Explore this alternative risk financing tool.
A captive is a legal entity, licensed as an insurance company, to insure a proportion of its shareholders’ risks. To put it simply, it is an insurance company owned by the captive members (shareholders). By forming a captive, you can create powerful risk management tools that directly serve your individual needs. Say goodbye to the limitations of traditional insurance and embrace a solution that puts you in control.
By forming or joining a captive, members sign on for a predetermined level of risk and then pay the associated premiums for the administration of the captive (fixed costs) to the captive insurer. In exchange, they receive coverage tailored specifically to their needs as well as opportunity to benefit from dividend payments and underwriting surplus distributions. Insurance that pays you back for good experience!
Common Captive Coverages:
- Property & Business Interruption
- Workers’ Compensation & Employers Liability
- Commercial General Liability
- Auto Liability
- Professional Liability
Benefits:
- Your performance determines your cost – a true performance-based product.
- Improved cash flow
- Improved risk coverage
- Reduce insurance costs – lower fixed costs
- Access to reinsurance markets
- Lowers your total cost of risk
- Greater flexibility in coverage terms, conditions and exclusions.
Is there a Captive Structure right for you?
What value we provide to you?
- Access to the Captive Market: As a specialized broker, we provide access to this specialized market, offering you exclusive opportunities and advantages that traditional insurance arrangements cannot match.
- Feasibility Study and Expert Advice: At TSIB our dedicated team conducts a thorough feasibility study to assess the viability of a captive insurance program for your business. We provide you with expert advice and guidance every step of the way, ensuring that your captive insurance solution is tailored to your company’s specific needs and goals.
- Structured Program and Safety Program Enhancements: At TSIB, it is our job to help you structure your captive insurance program, incorporate your risk profile, and figure out the coverage requirements and financial objectives. Additionally, we assist in enhancing your safety program to align with the unique demands of the captive market, thereby reducing risk exposure and improving your overall safety performance.
There are many types of Captive Structures. Three of the most common are Single Parent / Pure Captives, Group Captives, and Rent-a-Captives.
What is a Single Parent / Pure Captive?
A Single Parent or Pure Captive is a captive insurance structure in which a single organization, such as your construction company, forms its own captive insurance company. The parent company becomes the sole shareholder of the captive, gaining full control of its insurance. There are several benefits to Single Parent captive structure:
- Complete control over designing and tailoring your insurance coverage to meet your specific needs. You can address the unique risks associated with your business.
- Turn your insurance premiums into long term cost savings and improved cash flow by gaining control over underwriting profits and investment income through risk retention and safety protocols.
- Along with cost savings, captives allow you to have the flexibility to implement risk management strategies by analyzing claims data and risk trends to proactively mitigate risk, minimize losses, and improve overall project performance.
What is a Group Captive?
A Group Captive brings together multiple companies within the same industry to form a shared captive insurance company. Each participating member retains a portion of risk within the captive, benefiting from collective strength and resources. While working together as a group, there are a variety of additional benefits such as:
- By pooling risks with your peers in other construction industry companies, you gain access to greater risk-sharing capabilities. This can lead to reduced volatility, improved stability, and more predictable insurance costs for all the companies.
- Additionally, Group Captives can leverage the collective buying power of their members to negotiate more favorable terms, conditions and pricing with reinsurers. This results in cost savings and broader coverage options that may not be available on an individual level.
- Group Captives also provide invaluable opportunities for networking, best practices, and learning from other industry professionals. This collaborative environment fosters knowledge exchange and strengthens risk management practices across the group.
What is a Rent-a-Captive?
Rent-a-Captive, also known as Sponsored Captives, are captives that allow businesses to participate in a pre-established captive insurance program. Instead of forming their own captive from scratch, companies can join an existing captive managed by a specialized sponsor. This provides a variety of benefits:
- Your business can benefit from the captive market without the significant upfront costs and administrative burdens associated with establishing their own captive. This allows for cost-effective risk management and enhanced coverage options.
- The Captive sponsor also provides administrative and regulatory support and manages the day-to-day operations and compliance requirements. This frees up resources and allows you to focus on your core operations.
- This also provides exposure to a diversified risk portfolio, as multiple businesses from various industries participate in the program. This can help stabilize insurance costs and provide access to reinsurance markets.
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