A group captive is an insurance company formed by and for the benefit of its membership. Most group captives form to provide an alternative for workers compensation but can consider general liability and business auto for the right risks.
Group captives can be a good management approach for companies that pay over $150,000 annual for casualty insurance and have better than average loss ratios and a commitment to running a safe operation.
Contrary to popular opinion, joining a group captive does not take any more of your time, as the day-to-day operations are managed by the group captive manager.
Group captive owners meet periodicity to make group decisions; then, the manager carries out the day-to-day operations. Each member has one vote as it relates to captive decisions.
The captive manager is responsible for the day-to-day operations, including:
Maintaining all records
Coordinating and managing audits and actuarial reviews
Ensuring compliance with all regulations
Providing semiannual financial and other reports to captive owners
Filing annual financial and premium tax returns
Managing other third-party relationships including CPA, Legal, Actuarial, Reinsurance, and others as required
Managing and running board meetings
Some group captives may outsource some of these services to third-party firms.
Group Captive Members
As a member of a group captive, your business does not need to manage the day-to-day issues of the group captive. Each member gets one vote on the captive’s board.
Members may be required to attend annual board meetings to vote on significant issues like selection of vendors, underwriting issues, adding or deleting coverage, rating changes, and the management of surplus.
Types of Coverage Offered by a Group Captive
Traditional casualty lines, such as general liability, workers' compensation, auto insurance, and product liability coverages are the most common types of insurance covered by a group captive.
Group Captive Premiums
When your business joins a group captive, you receive a regular insurance policy from a carrier with an A+ rating. The group decides on the level of risk that is shared with the rest of the group.
In addition, the group benefits from the insurance carrier sharing most of the risk. Reinsurance provides an additional layer of assurance that there will always be funds to pay claims. Members who fail to control losses will see their rates rise in the future.
Claims and Loss Services
Group captives can offer greater expertise in claims management and loss control services. Captive claims adjusters and loss control professionals often specialize in your industry and work for the members, not the insurance carrier. This allows for better communication and tailored services to captive group members.
How a Group Captive Can Be Used as an Effective Business Risk Management Tool
A group captive gives you more control over your insurance program. Captive members enjoy more predictable and stable insurance pricing year after year. In addition, captive members enjoy downward trending of rates regardless of conditions in the insurance marketplace.
Group captive members also benefit from improved claims management and claims representatives that work in the best interest of the membership.
Its group purchasing power allows its members to obtain risk services, insurance, and reinsurance at a very cost-effect level, rather than each member of the group purchasing such services by themselves.
Group captive insurance programs offer greater control over premium and claim management for long-term financial strength and stability with lower operational, administrative, and tax-related costs, as compared to traditional insurance.
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Leap | Carpenter | Kemps Insurance Agency Can Help
Do you want to learn more about group captive insurance programs and begin the process of evaluating if a captive is right for your company?Talk with an expert group captive agentat Leap | Carpenter | Kemps to find out.
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