By using a shell company, the captive company can avoid having to obtain licenses in every state where it wants to offer insurance, since the main company has the required licenses. The presentation relates to the use of an authorized and authorized insurer to issue an insurance policy on behalf of a self-insured organization or a captive insurer without the intention of transferring any of the risks. By using a shell company, the insured may be in a better position to deduct premium payments from insurance contracted through the parent company and, ultimately, through the captive one. The insured receives a policy from the parent company, but the risk covered by the program ultimately falls on the captive insurance company.
Fronting has been defined as the use of an authorized and authorized insurer to issue an insurance policy on behalf of a self-insured organization or a captive insurer without the intention of transferring any risk.
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