Captive insurers and risk retention vehicles

What a captive is and who it makes sense for

A captive insurer is an insurance company formed by a business or group to insure primarily its own risks and those of its affiliates. When a group pays significant premiums to the commercial market and has a better than average loss history, a captive lets it keep the difference, design tailored coverage the market does not offer, stabilize the cost of insurance and access reinsurance on wholesale terms.

It makes sense for groups with consolidated annual premiums above several hundred thousand dollars, with frequent and predictable risks (fleets, general liability, employee health, product warranties) or with exposures the local market does not cover well. It also serves as a retention vehicle for contractors that need surety capacity and for groups that want to formalize the self retention they already practice in fact.

• Feasibility study with actuarial projection and capital analysis
• Choice of domicile: Puerto Rico under Law 399-2004, Bermuda, Cayman Islands, Barbados, Vermont or others
• Formation, licensing and capitalization of the captive
• Fronting structures with Dominican insurers authorized under Law 146-02
• Reinsurance and retrocession programs
• Protected cell and rent a captive structures for smaller groups
• Corporate governance, administration and ongoing compliance
• Tax and transfer pricing treatment of premiums paid to the captive

Captives and the Dominican Republic

The Dominican Republic has no dedicated captive statute, so Dominican groups usually domicile the captive in a specialized jurisdiction and reach the local risk through a Dominican insurer that issues the policy (fronting) and cedes the risk to the captive through reinsurance. That structure must respect Law 146-02, the rules on acceptable reinsurers and the tax rules on premiums ceded abroad. Our combination of Dominican law practice, a presence in Puerto Rico and experience as a reinsurer lets us assemble the whole structure with one team.

Why VSP

Few firms in the region can say they have founded and run a reinsurer. We can. We know the capital and solvency requirements, the reinsurance treaties, reserve administration and the relationship with the regulator because we live them daily. That operating knowledge is what separates a captive that works from one that exists only on paper.

Content reviewed by C. Constantin Poindexter Salcedo, MA, JD, CPCU, AFSB, ASLI, ARe, AINS, AIS, CPLP, partner at VSP Consultores Legales. Updated September 22, 2026.