A common question asked is, what is a captive insurance company? This is answered in many ways as there are numerous different captive programs and structuring programs. Perhaps, the simplest definition of a captive insurance company is one that is owned by its insured.
Captives are real insurance companies that are regulated by a state department of insurance but have a limited base of insured. There are many benefits that are gained through ownership in a captive insurance company. Here are reasons you should create a captive insurance agency.
FlexibilityFor Hard-To Insure And Emerging Risks
One of the top reasons of creating captive insurance programs is their flexibility, especially within emerging risks markets. The commercial market is often hesitant to underwrite new and emergingrisks where the risks of loss is hard to quantify due to the lack of historical knowledge. A captive can be used to fill in coverage gaps that exists in commercial policies, or provide coverage limits that are hard to insure automatically.
An important factor to consider for many insureds is access to reinsurance, particularly when premium costs are rising and benefits coveragesbecome harder to obtain. They can also be used to gain access to markets reinsurance. Thus, many participants have found captives to be an effective tool in leveraging benefits to manage their risks.
Captive insurance companies can also give the provider organization increased control over the underwriting, claims management, and investment processes. In the underwriting process, they can customize their coverage by removing standard items that are not needed. It also allows them to exercise more control over deductibles and self-retention layers.
Additionally, the captive allows for greater control over the investment of premium dollars allowing the organization to align their premium financing with the organizations risk management goals.
Finally, many captive participants in high risk industries have found themselves with better safety and risk management program as a result of being captive program participants. In addition to the benefits mentioned above, you’ll realize better claims results. No wonder you should turn to a captive agent when you want to compare insurance quotes without the hassle.