Is a Captive Insurance Program Safe For Your Business?

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Business owners are often skeptical about captive insurance arrangements due to preconceived notions of risk, reliability, and effectiveness. Many hear horror stories about poorly designed programs that lead to greater risk and self-retaining. In reality, captive insurance programs can work extremely well. The key is to make sure you work with people that know what they’re doing and create a plan that will benefit your company moving forward. 

Traditional Markets Can Be Just As Risky, If Not More

Many businesses fail to realize that there are coverage gaps in what they currently have with an insurance broker presently transferring their risks. You can’t insure for everything, resulting in situations where we don’t regularly review your insurance policies. 

A captive insurance model is built around broader coverage, meaning business owners get more coverage than they would with a traditional model. Since you’re analyzing your business’s current needs, you get to determine what coverages are most important in the captive insurance arrangement. 

How to Approach a Catastrophic Loss

When you agree to a captive insurance arrangement, you get catastrophe coverage along with the frequent losses a captive insurance arrangement is designed to address. This includes elements that go far beyond traditional loss history like reinsurance and excess coverage. These are all available to protect you if something catastrophic were to happen. 

In addition, if you’re in a group captive arrangement, you might also be concerned about a larger loss from someone else. Generally speaking, there’s a relation between other member’s performance and costs to your business. But, if you’re partnering with a captive insurer that values your company, it’s guaranteed to perform better than the traditional insurance marketplace. 

You Can Always Go Back to a Traditional Insurance Marketplace

If all else fails, you can always go back to a traditional insurance model. This usually only happens If you’ve had a year with terrible claims and/or a lot of losses on top of a struggling captive insurance arrangement. If it can no longer support your business or adequately cover your losses, you can always unravel the captive insurance arrangement and revert to a traditional insurance marketplace. 

Even so, a captive insurance arrangement is arguably a very safe and worthy investment. Captive arrangements are designed to solve problems. Properly constructed by experienced professionals, a captive insurance arrangement should greatly benefit your business.

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