How Captive Reinsurance Works

Captive Loss Simulator
Enter a loss in Loss Details section below to get started.
Loss Details
Loss Amount
Add Loss
Total Loss
$0
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Default Assumptions
Adjust these settings to customize your policies and explore how different combinations impact loss distribution.

These adjustments form the foundation for running tailored scenarios. While the simulator allows flexibility to explore various configurations, the default assumptions may not reflect the specific requirements or constraints of captives in real-world scenarios.
Starting Captive Balance
XoL Attachment Point (AP)
XoL Max (per occurence)
Agg Attachment Point (AP)
Quota Share Distribution
Captive Responsibility
Reinsurer Responsibility
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Disclaimer
This simulator is intended for illustrative purposes to demonstrate how basic reinsurance policies can support a captive, interact with each other, and distribute losses across various scenarios. Actual reinsurance policies can vary widely in structure, terms, and interactions, depending on negotiations with reinsurers and specific business needs. This model simplifies these complexities to focus on core concepts.

The simulator does not reflect actual captive financial or accounting operations and should not be used to make decisions regarding capitalization, collateral, surplus, solvency, or claim payment timing, as claims may take years to settle. Calculations are illustrative and should not be interpreted as real-world outcomes.

Default assumptions can be adjusted to explore different configurations and scenarios, but they may not reflect the specific requirements, constraints, or realities of captives in practice.
The total funds available in the captive to pay losses, also known as the Loss Fund. The starting amount can be set in the Default Assumptions section.
Captive Cash
$0
XoL Policy Total:
The total amount paid by the XoL reinsurer across all losses. The XoL reinsurer covers single claims exceeding the XoL Attachment Point, up to the XoL Policy Max. Any claim amount beyond the XoL Policy Max is applied to the Captive. Adjust XoL AP and Max in the Default Assumptions section.
$0
Agg Policy Total:
The total amount paid by the Agg reinsurer across all losses. The Agg reinsurer covers claims after the captive has paid an amount equal to the Agg Attachment Point. When combined with an XoL Policy, the Agg Policy only covers amounts below the XoL Attachment Point. Adjust the Agg AP in the Default Assumptions section.
$0
300 of 400K
Quota Share Total
The total amount paid by the Quota Share reinsurer. Quota Share divides single claim amounts proportionally between the captive and reinsurer based on the designated ratio. When combined with an XoL Policy, the Quota Share reinsurer only covers amounts below the XoL Attachment Point. Adjust the Quota Share ratio in the Default Assumptions section.
$0
Select Policies
This simulator allows you to explore three reinsurance policy types: Excess of Loss (XoL), Aggregate (Agg), and Quota Share. Each policy illustrates core reinsurance principles and can stand alone or, in some cases, be combined. XoL can be paired with either Agg or Quota Share, but Agg and Quota Share cannot be combined (in this version of the simulator).

The policy types in this simulator are simplified to focus on their fundamental functions. Adjustments in the Default Assumptions tab let you customize policy terms and explore different loss distribution scenarios. Please note that real-world policy terms, coverage, and interactions vary significantly and are shaped by negotiations with reinsurers and the unique needs of each captive.
Select which types of reinsurance you'd like to add to the simulator.
Excess of Loss (XoL)
Covers individual claim amounts exceeding the XoL Attachment Point, up to the XoL Policy Max. XoL coverage is determined on a per-loss basis, meaning each loss is assessed independently of other losses. In this model, any claim amount above the XoL Policy Max is applied to the Captive.
Aggregate (Agg)
Covers all claims once the captive has paid an amount equal to the Agg Attachment Point. When combined with an XoL Policy, the Agg Policy only applies to portions of claims below the XoL Attachment Point and above the XoL Max.
Quota Share
Divides the cost of each claim proportionally between the captive and the reinsurer based on the designated ratio. Quota Share does not have its own attachment point but is influenced by XoL policies, covering only loss amounts below the XoL Attachment Point when the two policies are combined.
$200K XoL Attachment Point
$1M Max Limit
Quota Share: 50%
400K Agg AP
$200K
$200K
$200K
$200K
$200K
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