What is a Captive?
A captive is a small insurance company formed by an individual or a group of companies, for their own benefit. Instead of buying insurance from a traditional carrier, the captive buys reinsurance and returns excess premiums to the owner in the form of “Policyholder Dividends”. Investment Income also generates profit to the captive member in the form of “Shareholder Dividends”. Statutory policies are typically issued to each member just like in a traditional program, but unlike a traditional program, the captive member is in control and benefits from the profits. As of January 1, 2025, there were over 7,100 Captive Insurance companies worldwide and this number is constantly growing.
Workers’ Compensation, General Liability, and Employee Benefitsare just some of the insurance lines frequently written in the captive marketplace. Captives currently generate over $85 Billion in annual premiums. Their capital and surplus exceeds $350 Billion. Captive insurance and reinsurance are an integral part of the “alternative risk market” which accounts for more than 37% of all commercial insurance premiums.
Captive Insurance owners can be found in any variety of industries, including: Manufacturers, Retailers, Wholesalers, Associations, Transportation, Service Companies, Municipalities, and so on. “Single Parent Captives” contain only one large company. “Group Captives”are generally comprised of small to medium sized companies and can be of like industries or can combine several types of companies, effectively diversifying the risk.
A captive insurance company serves to help control and smooth out the upward and downward cycles of the insurance market. In a hard market, a captive can provide a safe haven from increasing premiums and diminishing service. Most importantly, a captive gives the owner unique control over their insurance program. A captive can be a superior risk management tool and play an important part of a business’s overall financial plan.
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Advantages of a Captive
The Advantages of Captive Insurance participation are many. Here are just a few examples:
Captive insurance members own and control their own custom designed insurance program.
Members reap the profits instead of leaving them with a traditional insurance company, lowering the net cost of insurance.
Excess policy premiums are returned to the member in the form of “Policyholder Dividends”
Investment Income is returned to the member in the form of “Shareholder Dividends”.
Dividends are voted on by the “Captive Insurance Members” and paid to the “Captive Insurance Members”.
A dedicated “Third Party Claims Administrator” works for you the member in your best interest, not the interests of a big insurance company.
“Loss Control” services are customized to each member and are rendered as often as needed by our safety experts.
Ability to choose your own “Legal Panel” versus one being assigned to you by an insurance company. The one with the best attorney usually wins.
Ability to hold regular meetings with other members to: Review results, share ideas, interface with our claims adjusters and loss control specialists, hear expert guest speakers on: safety, claims management and legal issues, and to keep up to date on important industry news.
“Annual Board Meetings” are held to review results, vote on all pertinent captive issues (including Dividends), and share ideas, often in fabulous locations all over the world.
A Captive gives the member “ultimate control” over their insurance program, which is tailored specifically for them.
