Insurance coverage is often handled by a firm owned by a third party that insures a broad range of companies. With captive insurance, the insured and the owners are the same. There are many benefits to this kind of arrangement.
group captives Insurance coverage is often handled by a firm owned by a third party that insures a broad range of companies. With captive insurance, the insured and the owners are the same. There are many benefits to this kind of arrangement.
More Affordable Coverage
Because the insured parties in group captives share administration costs, the coverage is less expensive than if they each tried to underwrite their own policies. They can also get a group rate on services rather than having to pay piecemeal for reinsurance. Members can also have more input into premium pricing than with traditional coverage. Often, captives are required to bear the costs of small claims themselves, which sets the policy aside for situations where compensation is needed the most.
Less Variance in Claims Experience
When a group captive is created, past losses are taken into consideration. A feasibility study allows the captive to predict future claims. By design, a group captive experiences lower levels of probable loss. The increased predictability of losses translates into a greater ability to process similar claims consistently. This results in higher retention rates, which renders the need for a considerable surplus of capital for processing claims unnecessary.
A group captive is particularly useful for those in high-risk industries such as physicians and waste disposal companies. The higher the risk of loss an industry has, the more specific insurance needs it has. Risk of catastrophic losses can make traditional coverage either hard to get or hard to afford. The captive can customize insurance packages to cater to the specific needs of its members.
Member-owned captives enjoy some benefits that they cannot get with traditional coverage. By unbundling conventional packages, they can underwrite the specific policies they need at a price they can more readily afford. The result is more reliable claims approval for potentially big losses.