Captive Asset Management 101: What Business Owners Need to Know After Forming a Captive
At Silver Rock Partners, we work with many business owners who have successfully formed a captive insurance company—but aren’t sure what comes next. Creating a captive is a major step in controlling risk and gaining flexibility, but the process doesn’t end at formation. Captive asset management is just as important as setup, and it plays a key role in long-term success.
Once a captive is formed, it must be managed with care. Investment decisions affect regulatory compliance, tax treatment, and the financial strength of the captive itself. Without the right oversight, businesses may miss out on valuable opportunities or face regulatory problems.
Why Captive Assets Require a Different Approach
Captive insurance assets are not like regular business investments. They exist inside a regulated insurance entity, which comes with its own rules and requirements.
These assets must follow strict guidelines related to liquidity, risk exposure, and allowable investment types. For example, a portion of the assets must be kept in highly liquid and conservative investments to meet statutory reserve requirements. Other funds—called surplus—can be invested more freely, but still within a defined structure.
The captive’s asset management strategy must balance risk and reward while staying within legal limits. This process requires ongoing attention, not just occasional reviews.
What Can Go Wrong Without the Right Strategy
When captive assets are not managed correctly, several issues can arise:
- The captive may fall out of compliance with its state of domicile
- Investment returns may not align with the long-term needs of the company
- Surplus funds might not be deployed in a productive or strategic way
- Regulators may flag inconsistencies between investment practices and the filed Investment Policy Statement (IPS)
Mistakes in this area can impact the captive’s ability to meet claims, its overall tax position, and its reputation with regulators. That’s why a consistent, well-managed approach matters.
Understanding the Investment Policy Statement (IPS)
Every captive insurance company must have a formal Investment Policy Statement. This document outlines the rules for managing the captive’s assets. It sets limits on asset types, duration, risk tolerance, and liquidity.
The IPS must be filed with the captive’s state of domicile. It guides how both reserves and surplus are invested and must be reviewed and updated regularly. If market conditions shift or business priorities change, the IPS must be adjusted accordingly.
An outdated or overly rigid IPS can limit opportunities—or lead to problems during an audit. That’s why we treat it as a working document, not just a one-time requirement.
How Silver Rock Partners Manages Captive Assets
Our captive asset management services are designed to support every stage of the process. We work in partnership with SRP Investment Advisors and Procyon Partners to create a clear division between strategic oversight and daily portfolio execution.
- SRP Investment Advisors provides compliance-focused oversight and works closely with regulators, actuaries, and captive boards
- Procyon Partners handles portfolio design, trading, and performance monitoring based on the guidelines set in the IPS
Together, we provide a balanced, transparent, and compliant asset management structure. Our role is to help each captive function as a reliable, well-run part of the broader financial strategy.
How We Build Customized Portfolios
Each captive has unique goals, risks, and regulatory obligations. That’s why we customize asset management to the specific needs of the business.
For reserves, we focus on preservation. These funds must remain highly liquid and stable to support claims. Our portfolios include conservative fixed income instruments and cash equivalents that meet insurance requirements.
For surplus, we take a more strategic approach. Depending on the captive’s goals and domicile rules, we may incorporate equities, diversified bond funds, or alternative assets. These investments help captives grow surplus capital over time.
When allowed, we also explore specialized investment structures that align with the business’s risk tolerance and long-term goals. Every recommendation follows the IPS and is made in consultation with the captive’s advisors.
Common Mistakes—and How We Help Clients Avoid Them
Many captives face problems not because of poor intent, but due to a lack of coordination or planning. Some of the most common mistakes include:
- Overreaching with investments that don’t match the captive’s reserve or surplus limits
- Failing to update the IPS after material changes in financial markets or business needs
- Gaps in communication between investment managers and the captive board
At Silver Rock Partners, we help avoid these issues by maintaining open communication with all parties involved, including legal counsel, tax advisors, and actuaries. Our team supports regular reviews and reporting to keep everything aligned.
Why Long-Term Captive Asset Management Matters
A well-managed captive can serve as more than just an insurance vehicle. Over time, it can become a source of surplus capital, liquidity, and financial stability. But that only happens when the captive’s structure, investments, and compliance obligations stay in sync.
At Silver Rock Partners, we don’t treat asset management as a side task. It’s a central part of how we help our clients build lasting financial value. From day one through every annual review, we remain focused on performance, compliance, and strategy.
If your business owns a captive—or is planning to form one—we’re here to help manage the assets with care and purpose. Reach out to us online or give us a call. Let us show you how captive asset management can support your goals for the long term.