What is a Group Captive?

Captive insurance companies are usually closely held reinsurance companies that have been successfully used by large corporations for many years. Captives have been used by these corporations to reduce and stabilize their insurance costs, provide much greater control, and in some cases, act as an additional profit center for the company.

There is little argument in the industry that captives can provide great benefits for their owners when managed and deployed correctly. There has been explosive growth in the captive industry over the past 25 years that has transcended the “hard” and “soft” insurance market cycles. The industry has grown from a little over 1,000 captives in the early 1980’s to well over 5,000 captives today.

Group Captives provide benefits to middle-market companies that large corporations have been enjoying for many years. A group captive is a reinsurance company formed on behalf of a group of policyholder/members to insure a predictable layer of risk. Group Captives have been around since the late 1970’s and came to prominence during the hard market of the mid 1980’s. Since then there has been tremendous growth in this risk financing approach for middle market companies.

ARU has a unique Group Captive model that is based upon 25 years of experience of working with many different group captive insurance companies. The ARU approach minimizes volatility while maximizing profit potential. Our group captives offer middle market companies coverage for worker’s compensation, commercial auto, and general liability coverages; property and other lines of commercial insurance are considered as well. All ARU captives provide 100% ownership of all investment income and underwriting profit to the insured members. All services are custom designed to benefit the members.

The following flowchart shows the various components of our group captives. The services are all provided on an “unbundled” basis; where the best service providers are selected independently by the group captive members. This provides flexibility, stability, and diversification for the captive members.

Group Captive Insurance flowchart

ARU employs a sophisticated underwriting and rating approach to qualify potential members. Once potential members are thoroughly underwritten based upon their loss experience, safety programs, and financial condition – they are submitted to the group captive new business committee for final approval. All ARU group captives have an Executive Committee and various sub-committees populated by the member policyholders.

Premiums for the members are always based upon their own loss experience plus expenses for reinsurance and fixed costs. Pricing is never based upon insurance industry market cycles.

The key benefits of the group captive approach are:

  • Reduced cost – Members own 100% of investment income and underwriting profit
  • Greater Stability – eliminates market cycle pricing philosophy
  • Greater Leverage with insurers, reinsurers, and third party administrators
  • Flexibility – Unbundled Services
  • Greater Control and authority over service providers
  • As an owner, having a real say in how services are provided and selected (investments, underwriting, claims & loss control, and other related services)