Common Questions
What exactly is a group captive?
A group captive is a member-owned insurance company that pools risk together to provide commercial insurance coverage. It allows businesses to participate financially in their own results, gaining more control over long-term risk management and potentially benefiting from underwriting profits.
Can the captive "blow up"?
No structure is risk free, but you'll know your "worst case scenario" before joining, and the group is backed by a domestically A-rated carrier.
What happens when there are claims?
Claims are managed by a third-party administrator (TPA), who is hired by the members. Members typically contribute a portion of their premiums to a loss fund, which is used to cover losses. This structure ensures that claims are handled with a focus on risk control and transparency.
Why haven't I heard about this before?
Group captives are often considered a high-level strategic alternative rather than a standard commercial insurance product. They require a significant commitment from management and a strong safety culture, which is why they are typically used by high-performing middle-market companies.
What types of businesses use captives?
Common industries include manufacturing, construction, transportation, agriculture, and specialized professional services. That said, there are many programs available for most types of risks and businesses.
Are captives only for large companies?
While they are often associated with large enterprises, group captives are increasingly used by mid-market companies with commercial insurance premiums above $100,000. The key requirement is a strong safety culture and management commitment to risk control.
What happens to unused loss fund dollars?
Unused loss funding dollars are typically returned to the members plus accrued investment income over a specified amount of time. This provides a tangible financial benefit for strong performers who maintain excellent safety records.
What responsibilities come with ownership?
Ownership requires active participation in governance. Members are responsible for participating in claims, risk control initiatives, and underwriting performance reviews. It is a strategic commitment that requires dedicated executive involvement.
How does a company evaluate if it qualifies?
Qualification involves a comprehensive assessment of safety culture, management commitment, and commercial insurance history. A formal checklist is typically used to ensure that the company meets the specific criteria for a group captive program.