Скачать или смотреть Collateral vs. Capital | Part 1

The difference between collateral and capital in captive insurance is a very common question in the industry.

Collateral is an exchange of an asset between two parties, generally a lender and the recipient. In the context of a captive, collateral is demanded by the fronting carrier because the captive is generally not creditworthy in the eyes of the carrier, and the carrier ultimately is taking 100% of the insurance policy risk.

On the other hand, capital is generally an equity investment from one party to another. In corporate stock investing, an investor will provide an asset (cash) in exchange for a company's stock certificate.

For a captive, capital is an investment from the insured into a captive insurance arrangement, and generally, that captive is either mutually or wholly owned by the insured.

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