Experts Say a Soft Market is Best For Starting Captives.

A soft market may provide the best setting for setting up or joining a rent-a-captive.

Philip J. Harvey, president of Philip J. Harvey & Co., said companies shouldn't wait for supply to decrease and insurance policies to become expensive before looking at alternatives.

"You don't wait for the problem to happen," Harvey said. "It's too late then. You have to have plan B."

Harvey mentioned the workers' compensation market, where insurers have been selling products below costs. He suggested that the market would turn next year when insurers that are faced with losses will leave the market. Companies may be forced to look at the alternative market to find insurance at affordable prices.

A rent-a-captive, or segregated cell facility, is a captive that is shared by more than one company. Usually formed by insurance companies, brokers and captive managers, rent-a-captives rent their surplus or capital to their clients so their clients don't have to launch their own captive, said Philip Stevens, vice president of Aon Group Inc.

Five domiciles allow rent-a-captives: Bermuda, Guernsey, Cayman Islands, Gibraltar and Vermont.

The benefits of a rent-a-captive are underwriting profits and investment income, Stevens said, plus companies can control their losses and manage their claims better. The owners of the captive receive revenue and can gain new business or keep existing clients.