If your agribusiness pays high insurance costs despite employing good risk management, it’s time to consider joining an agricultural group captive. Terra is the nation’s premier group captive servicing the agricultural and food-related industries. It provides an attractive alternative risk solution for companies that want to break free of class ratings and insurance market cycles. We welcome both brokers and businesses into our program.
What Are Agricultural Group Captives?
In the conventional commercial insurance model, businesses pay premiums to an insurance company. In exchange, the insurance company provides coverage, handles claims, pays losses, and secures reinsurance, as needed. If the business has lower than expected claims, the insurer keeps any underwriting profit and investment income. This means businesses with good loss control measures may end up being highly profitable for insurance companies. However, these businesses may still see rising rates, due to widespread trends that are completely out of their control. They may also have trouble securing the coverage terms they need.
A captive insurance company is an alternative insurance solution, in which the insured owns the captive company. This model allows businesses to exercise greater control over their coverage and receive a return on underwriting profit and investment income.
The ARU group captive model is a gamechanger for middle-market businesses. Whereas large corporations have enjoyed the benefits of single-parent captives for decades, smaller companies have often been unable to take advantage of this option. With ARU group captives, this is no longer the case. Now, midsize companies can join forces to reap the benefits of the captive structure.
What Does the “Terra” Agricultural Group Captive Cover?
Agricultural businesses need robust insurance protection. The Terra Group Captive takes care of many insurance needs:
Agricultural businesses that take part in this program can also access property and umbrella coverage outside the captive.
The deductibles are flexible, to meet the needs of the individual member, and the limits have a base limit of $2 million for General Liability/Auto Liability and Statutory coverage for Worker’s Compensation. Umbrella and lead excess liability coverage is available for a lead $5 million excess our underlying $2 million policy limits.
Who Can Join the Terra Agriculture Group Captive?
The Terra Group Captive is designed for agribusinesses, including food-related processing, service, and distribution firms. Types of companies considered for membership include:
There are some additional eligibility requirements. Companies interested in joining should have combined premiums of $250,000 or more (no maximum premium), for workers’ compensation, general liability, and auto insurance. Potential members should also be in good financial condition with a good loss history and safety and loss control programs. Before joining, companies will need to provide loss information and premiums by line for the current year and five years prior. Restaurants and tobacco companies are ineligible for the Terra captive program.
Why Should Agriculture Businesses Consider a Group Captive?
In the conventional insurance market, insurance underwriters apply rates based on many factors outside the policyholder’s control. Insurance markets go through cycles due to a variety of factors, including economic conditions and widespread claims trends. During hard cycles, insurance prices increase for most policyholders, even those who haven’t had claims, and it may be difficult to find the coverage terms needed to manage risks effectively.
Insurance underwriters also implement class underwriting. This means that if you’re a food processor, and other food processors in your risk pool have seen a rise in auto liability claims, your company may also see higher rates – even if you’ve managed to avoid claims through a driver safety program paired with telematics and dashcams.
Businesses sometimes put up rising insurance rates because they think they have no choice. However, group captive programs provide another option. When you join a member-owned group captive, you can enjoy significantly lower insurance costs by avoiding class underwriting and the turbulence of changing insurance market cycles. In the captive program, your rates are based on your individual group’s experience, not on the typical experience of your class.
Members of the group captive also retain ownership of their premiums and investment income. If they are successful at keeping their losses down, they receive dividend payments. As a result, companies that are able to maintain a better-than-average loss experience save significant amounts of money by joining a captive.
How Do Group Captive Members Control Costs?
Good risk management is critical in a group captive. Since you are taking ownership of your insurance, you need to keep your losses down. To join, you will need to demonstrate you are capable of this. However, since the Terra Group Captive caps losses, members know the maximum amount they will pay.
Terra also helps members take control of their losses and costs by developing custom loss control services, claims handling, and financial reports. When you join a captive, you can access to all the information you need to identify loss drivers and take proactive steps to reduce your exposures.
The group captive model also increases your market leverage, giving midsize companies access to programs that would otherwise be the domain of large corporations. Through the Terra Group Captive, members access coverage and policies with an A.M. Best rating of A+ for workers’ compensation, general liability, auto liability, and auto physical damage.
When Is the Best Time to Join a Captive?
The captive model has been growing. Many businesses turn to captive insurance during challenging insurance market conditions because they are frustrated with traditional insurance. They see their rates increase year after year, even though they have kept their losses down. They also have a harder time securing the coverage terms they need. If this situation sounds familiar, it may be a good time to join a captive.
You may think another option is to wait for the insurance market to improve – but keep in mind the conventional insurance market will always go through cycles. Rates and coverage capability may improve for a while, but another cycle will soon start, making it challenging to find affordable coverage again. When you go the captive route, you no longer need to worry about these market cycles – you focus just on your own losses and risk management.
Captive insurance is a long-term solution that works regardless of the current insurance market cycle. The sooner you join a captive, the sooner you’ll start reaping the benefits.
How to Get Started
If your agriculture business has workers’ compensation, general liability, and auto insurance premiums with a combined total of $250,000 or greater, as well as a favorable loss history and good financial condition, contact ARU to learn more about joining the Terra Group Captive.
You will need to provide a loss history for the current year and the five years prior. ARU will use this information to evaluate your eligibility for membership. Contact us to learn more.