Captives and Alternative Risk
For most companies, traditional insurance fits the bill. In certain circumstances, however, a company (or group of companies) can create and own a licensed insurance subsidiary to insure its own risks. This structure, called a captive, allows you to underwrite your own insurance, manage claims, and potentially retain underwriting profits and investment income that would otherwise go to a third-party commercial insurer. If you are interested in exploring a captive, we can help.
Is A Captive Right For You?
While there are many advantages to captives, they’re not suitable for all organizations. We’ve found that captives work best for firms that share the following characteristics:
- Senior management is actively involved in insurance and risk management, has invested the time to understand how the captive works, and is willing to be a long-term participant in the captive program (i.e. a corporate “champion”).
- A firm commitment to building and maintaining an aggressive focus on loss control and claims management to reduce losses.
- Experienced in retaining risk and an average or better-than-average loss history.
- A stable company history and strong financials.
- Sufficient premium (including expected retained losses). There is a huge range: For single parent captives the “rule of thumb” is a minimum of $1,500,000 while the minimum for participation in group captives can be as low as $150,000.
Lines of Coverage.
Captives have been used to write a nearly limitless array of insurance coverages but are typically used for those coverages that lend themselves to greater predictability based on loss frequency and severity. The most commonly placed coverages are workers’ compensation, general/product liability and auto liability, but other lines of coverage can include:
- Marine and cargo
- Environmental liability
- Credit
- Warranty
- Professional liability
- Employee benefits
- Cyber liability
- Employment practices liability
- Property
Who Needs Professional Liability Coverage?
Professionals who benefit from this type of insurance include:
Experience
Extensive experience with the full range of captive structures.
Expertise
Exceptionally experienced professionals to guide and support you, including analytics, risk financing, and coverage experts; loss control consultants; and claims specialists.
Relationships
Key relationships with specialty captive service providers, including captive managers, domicile regulators, actuaries, lawyers, bankers, fronting carriers and reinsurers, premium financing companies, third-party claim administrators (TPA), and premium financing companies.
Request A Business Risk Review.
See what a review of your current insurance coverage uncovers. You may find that you’re adequately protected. You may find otherwise. Either way, you deserve to know for your peace of mind.