Captive Management for the Mining Industry

For mining companies with captive insurance companies, using the right structure can significantly affect the cost and availability of suitable insurance.

For mining companies with captive insurance companies, using the right structure can significantly affect the cost and availability of suitable insurance. Marsh advises mining companies around the world on their captive insurance options.

Captive insurance companies are common in the mining sector, driven by a combination of factors, such as:

  • Types of risks.
  • Market capacity and accessibility (insurance or reinsurance).
  • Claims control.
  • The global nature of mining firms.

Why captive?

Every mining company faces a range of exposures that it could finance via an in-house insurance mechanism. While many risks may be traditionally insurable, some will involve only a partial solution from the insurance market. A captive agency can help finance completion of the structure.

Where traditional insurance solutions can be limited or expensive, a captive gives you more options, and even has the potential to become more valuable over time.

Are you a captive candidate?

If you’re thinking about a captive structure, you need to carefully consider several factors. A lot will depend on the issues a captive approach is intended to resolve, such as the level of cover, financing uninsurable risks, and taxation. You may also need to consider whether:

  • To place the captive insurer onshore or offshore.
  • To operate a wholly owned captive insurer, or use a third party through a “protected cell” or similar arrangement.
  • To underwrite risk on an insurance or reinsurance basis.
  • Financiers require evidence of cover and any criteria around it.
  • Appropriate cash resources are available to capitalize your captive.

Managing captive capital

Capital management is important to any captive, given the high property damage and business interruption limits they underwrite. Depending on your company’s objectives and where your headquarters are domiciled, both onshore and offshore options can be attractive. For example, you may want equalization reserves to help manage catastrophes, or a low-to-zero tax rate to help the longer-term growth of surplus in your company.

What we offer

At Marsh, we advise on captive insurance options for mining companies around the world. Recognizing the many factors that need to be considered — either before implementing a captive structure or having established one — we can support you by:

  • Identifying whether a captive approach is best for your insurance needs.
  • Helping you determine the right location, structure, and operation for your captive.
  • Structuring the optimal program in which to place your captive, including limits, premium, and cover.
  • Guiding your premium decisions and allocating them in a way that supports transfer pricing considerations.
  • Optimizing the level of capital you deploy for such risks, within the parameters set by the business.
  • Establishing and managing the captive in its chosen domicile.

Our global team of 450 captive professionals comes from a range of backgrounds, including insurance, reinsurance, accounting, taxation, and law.