Large corporations have been using captive insurance for decades to reduce and stabilize their insurance costs, provide greater control over their claims management, and, in some cases, act as an additional profit center for the company.

But you don’t have to be in the Fortune 500 to benefit from a captive program. By leveraging member-owned group captives, small and midsize companies can enjoy all the benefits of the captive insurance structure without possessing the resources of a much larger corporation. The group captive structure evens the playing field, allowing more companies to experience the advantages of captive insurance.

Large companies often use single-parent captives. However, other types of captive structures may be suitable for other types of companies.

A single-parent captive is owned by a single company and provides insurance for just that company. This can be a good option for large corporations with the necessary resources. However, it may not work well for small to midsize companies. In addition to lacking the resources needed to invest in a single-parent captive, smaller companies may have difficulty managing risks in a single-parent captive because one large, unexpected claim may have a disproportionate impact on costs.

Group captives are the solution. In a member-owned group captive, multiple companies pool their risks and resources to form a group captive that insures all member companies. The partnership is beneficial for all member companies. Plus, it allows them to control their risks and insurance costs in a way that would otherwise be out of reach.

Interest in captive insurance is soaring as more companies look for cost-effective ways to manage their insurance costs and risks. Captive programs are especially attractive in times of major insurance rate fluctuations. Even though captive insurance can be extremely beneficial for the right company, not all captive structures are the same.

ARU uses a proven captive model:

• Thoughtful member selection. We apply a unique underwriting philosophy when evaluating potential captive members. The individual members that join a captive have a direct and significant impact on the group captive’s success. Our quality-above-quantity approach ensures we only admit members that will have a positive contribution to the captive.
• Proprietary captive structure. Volatility can be a threat to success. Our unique captive structure minimizes this threat for individual insured members, allowing them to achieve profit by controlling predictable claims while reducing volatility from larger, unpredictable claims.
• Stable industry partnerships. We write risk in partnership with A.M. Best A+-rated insurance carriers, which provides another level of financial security to the group captive.

Deep expertise. The ARU team has decades of experience in captive and alternative risk solutions. In fact, our team members handled captives as far back as 1980, when group captives were a new concept. Over the years, we’ve worked with different captive structures, meaning we have the experience needed to know what works well and what doesn’t.

In the traditional arrangement, insurance carriers use numerous factors when determining price, not all of which are directly related to your business. National trends and economic factors may have a significant impact on your rates. This is often frustrating for businesses with a lower-than-average number of claims that see their premiums increase regardless.

Captive insurance provides an alternative insurance option. In a group captive program, businesses exercise better control over their rates and claims management, allowing them to lower their overall insurance costs. They can even earn dividends once they’ve fulfilled all the captive’s financial obligations.

This is why the captive arrangement is best suited for companies with a strong culture of risk management. If you’re already paying attention to your losses through proactive risk management, the captive structure may be the ideal way to seize even greater control of your risks and costs.