Captive Management & Professional Liability Review
Captives Face More Than Underwriting Risk
Captives are formed to finance and manage risk, but some also develop management and professional liability exposures of their own.
As captives grow and evolve, responsibilities may extend beyond traditional risk financing and include governance, claims oversight, fronting arrangements, collateral management, regulatory compliance, service provider management, reinsurance, investment oversight, and interactions with multiple stakeholders.
Not every captive requires standalone management or professional liability coverage. The purpose of this review is to help identify situations where a closer look may be warranted.
Common Areas of Exposure
Governance and Board Decisions
Many captives have boards, officers, managers, trustees, or committees responsible for decisions involving capital management, dividends, investments, reinsurance, regulatory compliance, strategic direction, and service provider oversight.
Questions regarding these decisions may arise from regulators, participants, members, shareholders, creditors, or other stakeholders.
Claims, Fronting, and Professional Activities
Captives may also face issues involving claims handling or oversight, policy issuance and administration, coverage determinations, fronting arrangements, collateral requirements, reserve disputes, regulatory reporting, and outside service provider management.
Even when allegations lack merit, responding to them can be expensive and time-consuming.
Employment, Fiduciary, Cyber, and Crime Exposures
Captives with employees, benefit plan responsibilities, sensitive data, or control over funds may also have exposures involving employment practices, fiduciary duties, cyber incidents, employee theft, funds transfer fraud, or social engineering.
Captive Structures That Often Merit Review
A closer review may be appropriate for:
- Single-parent captives with active governance
- Group captives
- Association captives
- Risk Retention Groups
- Protected Cell Companies
- Segregated Cell Companies
- Captives participating in fronting arrangements
- Captives writing third-party or unrelated business
- Captives with multiple participants, cells, or insureds
- Captives with claims oversight responsibilities
- Captives with regulatory, collateral, reserve, reinsurance, litigation, arbitration, or claim disputes
Coverage Areas Often Reviewed
- Board and management decisions
- Claims handling, coverage decisions, policy administration, or service provider oversight
- Employment-related allegations
- Employee benefit plan responsibilities
- Cyber events, privacy issues, or data handling
- Employee theft, funds transfer fraud, or social engineering
- ICML
- ICPL
- EPL
- Fiduciary
- Cyber
- Crime / Fidelity
Captive Liability Quick Review
Rockwood has developed a short Captive Liability Quick Review to help identify captives that may benefit from a more detailed discussion.
The review is intended solely as an educational and risk-identification tool. A yes answer does not mean coverage is needed. It simply means a closer review may make sense.
Who Should Take This Review?
This review may be useful for:
- Captive owners
- Captive board members
- Captive managers
- Risk managers
- CFOs
- General counsel
- RRG executives
- Association or group captive sponsors
Take the Captive Liability Quick Review Online or Download the PDF
About Rockwood
Rockwood works with insurance organizations and captive-related risks on management and professional liability placements, including ICML, ICPL, EPL, Fiduciary, Crime, and Cyber.
Our focus is helping insurance entities evaluate and structure coverage that aligns with their operations, governance responsibilities, and professional liability exposures.
Questions?
If you would like to discuss your captive’s structure, operations, or current management and professional liability program, we would welcome a conversation.
Mark Lann
Executive Vice President
Rockwood Programs, Inc.
786-412-4131
mark.lann@rockwoodinsurance.com
This material is intended for general informational purposes only and should not be construed as legal, tax, accounting, or insurance coverage advice.