Understanding the Complexities of Captive Solutions

Captive Solutions

Captive Solutions Companies and individuals that have a great deal of risk because of the type of work or business they conduct (for example hospitals and doctors) often require programs that help mitigate their exposure to costly lawsuits. Captive solutions are increasingly becoming a viable alternative to traditional insurance solutions for healthcare organizations and others.


A captive insurance company, as defined by the NAIC (National Association of Insurance Commissions) is “a wholly owned subsidiary created to provide insurance to its non-insurance parent company (or companies). Captives are established to meet the risk-management needs of the owners or members. They are essentially a form of self-insurance whereby the insurer is owned wholly by the insured. They are also set up to minimize the potential of lawsuits, help to determine how certain claims are to be handled, and ultimately create investment earnings to offset the cost of premiums.


Captive insurance companies have been around for over 50 years and have become a staple in many corporate risk management programs, their main purpose being to provide clients a level of protection that traditional insurance markets don’t generally offer because their risks are too great. For years, there were just a few captive domiciles for captive owners to choose from, but today it is estimated that there are currently 36 domestic captive domiciles.


With several options out there, a captive solution might offer the best chance of lowering or removing exposures simply because it is a premier risk management, as well as a risk financing tool for a slew of concerns and issues, including:


  • Increasing premium costs in almost every line of insurance coverage


  • Difficulties in obtaining coverage for certain types of risk


  • Inflexible credit rating structures (which reflect market trends rather than individual loss experience)


  • Insufficient credit for deductibles and/or loss control efforts, and


  • Differences in coverage in various parts of the world


For a time, many insurers clients were a little leery about making the switch from their commercial insurance to a captive solution, not quite understanding the pros and cons of this particular insurance option. Once they understood the value it brings, and realized that the upswing was that it allowed them to stay focused on their businesses (while their agent handled their captive risk management platforms and could then deliver profitable results back to them) they were convinced that this was a worthwhile venture.


There are different captives available, depending on specific needs, including:


  • Risk Retention Group


  • Single Parent Captive


  • Association Captive


  • Agency Captive


  • Protected Cell Captive


  • Rent-a-Captive


  • Series, LLC Captive


Speak to a reputable agent that knows exactly the type of captive solutions being considered and can provide the information needed in order to make an informed decision.