Captive insurance groups have been around in one form or another for well over a century. During the insurance crisis of the late 1970s, they gained credence as businesses and associations began programs to allow individuals to invest and be covered at the same time. Today, over 5000 captive insurance organizations exist across the globe. Some, like CaptiveResources, have been helping those interested in the industry since the 1980s.
There are many forms of captive insurance. For example, micro captives are for small to mid-sized businesses with premiums equal or less than $2.2 million. An Industry Captive is owned by organizations and investors within the same industry. In this article, we’re going to delve into a captive for those organizations which lack the capital resources of the industry-based association mentioned above. It’s called a Group Captive.
Group Captives, also known as Association Captives, are established when a group of individuals, entities, or industry associations join together to collectively own a captive insurance company. Like other forms of captive insurance, a group captive directly involves investors in the decision processes surrounding policies, premiums, and investments. In addition to being covered, they receive a regular dividend which varies depending on how much the captive has gained or lost in a particular period.
There are advantages to a group captive as opposed to an individual captive. For instance, those in a group captive see stability in pricing and insurance coverage. This, in turn, improves the services offered. In another example, a group captive can be utilized for organizations without adequate capital resources.
Because there are a larger number of investors, the value of claims can be predicted with a higher degree of confidence. This helps lower the forecasted costs of insuring the captive’s risks and, subsequently, maintaining the number of investors. Other advantages to a group captive are cost-effective, mass purchasing power, reduced overhead, and the ability to increase options for specified insurance needs.
While this may seem intriguing and a way to lower your existing costs, you need to do research first. Speak to other organizations who have a group captive. Or, if one of them seems solid, think about joining their captive. Either way, the more information you have, the better you’ll be prepared to jump into the captive industry.