance with the CICA and report compliance to the Board at its quarterly meetings. During operations, any deviation from the CICA must be immediately reported to the Board and to the Minister.
The Captive Manager will be responsible for ensuring compliance with all requirements of the Criminal Code. If any criminal activity is suspected, it will be promptly reported to the Board, appropriate legal counsel, the Minister, and to relevant police authorities.
As the designated Chief Anti-Money Laundering Officer, the Captive Manager will be responsible for educating the Directors on anti-money laundering regulatory requirements and safeguarding against any
