This insurance structure is a game changer! Once you understand the difference between traditional insurance and a captive, you are going to want to be in a captive, which is why our captive members have a 100% retention rate. This option is what our best-in-class businesses aim to qualify for.
What is
Captive Insurance?
Captive insurance refers to a strategy where a company establishes its own insurance company to cover its risks. This approach is especially advantageous when facing rising premiums, limited coverage options, increased deductibles, and stricter policy terms. By using captives, businesses can gain more control over their risk management. This often results in cost reductions, enhanced investment opportunities tailored to both immediate and long-term business needs, and the potential to reinvest surplus capital into areas such as employee benefits, product development, and more.
Our team is here to guide you from the initial placement to ongoing management, exploring a range of solutions such as captives or tailored programs, which may include:
- Single-Parent Captives: These programs supplement your existing insurance coverage, filling gaps and exclusions that might be present in traditional policies.
- Group Captives: In this structure, multiple unrelated companies come together to insure their collective risks, with each company owning a small share of the captive insurance entity.
- Cell Companies: A growing option within the captive insurance market, cell companies allow a parent company to segregate its risks into separate accounts, providing lower capital requirements, greater flexibility, and independent operational structures.
- Rent-a-Captive: This variation of a cell company allows businesses to join an established captive program without needing to make a significant upfront capital investment. While you share profits with other participants, the financial commitment is generally lower.
Captive Insurance
Performance Data on
Group Captives
23%
Members earn back 23% of the dollars they invest into their loss funds
48%
Members have 48% fewer fatalities compared to industry averages
72%
72% of new members saved money compared to their previous insurance plan
100%
Captive members have a 100% retention rate
Captive Insurance?
Who Can Benefit from
Captive insurance is a valuable tool for various businesses, including large multinational firms with revenues exceeding $1 billion, as well as smaller enterprises, contractors, project owners, and developers. It offers a flexible risk management option that can be tailored to a wide range of industries and organizational sizes.
Top Industries:
Benefits of a
Captive Insurance Program
1. Returned Premiums & Investment Income
When managed properly, captives can generate substantial returns, with an average return of 23% on the funds invested in your loss reserves. Unlike traditional insurance, where the carrier retains both the interest and profits, captives invest premiums and return both the interest and profits to you. This underwriting profit margin often surpasses most other investments available in the market.
2. Rewarding Safety Practices
If your company maintains a strong safety culture and minimizes claims, a captive can reward those efforts. In the standard insurance market, your premiums reflect the overall claims performance of your industry, meaning you're often penalized for the claims experience of others. Many low-claims companies are moving to captives, reducing the market share of high-claims firms, and helping stabilize pricing.
3. Stabilized Pricing
Captive insurance helps stabilize premiums for the parent company, as captives are not influenced by the market's ups and downs. When the insurance market hardens and premiums rise, a captive's premiums remain unaffected, protecting your company from these fluctuations. This stability also supports more accurate financial modeling and projections.
4. Tax Advantages
In the U.S., premiums paid for business insurance are tax-deductible under Section 162 of the Internal Revenue Code. With captives, these premiums are also deductible, but instead of being forfeited to a third-party insurer, they’re retained within the captive. This structure allows the parent company to invest premiums as reserves until claims are paid, and if no claims are made, the reserves can be returned as long-term capital gains—either to the business or its owner.
5. Eliminate the Middleman
Captives give direct access to the global reinsurance markets, bypassing brokers and other intermediaries. This reduction in middlemen means your captive can reinsure your risks more cost-effectively than traditional carriers, potentially lowering your overall insurance costs.
6. Lower Operating Costs
Not all captive insurance programs are created equal. The captive programs we offer have significantly lower operating costs compared to many others in the market, providing more value for your business.
7. Control Over Claims
With a captive, you have direct control over how claims are handled, offering greater flexibility and transparency. In contrast, traditional insurers dictate the claims process, giving you less influence over how your risks are managed.
Minimum Qualification:
Minimum qualification for captives is for businesses currently paying more than $100,000 annually combined for Auto Liability, Auto Physical Damage, General Liability, and Workers Compensation.
Minimum for auto & equipment dealers is $250,000 not including open lot. Minimum for trucking is $450,000.