How Group Captive Insurance Programs Are Managed

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.

The group captive is owned by its members but managed by a third party called a captive manager.

The Role of a Group Captive Manager

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:

• Underwriting
• Claims management
• Loss control
• 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 Compliance
• 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.

Management of Group Captive Surplus or Dividends

The majority of group captive insurance businesses pay dividends to their owners or insured’s, or otherwise disperse underwriting profits and interest.

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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.

Why Join a Group Captive?

Different companies with shared insurance and risk needs and above-average claims can experience the significant benefits of joining a group captive.

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 agent at Leap | Carpenter | Kemps to find out.