Captive Insurance For Community Banks

Over the last few years, I have written about the Bank Captive program run by KeyState. The program continues to grow.

The KeyState Bank Captive Program has now been endorsed by twenty-six State Banking Associations, the latest being Mississippi, Texas, and New York.

The KeyState Bank Captive Program has sixty-six banks participating across six pools, including a new large bank pool for banks with more than $2.5 billion in assets. These banks represent nineteen states and nine Fed districts. They expect to add thirty more banks in the next twelve months.

The program continues to be a great way for banks over $1b in assets to manage risk, spread the cost of risk, and receive tax advantages.

The key component of the program is that a participating bank does not usually change the insurance coverage currently in place. The program funds risk that exists now. No new risk is created by the captive.

Looking forward, I can see the insurance marketplace changing from the current buyer’s market to one less advantageous to bankers. If that happens, banks with a captive subsidiary will be well-positioned, I think, to take on exposures that insurers may (in the future) be unwilling to insure. Perhaps I should say, unwilling to insure at a reasonable cost .

As always, I have no financial interest in the KeyState program. I see it as a solid tool for many of my clients.  Give me a shout if you want to discuss.