Growing interest in Keystate’s Bank Captive Program

What is a captive and how can it benefit a community bank? 
A captive is a wholly-owned subsidiary of a bank’s holding company that operates as a licensed insurance company. Premiums are paid annually by the bank to its captive for coverages not covered commercially. Captives can cover deductibles, exclusions and emerging risks. With enhanced risk management and a meaningful federal incentive, banks can reduce their annual “total cost of insurance” by 20-30% and increase their average annual EPS by 1-2%.

Why should a bank evaluate a captive now? 

  • Commercial premium increases 
  • Cyber coverage premiums are up 20-40%
  • Bankers Professional Liability and Crime Bond premiums are up 10%-30%
  • Commercial coverage narrows
  • Higher deductibles
  • Broader exclusions
  • Sublimits applied to certain coverages
  • Commercial carriers denied COVID-19 business interruption claims
  • Banks in KeyState’s Program settled over $4 million in COVID claims
  • Captives provide coverages that are not available commercially
  • Reps & warranty coverage for M&A transactions
  • Texas Department of Insurance (TDI) has licensed 21 new captives since 2020, up 46%

What banks can form a captive?
S and C corp banks with $750M to $15B in assets are well-suited for KeyState’s Program. Launched in 2012, over 85 banks joined the Program. KeyState expects the Program to grow by over 10% in 2022.

KeyState is registered with the TDI as an approved captive manager. 27 state banking associations endorse KeyState’s Bank Captive Program. 

David Guerino, SVP & Managing Director 
[email protected]

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