Group Captive Insurance FAQs

WHAT IS A CAPTIVE INSURANCE COMPANY?
A Captive insurance company is a risk transfer alternative to traditional insurance companies. It is created and owned by its policy holders and designed to cover expected losses for general liability and workers’ compensation. Member-owners share in 100% of the underwriting profits and investment dollars.

WHAT IS A GROUP CAPTIVE?
A Group Captive functions as a legally licensed, limited-purpose property and casualty insurance company, owned and managed by its members under IRC Section 831(a) with an emphasis on risk control and loss prevention practices.

WHY JOIN A GROUP CAPTIVE?
Different companies with shared insurance needs and above-average claims can experience the significant benefits of forming a Group Captive. Its mass purchasing power enables Group Captives to obtain services and reinsurance more cost-effectively than if each member of the group attempted to obtain such services and reinsurance by itself. Captive insurance provides greater control over premium and claims management for long-term financial strength and stability with lower operational, administrative and tax-related costs.

WHAT ARE THE FINANCIAL BENEFITS OF A GROUP CAPTIVE?

  • Retained Investment Income and Improved Cash Flow: Unlike premiums paid to commercial insurers, premiums paid to a Group Captive remain inside the captive and generate investment income with the potential for significant return on premium paid and reserves held.
  • Stabilized Risk Financing Over Time: Group Captives are sheltered from market volatility and avoid exposure to subsidizing the premiums of companies with greater loss experience.
  • Savings from Lowered Costs: Cost-savings come from lower administrative, operational and tax-related costs.

HOW IS A GROUP CAPTIVE A STRATEGIC BUSINESS RISK MANAGEMENT TOOL?
A Group Captive facilitates greater control over business risk management, in particular with policy terms and conditions. Cost efficiencies and reductions in insurance premiums are also dominant drivers for captive use. Member-owners can choose their providers, obtain broader insurance coverage and access the reinsurance market that may offer better rates, coverage, and service. Additionally, Group Captives benefit from greater claims management oversight and involvement.

HOW CAN IMPROVED SAFETY AND LOSS PREVENTION BENEFIT GROUP CAPTIVE MEMBERS?
A Group Captive loss prevention initiative can help reduce claims frequency and size and improve employee safety. Group Captives mature, grow and succeed when members are motivated to advance workplace safety and risk management. Through active involvement in the group, members control premium costs and generate profits and unused premium can be shared through dividend distributions.

I HAVE ADDITIONAL QUESTIONS; WHERE CAN I GET MORE INFORMATION?
For more information, please visit our Group Captive Insurance page. You may also contact one of our Risk Advisors today at 516-683-6100 or by email at 411Risk@ChernoffDiamond.com.