For some companies, traditional insurance programs just don’t work. Unfortunately, they’re often the only option explored. A captive can offer you an alternative form of risk control that actually delivers rewards.
Captives don’t work for every company, but they often work well in high-risk industries that meet a certain level of annual workers compensation premiums. In a captive, you become your own insurance entity. That means when claims are kept to a minimum, you get the profits, not the insurance companies. They also have mechanisms to control costs when claims are high.
For property & casualty insurance, there are few different types of captive solutions that might make sense. They include:
Single Parent Captive
A single-parent captive is designed for companies insuring the risk of a parent company and its subsidiaries/affiliates. The parent company capitalizes the captive insurance company in compliance with the domicile in which it’s incorporated. A single-parent captive is best suited for companies with premiums in excess of $2 million. Captive solutions are also available for smaller property and casualty insurance companies (Micro Captives) with premiums of $2.65 million or less.
Group captives (including an association) are for groups of non-related organizations that join together to form their own insurance company. Members capitalize on the natural spread of risk associated with joining other well-run companies in the risk pool. Groups can be either:
A group captive is best suited for single organizations with premiums in excess of $300,000.
A rent-a-captive enables an organization to “participate” in an existing captive formed by an insurance company and/or third party sponsor. Rather than forming and capitalizing their own captive, organizations rent the capital/surplus of an existing captive facility. This type of captive can be accessed for a fee by a group of companies or an individual organization. A rent-a-captive is best suited for single organizations with premiums in excess of $1 million or groups with premiums in excess of $3 million.
Our team will work with you to determine if a captive is a good fit and if so, what type of captive you should use.
The Benefits of Property & Casualty Captives
Partner, National Captive Practice Leader
25-plus years in the alternative markets/captive industry