Construction sites can be hazardous, but accidents aren’t inevitable. Some commercial construction companies are successful in minimizing losses. If you are one of those companies, consider joining the ARU construction group captive.
What Is a Construction Group Captive?
Construction companies need insurance to cover their risks and meet their legal and contractual obligations. In the conventional insurance market, companies purchase coverage from an insurance carrier. In exchange for the premiums the construction company pays, the insurance carrier handles claims and pays losses.
If the construction company minimizes its losses, the insurance carrier makes an underwriting profit. The carrier can also earn investment income. The construction company does not see a return on this money, no matter how much work it puts into fostering a culture of safety and responsibility.
The captive insurance model provides an alternative way of approaching insurance and risk management. A captive is designed to insure the member companies that own it. This setup allows the insured company to retain ownership of the premiums and investment income and to exercise greater control over coverage and insurance services.
Historically, captive insurance companies have been associated with large companies with sufficient resources to invest in this model. However, group captive options are suitable for midsize companies. Whereas a single-parent captive has just one owner, a group captive has multiple owners and provides insurance for all the members in the group. The group captive structure gives middle-market companies a way to work together to achieve greater leverage.
Pillar Group Captive is a large, nationwide group captive designed for commercial construction firms. It provides workers’ compensation, general liability, and auto coverage. A carrier with an A.M. Best rating of A+ (superior) fronts the captive. Limits of $1 million for employer’s liability and $2 million for general liability and auto liability are standard. Workers’ compensation. General liability and auto coverages can be issued on either a guaranteed cost or deductible/SIR basis.
Who Can Join the ARU Pillar Construction Group Captive?
To join Pillar Group Captive, your company must meet certain eligibility requirements:
Why Join a Construction Group Captive?
Insurance underwriters use many factors when determining insurance rates. Some of these factors are completely outside of your control. For example, company class tends to be an important factor. This is a problem for commercial construction companies because their class is regarded as high risk. As a result, you should expect to pay expensive rates – even if your own loss history is much better than the loss history of the average commercial construction company. Essentially, you’re subsidizing the poor risk management of your competitors.
A construction group captive allows you to break free of class-based ratings. Your insurance costs are based on your individual loss experience, not on the experience of other companies. Additionally, if you’re successful in keeping your claims down, you will receive dividends back – conventional insurers don’t provide refunds even if you don’t file a single claim.
When Is a Good Time to Join the Pillar Construction Group Captive?
The captive model has experienced significant growth in recent years. More companies are turning to this alternative insurance solution in response to frustration with conventional insurance.
Interest in captive insurance tends to increase during hard insurance markets. The conventional insurance market regularly goes through soft cycles, in which affordable coverage is readily available, and hard cycles, in which insurers raise prices and become more restrictive about the coverage they offer. During hard cycles, even policyholders that have been successful in keeping losses down may see their rates rise and their coverage become more restrictive. Unable to find acceptable coverage in the conventional market, more companies are looking toward captive insurance.
However, captive insurance is not just a solution during hard insurance markets: it is a long-term strategy that lets you break free of insurance cycles and secure greater insurance price stability and control over your coverage.
The Pillar Group Captive gives members increased market leverage and control over services and costs as well as flexible coverage and a proprietary low volatility program structure.
Do You Maintain a Safe Construction Site?
A lot can go wrong on a construction site. Construction worker injuries are unfortunately common. Visitors to the site and people nearby may also suffer injuries due to unsafe conditions. Property damage and auto collisions are also concerns. There are constant news reports with stories of construction workers who have fallen, cranes that have toppled, and other worst-case scenarios.
However, these incidents do not necessarily impact all construction companies to the same extent. With good risk management practices and an adherence to OSHA standards, some construction companies have been successful at avoiding most types of losses.
This is beneficial in numerous ways. Safety-focused construction companies foster a positive work environment that supports increased employee engagement and retention by avoiding the negative impact on worker morale that follows an injury. They also avoid project delays and other setbacks that often follow an injury or other incident.
Safety-focused construction companies should also be able to enjoy lower insurance costs. However, the use of class-based underwriting and the impact of insurance market cycles means rates are not always as low as a company’s loss history should warrant.
With ARU captive insurance, safety-focused construction companies can access the rates they deserve. The Pillar Group Captive also helps members by developing custom loss control services, claims handling, and financial reports. These resources enable even greater control over losses for companies devoted to good risk management.
What If Losses Are Higher Than Expected?
Although construction companies can greatly reduce their losses through good risk management, there is always a chance a major loss or series of large losses will occur. Pillar Group Captive caps losses. Members are motivated to keep losses down to be eligible for dividends, but if losses are higher than expected, the amount a member pays is still capped at a pre-determined amount.
Are you ready to reap the benefits of the group captive model? Reach out to ARU to get started.