Captive Insurance Services

A: A captive insurance company is owned by the company or companies it insures. By forming their own captive insurance company instead of purchasing coverage through a traditional insurance company, captive owners gain control over their coverage, which creates a financial incentive to reduce losses.

A: A group captive is owned by a group of companies and provides insurance coverage for all members of the group. This is different from single-parent captives, which are owned by and provide insurance for a single parent company. Whereas single-parent captives are popular with large corporations (such as Fortune 500 companies), group captives are well suited for middle market businesses.

A: When a group captive has homogenous insureds, all the members are similar. For example, all the parent companies may be in the same industry. When a group captive has heterogeneous insureds, the members are more diverse and may be in different industries.

Since risk levels vary depending on industry and company size, homogeneous captives may appeal to companies that want to partner with other companies with similar risk profiles. However, heterogeneous captives may appeal to companies that want to diversify the captive’s risks by working with a broader range of member companies.

A: Captive insurance is sometimes described as a type of self-insurance. However, our member-owned group captive model is different from conventional self-insurance in many ways. Members are not simply paying for losses out of their own reserves. Rather, they are participating in a member-owned reinsurance company written on A+-rated licensed insurance company paper. The ARU model empowers captive members to profit from controlling their predictable losses while minimizing volatility from large and unpredictable losses.

A: In a rent-a-captive solution, the company rents the facilities of a captive instead of forming a captive itself.

Although forming a captive may be a financially-beneficial solution for loss-conscious companies, it does require some upfront costs and commitment. Rental captives bypass the upfront costs and long-term commitment by allowing the company to enter into a rental agreement with a captive. This allows your company to enjoy some of the benefits of the captive structure in exchange for a fee.

A: The captive structure is not ideal for all companies.

If your company has a poor loss history and is not proactive about loss control, the captive insurance model may not be a good fit. However, if your company has implemented robust safety practices and has been successful in controlling losses, a captive may be a solid and financially-beneficial option.

Company size also matters. Your company doesn’t need to be a large corporation to leverage group captive insurance. Since member companies pool their resources and risks, it is possible for middle-market companies to leverage captive insurance. However, small companies and those that have minimal insurance requirements may be a poor fit. In general, your company should be paying more than $250,000 in primary casualty insurance premiums and have more than 50 employees before you consider joining a member-owned group captive through ARU.

A: ARU is dedicated to providing member-owned group captive and alternative risk financing solutions to midsize companies. Our team has decades of experience in group captive solutions, during which time we’ve seen what works and what doesn’t. We have a unique and proprietary group captive model to minimize the volatility for the captive members.

A: In the traditional commercial insurance arrangement, the insured transfers its risk to an insurance company. If the company experiences higher-than-expected losses, the insurance company pays these losses, as per the terms of the policy, which may result in an underwriting loss.

When you become a member in a group captive, you become your own insurer. Instead of transferring your risk, you retain it through the captive insurance program. The ARU group captive model helps minimize volatility, but there is still a risk of higher-than-expected claims. This is why the captive model is best suited for companies that have effective loss control measures in place. Although there is some risk, by controlling their losses, group captive members can benefit from investment and underwriting profits.