Exit strategies, a critical yet often under-discussed aspect of the captive insurance lifecycle, are essential for captive owners planning their future transitions. Although these strategies can be complex and sensitive, which might not suit early conversations with prospective captive owners, more transparent discussions about the strategies involved, and when they are appropriate, can only be beneficial.
More sophisticated approaches exist beyond the basic options, such as loss portfolio transfers and company liquidation. These include transferring additional risks with a different profile into the captive in order to make use of the underwriting capacity. Some domiciles, such as Luxembourg, also offer specific solutions — Luxembourg having an active market for captive sales, for example. By integrating the captive within a group of financial vehicles, structured finance solutions can optimise the exit strategy. As the industry evolves, a transparent conversation about exit strategies for captives is vital for maintaining financial stability and compliance.
