What is Captive Insurance?
Captive insurance is an alternative solution to risk financing for companies of varying sizes. Businesses who opt for this method of insurance essentially create their own insurance companies. Just like any traditional commercial insurance company, captives are subject to state regulatory requirements, where one of the main differences is where the capital comes from. In a captive, the insured contribute their own capital and can earn back unused loss funds and investment income from limited losses.
With funds coming directly from the insured, a captive is a form of self-insurance. The insured owns part or all of the insurance company that has been formed and has a say about how the insurance company operates. This control over how the insurance company manages claims, controls risk, and handles finances is a major benefit of opting into a captive insurance program over a traditional insurance program.
Although different types of captives are available, Scott Insurance specializes in group captives, where there are multiple owners of the insurance company. Group captives offer many external benefits that would not be gained from traditional commercial or other types of Captive insurance programs.
Advantages of Captive Insurance
- With full ownership of the insurance company, members benefit from its profitability.
- The direct return to the owners is a huge incentive to better control risk management within their organizations.
- The more money they save spent on loss funds, the more money the
owners get returned to them.
Additionally, one major deterrent of traditional commercial insurance is the unpredictable fluctuation of premiums, which is caused by the volatility in the traditional marketplace. With captives, premiums depend on the performance of its own members, not the entire insurance marketplace. This results in a more predictable, stable pricing over time.
Captive insurance programs offer many other benefits to companies outside of profit gains. One of the greatest gain is a stronger, healthier company that controls its own destiny. Company owners who have enrolled in these programs with Scott Insurance have shared that captives make their companies better overall. The incentives to improve risk management place a heavy emphasis on workplace safety and claim cost reduction while increased control leads to a higher level of accountability.
Owners view captives as a long-term solution that offers opportunities along the way. Through captive insurance programs, companies are able to continuously improve efficiencies internally while programs like group captives encourage healthy competition externally among members that work together for the benefit of the group.
The Scott Captive Experience
Scott Insurance has been in a leading position in captive insurance since 2001 when we launched our first commercial group captive. Since then, we have helped more than 175 companies reap benefits from captives, including millions in premiums returned to our clients.
At Scott, we are experts in captives in property and casualty (commercial group captives) and employee benefits (employee benefits group captives). Scott Advisors don’t want to simply offer a solution and walk away, we engage with your companies to create opportunities and long-term strategies. With this goal in mind, we don’t just take any company under this program. To create a group captive with Scott, your company must show entrepreneurial leadership, a focus on excellence within the company, dedication to employees, and a commitment to learn, grow, and develop from the group.