Why We Love Group Captive Insurance

John Lightfoot | Jul 20, 2022 | minute read

We like insurance, but we really love group captive insurance! That is a quirky thing to be crazy about, but it is true. The reality is the insurance world flows more smoothly at certain times, but the group captive market is generally on an even keel.

There are a lot of ups and downs in the insurance business, so we like it when everything is going smoothly, and our customers do, too. We like steady! Another thing we like is predictability. No one likes a surprise when it comes to claims payouts.

As a rule, insurance can be unpredictable, complicated, and unfair, but not so much with group captive insurance!

Insurance Is Complicated


Much like a social media status, insurance can be complicated. Why? Because the insurance industry runs in a cycle of hard and soft markets. Selling insurance is great during the soft market. Premiums are low and underwriting is lenient. We like the soft market!

Free Download: The Definitive Guide to Group Captive Insurance

It is a whole different ball game in the hard market in insurance. The premiums go up and underwriting tightens up making it harder to get the right companies and the best premiums for our customers. We love our underwriters, but they can be tough cookies during the hard market!

On a positive note, if we can endure the hard market, the soft market will cycle back around, and everything is cool again. 

Insurance Is Not Always Fair 


Reputable, financially strong insurance companies always pay their claims, but here is a little-known secret about insurance. It is not always fair!

When your insurance premium goes up, your first thought is, “I did not have any claims, how is that fair?”

Here is what goes on behind the scenes. Insurance companies look at loads of data before they issue your renewal policy. As an insurance company takes on new customers, they put the new companies in a pool with a bunch of others.

At renewal time, insurance companies analyze each insured’s loss history as well as the loss history for the whole risk pool before determining each company’s new premiums.

Here is the problem. Some of those other companies have similar risks and claims experience, but a lot of them do not. While one insured has not filed any major claims over the last term, a few of them may have had claims with major payouts. As a result, the premiums for the entire risk pool go up.

Is it fair to the business owners who invest their time and money in loss prevention programs to prevent claims? Not really, but the reality is, it happens.

Now that you have a better understanding of the fairness of insurance, we can get to the part about why we love group captive insurance. 

What We Love About Group Captive Insurance!


What sets group captives apart from the standard insurance market is only a group of like-minded companies go into the risk pool. When we say like-minded, we are referring to companies that are committed to keeping their loss ratios on the low side. All the companies in the pool own the insurance company, so they get lots of say in what goes on.

Here is a fun fact for you. Most of the time, the loss experience among the group fares pretty well. Companies do well because every company in the group goes through a vetting process to limit the risks in the risk pool. As a result, the impact of losses is greatly reduced for all companies in the captive insurance pool. 

Captive insurance companies are member-driven and transparent. All companies that make up a group captive insurance group must disclose their financials to protect the interest of the entire group. Now, that is fair. 

Much of the incoming premiums go directly into an account to pay any claims that come in.

At the end of the term, if the insurance company does not use all the funds, they predicted they would need to pay losses, the companies in the group captive program get a refund in the form of dividends. The dividends include excess funds plus interest.

Group captive insurance all comes down to fewer losses, lower claims payouts, and money back at the end of the term. It is not complicated. Moreover, group captive insurance better rolls with the punches of the traditional insurance marketplace, and we love it when things are steady. 

Final Thoughts


Successful captive insurance companies often perform better than the standard insurance market. Who does not like success?

Commercial companies that are willing to step out of the box by leveraging a group captive insurance program enjoy lower costs for the risks of their businesses and more control over their loss control programs. Even better, businesses can also usually expect more stable premium rates.

Ultimately, a group captive insurance program frees business owners up to focus on running their businesses while still having control and oversight over the captive insurance company.

Learn more about Group Captive Insurance. Download our free guide!

Free eBook: The Definitive Guide to Group Captive Insurance

Why Leap | Carpenter | Kemps Insurance Agency Is Your Choice For Captives

Group captive insurance companies are steady, predictable, uncomplicated, and fair. To learn more about the benefits of group captive insurance, contact one of the experts at Leap Carpenter Kemps Insurance Agency. Let us assist you in determining whether a group captive is appropriate for your company. Contact us today!

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About The Author

My insurance career spans more than two decades and includes extensive work in group captives and construction, working with general contractors and subcontractors all over the State.

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