Captive Insurance Frequently Asked Questions

Captive Insurance Brokers Answer Questions about Group Programs

Captive insurance is a new concept to many business owners. There are a lot of questions about the benefits of joining a captive. Here are answers to common questions about group captive insurance programs. If you have a question not answered here or on our website please submit it now at our contact page or call the captive savants at Alternative Risk Resources right now.

What’s the definition of captive insurance?

Captive insurance is an independent insurance company owned and managed wholly by the member businesses it insures. Understand the definition of captive insurance and how it could help your company turn larger profits.


How does captive insurance work?

You may benefit from your own safe practices by forming your own captive insurance company. Captive insurance does not work like self-insurance. It involves setting up an independent insurance company. Learn more about the formation and operation of captive insurance companies.


What’s the big advantage in joining a captive?

Control and reduced costs. Joining a captive insurance company lets your company see exactly how premiums are spent by the company and returns unused premiums along with investment income to your business, putting what used to be insurance company profit back into your bottom line.


What kinds of coverage are available through a captive?

Captive insurance can cover your property, casualty and medical stop loss needs.


What are the pros and cons of captive insurance?

Advantages of captive insurance include lower premiums, greater security and potential for profitability. Read more


Can captive insurance cover my unfunded risks?

Yes. A captive formed under the 831(b) election is an excellent way to provide coverage for otherwise unfunded risks.


Are captive insurance groups open to small businesses?

Yes, many small businesses join group captive insurance programs, but they must have at least $100,000 in annual insurance premiums to be eligible.


If my business joins a captive, is it difficult to return to the traditional insurance market?

No. With Alternative Risk Resources, it is very easy to plan and execute an exit from the group captive insurance program. Typically, once businesses start to reap the rewards of captive insurance they choose to continue.


Once my company is part of a group captive insurance program, can my premiums fluctuate?

Yes, however, unlike traditional insurance, your premiums are set by your business’ loss history, not market rates. Loss history based rates mean your premiums can go down if you improve your safety record and reduce claims.


What is the first step in joining a captive insurance group?

Once Alternative Risk Resources had identified a captive to fit your requirements, an independent actuarial study must be undertaken. The study will take into account your loss history and overall business performance to determine your premiums and initial investment amount.

 

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