July 7, 2017
By Steven Mallow - Commercial Producing agent for The Rackley Group
According to Captive.com, “a captive insurer is generally defined as an insurance company that is wholly owned and controlled by its insureds; its primary purpose is to insure the risks of its owners, and its insureds benefit from the captive insurer’s underwriting profits.”
Being wholly owned and controlled by its insureds means each member has voting rights. The members can vote on who is accepted into the captive as well as on operational items, which is nothing like the standard insurance market. When is the last time your current insurance company asked you how you would like them to proceed?
Captives include a layer of self-insurance. If you are risk adverse ,you will want to shy away from any form of captive. Each captive would have a set retention applied to the losses they incur. On top of the retention is a layer of reinsurance and getting coverage beyond that would bring the need for umbrella insurance.
Premiums are based off of member’s individual loss history, regardless of the market or industry experience. As loss ratios go down, underwriting profits go up. Now comes the best news of all. As a member, these underwriting profits are returned to you, instead of staying with the insurance company.
Is a captive for you?