By Steven Mallow - Commercial producing agent for The Rackley Group
Captive insurers can be the absolute best plan for your company for a multitude of reasons. Here are my top four reasons why:
Underwriting profit is returned to the members of the captive. Unlike the standard market, normally within three to five years all premium, other than administrative costs and paid losses, is returned to the members. Think about the huge amounts of money spent in insurance premiums never to return. The underwriting profit, in those cases, stays with the insurance company. Each member of a captive is basically an owner of an insurance company, so the profit stays with them.
Members of captives have control over their insurance programs. Each member has a vote and all members, no matter the premium size, have the same number of votes. The biggest company, by premium, will not have the most weight, they will have the same weight. Voting members can decide who is accepted into the captive and can even decide if it’s time for a new claims administrator.
Which brings me to my third reason, third party claims administrators. The company or person that works on the claims doesn’t work for the insurance carrier like in the standard market. They work both for the member and the captive as a whole. In which scenario would be more favorable for you? When the other side is paying the person who makes the decision and you have no say in it or when you do have a say?
The final reason a captive could be for you is this, future premiums are based off of each member’s own independent loss history. It doesn’t matter if the member is a hotel operation and the industry has seen huge losses or not. If the insured has done a good job with risk management and loss control, in the long run they will be rewarded.
I believe these to be four of the most important reasons to be in a captive. Stay tuned for more on captives here or check out the blog on www.therackleygroup.com