Large corporations have traditionally set up captive companies to provide coverage where insurance was unavailable or highly priced, to have greater control over risk, and gain tax advantages among other factors. Captives are typically set up for workers’ compensation, general liability, commercial auto insurance, and more recently for healthcare coverage.
Under a captive insurance structure, your subsidiaries, members or clients pay premiums for their insurance coverage to your captive instead of to an outside insurance company. Using a captive structure, you can purchase reinsurance directly, which can save on commission and premium costs. Your premiums will be calculated on your loss history instead of overall industry loss costs, meaning good risk management programs can yield big savings. You can also tailor coverage to the particular needs of each policyholder, making coverage more flexible than you might find on the open market.
Whether a captive is right for you depends on several factors, including ensuring that you are in a solid cash position to make premiums and ultimately pay claims. HAWK Advisers can help assess if your business is a candidate for a captive and what type of captive is best suited to meet your needs.
There are multiple types of captive insurance companies including but not limited to:
- Single-Parent Captive: insures a conglomerate’s own subsidiaries
- Association Captive: owned by a trade group that insures its members
- Group Captive: owned by multiple companies and commonly targets a common risk
- Agency Captive: owned by an insurance agency to provide reinsurance to clients
- Rent-a-Captive: provides captive services and coverage for a fee to another company—often one that is too small to create its own captive
Start a conversation with a HAWK Adviser to explore the captive insurance option best suited for your operations.