Beyond Traditional Coverage: The Rise of Captive Insurance
The global number of captive insurance structures is estimated to range between 6,000 and 8,000. A significant majority of Fortune 500 companies and large multinational corporations headquartered in the United States operate at least one captive. The U.S. leads globally in the use of captive insurance vehicles, accounting for over 50% of all captives, followed by the United Kingdom, France, Germany, and, more recently, Japan and Singapore.
These organisations have extensively leveraged and validated the effectiveness of captives, enabling them to navigate complex economic environments and respond to the challenges of a hardening traditional insurance market. As a result, captives have emerged as a compelling and strategic risk management solution.
What is a Captive Insurance Company?
A captive insurance company is typically defined as an insurance entity that is wholly owned and controlled by its insureds, with its primary function being to underwrite the risks of its owners, subsidiaries and affiliated entities. Captives are generally established to complement conventional insurance arrangements, enabling businesses to more effectively allocate premium funds, previously expensed entirely, and to manage risks and claims in alignment with the business specific operational needs.
Why a Captive Insurance Company?
Captive insurance companies are established to serve both economic and strategic risk management objectives. Integrating a captive entity within the broader business ecosystem enables a comprehensive approach to risk oversight, one that accounts for the interdependencies and correlations among risks across all core operations. This structure empowers the organisation to proactively identify potential events that could impact performance and to manage those risks in alignment with the group’s defined risk appetite. As a result, the business gains deeper insight into its overall risk profile and benefits from reduced volatility in operational and financial outcomes. Moreover, forming a captive insurance company can lead to significant cost efficiencies, often resulting in lower insurance expenses compared to premiums paid to conventional commercial insurers.
Some of the main features are:
- Improved Claims Handling and Processing: A captive is free to establish its own claims handling policies and procedures. This has obvious advantages, such as the reduction of the time taken to process and pay claims. In the event any risk is being reinsured and there is an event of default, it will be the Captive that will be handling all the claims process with the reinsurer / broker making it a more efficient approach for the group.
- Increased Coverage: The conventional insurance market may be unwilling or unable to provide cover for certain risks, often for complex business or high-value risk. The establishment of a captive to write such lines or to provide additional capacity can be an answer to these market problems.
- Underwriting Flexibility: The company has control over the policy contents, to ensure that the cover provided is bespoke to the company’s requirements. The opportunity to access the core of the insurance business allows the company to design policies for specific needs, whatever they may be.
- Access Reinsurance Market: Captive affords direct access to the international reinsurance markets which translates into a competitive premium quote and thus reducing overall insurance costs in the event of risks being reinsured.
- Growth Strategy: A Captive intention is to build a sustainable reserve over time that will enable the company to gradually reduce its reinsurance portion to further retain the risks and continue to build its technical reserves as well as its underwriting profits.
- Tax Benefits: The main highlight for Captive insurance companies from a Mauritius perspective is that the country offers a 10-year tax holiday for new Captive structure aligning with the strategy of positioning Mauritius as a leading international domicile for risk management and financial services.
- Direct Investments: A captive can afford the opportunity to direct excess liquidity towards investment choices and further grow the wealth of the Captive.
- Profit Centre: Since the premiums are paid to the Captive company, all the profits that are generated at the end of the year remain for the Captive and retained by the owner of the Captive.
Type of Captive licence under Mauritian Law
The Act offers a range of licences, as listed below:
- Pure captive insurance business– Mainly to insure risk of parent & subsidiaries.
- Class 1 third party captive insurance business – A mix of insuring risk of parent/subsidiaries & associated entities.
- Class 2 third party captive insurance business – A mix of insuring risk of parent/subsidiaries, associated entities and other third-party risks (subject to certain conditions).
- Class 3 third party captive insurance business – Insure any risks linked with core product or service for parent & subsidiaries.
- Multi-owner pure captive insurance business – Insuring risk of owners coming from common industry.
Tax Incentives
Mauritius offers a highly competitive and transparent tax framework, positioning itself as an attractive jurisdiction for international structuring, particularly around captive insurance. The jurisdiction’s regulatory clarity and fiscal incentives make it a compelling choice for businesses seeking efficient risk management solutions. Below are the key tax benefits available to captive insurance companies in Mauritius
- 10 Year Tax Holiday: Captives enjoy a decade of income tax exemption from year of start of operations.
- No Capital Gains Tax: Enhances capital efficiency.
- No Exchange Controls: Allows free repatriation of profits and dividends.
- No withholding tax on dividends.
- Post Tax Holiday: Captives will be taxed at 15% (Corporate Tax) with 80% partial exemption on Reinsurance activities bringing down the effective corporate tax rate to 3%.
Mauritius as a Captive Insurance Hub
Mauritius is one of the preferred International Financial Centre in the region as well as globally for its global business solutions and now stands out, in the region, with its Pure Captive Legislations, established through the Captive Insurance Act 2015, refreshed in 2023 to cater for Third Party risks. Mauritius has the credibility, competence and the right infrastructure be it in terms of support from professional players, regulators, or the banks, that can accompany potential captive owners in this modern approach to risk management.
1. Mauritius International Financial Centre Recognition
- Ranked 1st in African Region per World Bank Ease of Doing Business Report.
- Ranked 1st in African Region in the Global Financial Centres Index report.
2. Business-Friendly Environment
- Ease of Incorporation with an efficient, transparent company setup.
- Skilled Workforce being minimum Bilingual (English/French), educated professionals with strong financial and legal expertise.
- Modern Infrastructure with strategic geographic location and convenient time zone (GMT +4).
3. Regulatory Strength & Risk Mitigation
- Fully Compliant with Global Standards whereby Mauritius adheres to OECD, EU, and FATF norms, ensuring credibility and transparency.
- Mauritius is a party to a wide network of Investment Promotion Protection Agreements which offers protection to foreign investments and membership in MIGA (World Bank).
- Dual legal system, combining the advantages of both Common and Civil laws.
4. Proven Track Record
- Over three decades of experience as a reliable platform for structuring international investments.
- Trusted by global audit firms, legal firms, Auditors and Banks through their presence in the Country.
Why global businesses are increasingly turning to captives as a risk management solution
Risk management is a fundamental pillar of corporate governance, essential to safeguarding an organisation’s strategic and operational integrity. When conducted effectively, comprehensive risk assessments yield a robust risk register that captures key elements such as risk drivers, potential consequences, mitigation strategies, and triggering events. Among the most effective and flexible methods of risk financing is the use of captive insurance companies. Captives offer innovative structures that enable organisations to address risk exposures in a tailored and strategic manner, often beyond the scope of conventional insurance solutions.
In recent years, captives have increasingly incorporated emerging and non-traditional risks into their portfolios. These include exposures such as loss of key personnel, cyber threats, reputational damage, environmental liabilities, business interruption and more recently pandemic threats. This evolution is evident across both long established and newly formed captives. By adopting a holistic risk management approach, both at the enterprise level and within affiliated entities, organisations are better positioned to explore alternative risk financing solutions. Captives facilitate open dialogue around contingency planning and empower businesses to align their risk strategies with broader governance and performance objectives.
Why JurisTax
Effectively advising on captive insurance structuring, whether for feasibility assessment, formation, or ongoing management, requires expertise and access to strategic insurance partners. At JurisTax, we bring both.
We offer a comprehensive suite of services that spans day-to-day administration, regulatory compliance, and governance, as well as specialised insurance functions including underwriting, claims management, and insurance operations. Our approach enables clients to concentrate on their core business activities while we manage the intricacies of their insurance arrangements and captive structures, always in alignment with the interests of the insured parties.
JurisTax upholds the highest standards of quality, security, and regulatory compliance. Our commitment to data privacy and client confidentiality ensures that every captive solution we deliver is seamless, secure, accurate, cost-effective, and delivered within defined timelines.
Kaviraj Nuckched
Business Development Manager – JurisTax