Group Captives For Small and Medium-Sized Companies
March 16, 2023
An article by Barney Dixon in Captive Insurance Times looks at the option of group captives. Big companies that can independently afford the risk generally opt for single-parent captives. Grouping with similar companies offers the benefits of captives for less capital. Small and medium-sized companies may find them a better option. The main ownership structures are “Owned” and “Rented.” In the member-owned model developed by Illinois-based consultancy Captive Resources, group captives are structured as reinsurance companies. They are owned solely and equally by the members, with each member holding a seat on the board. According to the consultancy, traditional insurers base premiums on industry averages and state rates, which often don’t reflect any individual company’s loss experience. The member-owned group captives they advise use a company’s most recent five-year loss history to determine premium, a better indication of loss experience. The consultancy also claims that the ownership structure of its group captives reduces overhead costs.
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