Captive Insurance: The New Standard

What is a Captive?

In the ever-changing world it is important for business owners to feel safe and secure so they can focus on the importance of running a successful business. Captives are one of the best kept secrets in the insurance and business industry. With the current hard market in place driving increased premiums and reduced terms of coverage, DOXA Insurance, and Caitlin-Morgan Captives, understand there is a need for an innovative new strategy for risk management and risk financing for business owners. Captives were originally only utilized by very large Fortune 500 type businesses as a way to finance their risk. Over time the captive industry has become one of the most unique and creative ways to insure a business while mitigating the risk for an owner. A captive is a licensed insurance company that insures the risk of the owners. With the ability to control the underwriting, claims and investment decisions of the captive, the owners can ensure the best decisions for their business are being made to mitigate risk and ultimately lower its cost of risk in the long term.   

Captives operate similar to a traditional insurance company.  Premiums are actuarially derived or based on market rates, an annual actuarial study and audit is required each year, and the company is regulated by its home state or domicile. Captives provide a means for companies to formalize its self-insurance program and generally provides for a more efficient structure for financing its retained risk. Captive insurance programs do not replace a company’s commercial insurance program, instead the captive is utilized to work in coordination with the commercial program such that the captive in general is limiting its overall exposure and participating in profitable layers of risk that in general are more predictable.

Why Do You Need a Captive Program?

A captive is an extremely valuable tool for any company to have as part of its overall risk financing and risk management program. By retaining risk through a captive, companies are afforded the ability to reduce the inherent volatility of the commercial insurance market by not being subjected to market fluctuations and betting on their own risk management program to ultimately lower its claims and increase profitability of the captive program.

A captive is a very flexible insurance vehicle that is able to quickly adapt to the changing needs of a company, whether due to changes in the companies’ operations or risk profile, or changes thrown at it at the last minute by its current commercial carrier at renewal. A captive is able to provide customized and responsive insurance coverage. It can insure unique or specific risks that cannot be insured through the commercial market either due to a lack of market capacity or being cost prohibitive.

How Have Captives Changed the Insurance Industry?

Captive insurance has changed insurance greatly through innovation. Because captives are flexible and able to adapt quickly and provide customized coverage, captives are increasingly being used for new and innovative coverages. Coverages for new risks such as crypto currency or cannabis. New coverages sold to tenants by landlords. Because captives are not subject to the stringent regulation of commercial insurance companies they in general can be a much more efficient vehicle for bringing new and innovative coverages to the market. 

How Do You Know if a Captive is Right for Your Client?

One of the biggest questions people have is would their client be a fit to save money with a captive? Ask yourself, is my clients’ company loss ratio better than the industry’s average? Do they have a profitable business? Is there positive cash flow? Are they a self-insurer or using a large deductible? If you answered yes to these questions your client would be a perfect fit for a captive program. All that is needed is a captive management team with expert knowledge, for that you need Caitlin-Morgan Captives, a DOXA Company.

How to Start Your Captive Today

At DOXA Insurance Holdings we understand the importance of keeping your client covered with the best protection possible. With our expertise in the captive field DOXA offers a number of options for captive management. One of which being, Caitlin-Morgan Captives, a leading captive management team. With unique captive management solutions, they can find a fit for your clients specific needs to help them achieve a more profitable future. Contact us today to save your client money tomorrow!

Captive Insurance: The New Standard