What is Captive Insurance?

Captive Insurance Definition

Captive insurance is an independent insurance company owned and managed wholly by the member business it insures.

Is Captive Insurance Right for My Company?

Yes! Congratulations—as you read this, your company inches closer to taking control of the ever increasing expense of Workers’ Compensation and Liability insurance. Joining a group captive insurance plan is right for your company if you qualify and want to convert insurance premiums into a retained asset.

Most businesses accept their traditional insurance company is going to make an annually significant profit for accepting catastrophic risk. Premiums are collected and money is invested with the net result of ever enlarging insurance company profitability.

Why not turn the tables and own the insurance company providing your coverage?

831(b) Micro Captive Program Information Start Your Own Captive Insurance Company How Captive Insurance Programs Work

Understanding Captive Insurance Takes More than a Definition

You understand how captive insurance is defined, but you need to know what implementing a captive insurance program means for your company. Sure, it sounds nice, but so does every sales pitch. 

Here's the process of starting a captive insurance program in its simplest form:

  1.  Work with Alternative Risk Resources captive brokers
  2.  Set up your captive insurance company
  3.  Invest and accumulate reserves
  4.  Distribute surplus underwriting profits

Maximizing profits through a captive insurance program means you must define a clear plan for turning self-insurance (your current profits) into insurance premiums.

The Benefits of Captive Insurance: Pros and Cons

  1. Flexibility in setting the cost of premiums
  2. You may cover a huge variety of risks
  3. You have more control!
  4. They foster a greater safety culture
  5. You get ongoing education
  6. Risk management actually becomes profitable

Companies need to weigh the pros and cons of captive insurance to understand the potential benefit of insurance captives. Captive insurance allows your business to limit risk and retain what would have been insurance company profits. Unused premiums and income generated by your captive insurance company are returned to your business, turning what used to be an expense into a profit generating program. 

Alternative Risk Resources’ group captive brokers make the process of understanding and joining a group captive insurance company a turnkey process.

Explaining the Basics of Group Captive Insurance

Access to underwriting profits and investment income are the most tangible benefits of joining a group captive program. The biggest benefit to joining, though, is the intangible safety culture captives foster.

Accidents and losses change from being something a business accepts will happen to avoidable events. Everybody in an organization insured through a captive becomes more safety conscious, changing the focus from minimizing claims to actively preventing accidents.

Long-term, proven cost savings and the increased profitability of group captive insurance programs make captives an attractive risk mitigation and investment solution for qualifying businesses. With a group captive, your company is in control of its insurance plan with underwriting profits and unused premiums returned as profit. A captive insurance program is a company providing insurance coverage and benefits exclusively to its member owners.

The businesses paying premiums are the same entities owning and profiting from the insurance company’s success.

Fewer claims and invested unused premiums translate directly into profit for the group captive’s member owners. The bottom line advantages over traditional insurance programs ensure that eventually every company qualifying for captive insurance will participate. The lack of knowledge about how group captive insurance programs work is often the only reason a qualified company is not a captive insured entity. Alternative Risk Resources’ professional brokers are here to help you understand the benefits of captive insurance.

Captive Insurance Investment Income and Dividend Examples

These Are Actual Results of Businesses Saving Money with Captive Insurance

Lower premiums and investment income are the very real benefits of joining a group captive insurance program.

Exactly how much a business saves by switching from traditional insurance depends on a number of factors and actual savings vary on a member-by-member basis.

Contact the captive insurance experts at Alternative Risk Resources to answer any questions you have about the benefits of joining a captive program.
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