The captive insurance model is growing as companies look for new strategies to seize control of their insurance costs and risks. This is the perfect time to get started with captive insurance, and taking the first step is much easier than you might think.
What Do Companies Need to Know First?
Before joining or forming a captive, there are a few things that are good to know.
First, it’s important to understand exactly what “captive insurance” means, and due to the increase in captive variations, this isn’t always straightforward. At its core, a captive insurance company is a type of insurance company that’s formed to provide insurance for its parent company or parent companies. Like a traditional insurer, the captive insurance company needs to collect premiums, provide coverage and pay claims.
Second, captive insurance isn’t just for big companies. Although single-parent captives are typically associated with Fortune 500 companies, group captives can be leveraged by midsized companies. A single-parent captive provides insurance for one company and is wholly owned by that single company. A group captive provides insurance for all the members of the group.
Likewise, captive insurance isn’t just for casualty and property insurance.. Although captive programs are used to provide worker’s compensation, general liability, and commercial auto coverages, they can also be used to provide other types of commercial insurance, including health insurance and employee benefits. Because there are different types of captive structures, organizations can find models that meet their needs.
However, captive insurance is not suitable for every company. Ask yourself – would you want to insure your company? When you adopt the proprietary ARU captive structure, you’re partially becoming your own insurer, and that means you can benefit from your good experience and are protected against large claims and volatility through ARU’s unique reinsurance and structure.
As with every type of risk management program, captive insurance has both pros and cons. Whether your business sees more of the advantages or more of the disadvantages depends on your situation. If your company has strong risk management and a history of being profitable for insurance companies, this may sound appealing. You stand a good chance of maintaining a strong loss history, and you’ll be eligible for dividends. However, if your company does not have good safety practices in place, the captive model may not be a good fit.
Learn more about group captives.
Why Is This a Time to Join a Captive Insurance Company?
It’s no coincidence that so many companies are embracing captive programs right now. In light of rising property and casualty insurance losses, insurance rates are increasing, and insurance companies have been tightening their underwriting and reducing the amount of coverage they’re willing to offer. As a result, even companies with solid risk histories may see their insurance premiums go up. They may also have a harder time securing the broad coverage they need to manage their risks, or they may be required to pay large deductibles.
For many companies, the traditional insurance model simply doesn’t make business sense anymore. By switching to the captive insurance model, businesses can exercise more control over their coverage. They can also reap the financial rewards of strong risk management through dividends.
Of course, the traditional insurance market may improve – but any improvement will be temporary. The insurance market regularly goes through hard and soft cycles that have a substantial impact on coverage available and prices. Sometimes, insurance rates are low and underwriting is lenient, making it fairly easy for companies with good loss records to obtain the insurance coverage they need, but this can change quickly due to factors that have nothing to do with the company being insured. For the policyholders caught up in this cycle, the ups and downs can make it difficult to create a consistent risk management strategy and budget. By embracing captive insurance, companies can break free of the pressure from insurance market trends while managing their own risks.
How Can Midsized Companies Get Started with Captive Insurance?
The captive formation process can vary depending on the size of the company and type of captive structure. For midsized companies, joining a group captive program is a practical way to get started with captive insurance. When you join a member-owned group captive, you partner with other companies that are also serious about risk management. This collaboration provides greater leverage and a larger risk pool.
ARU provides additional stability through the implementation of our proprietary captive structure that’s designed to minimize volatility. ARU writes primary casualty and property programs through member-owned group captive insurance companies. The programs are all written in partnership with A.M. Best A or A+ rated insurance companies.
Learn more about the support services that ARU offers.
What Are the Eligibility Requirements to Join a Group Captive?
Strong risk management is at the heart of the captive model, and ARU implements a strong underwriting philosophy when assessing potential group captive members.
A company is eligible for consideration if:
Take the First Step
If you’re a midsized company interested in joining a member-owned group captive, getting started may be a lot easier than you think.
To evaluate whether or not a company is eligible, we require our New Submission Workbook to be completed. The worksheet asks for the current and five prior years of data and should be completed using currently valued loss data from the insurance carrier. It covers workers’ compensation, general liability (including products), auto liability, auto physical damage and property.
Click here to view our New Submission Workbook.
In addition to the worksheet, we will need the URL address of the company website or a good description of operations.
That’s it!
Once we have this information, the ARU staff will work closely with you to quickly evaluate the opportunity.
ARU also develops new group captive and alternative risk programs for many different applications. It may be for a certain line of business, specialty class of business, or a select distribution system or group. Almost any business that needs insurance and would consider an alternative approach to financing risk is of interest to ARU.
If you’re ready to take greater control of your own risk, it’s time to take the first step.
ARU also develops new group captive and alternative risk programs for many different applications. It may be for a certain line of business, specialty class of business, or a select distribution system or group. Almost any business that needs insurance and would consider an alternative approach to financing risk is of interest to ARU.
Explore these pages to learn more:
If you’re ready to take greater control of your own risk, it’s time to take the first step.