Risk protection is essential to businesses, but it comes with a price. Many business owners seek to strike a balance that controls costs without sacrificing coverage. One way to get top-quality coverage without an excessive price tag is by enrolling in a group captive. Here, we’ll break down what a group captive is and how it can be useful for some businesses. 

 What is a Group Captive?

A group captive is an insurance company that is entirely owned and controlled by the businesses it insures. Group captives usually write lines of coverage common to most businesses. For instance, a group captive may cover workers’ compensation, general liability, or auto liability for a business. 

How Does a Group Captive Differ From a Mutual Insurer?

“Group” captives are so named because they’re usually owned by a group of businesses working together, rather than by a single organization. Each owner participates by making an initial capital contribution – usually an amount much lower than the business would have to spend to self-insure its losses. 

Mutual insurers are another method by which a group of policyholders works together to insure group members against potential losses. In a mutual insurer, group members do not usually invest resources, as they do in a group captive. Mutual members also have less control over how the insurance arrangement operates than group captive members do. 

Why Join a Group Captive?

  • Lowered insurance premium costs. Most group captives base each member’s premium costs on that member’s own recent five-year loss history. Businesses with few or no losses in the past five years are rewarded for their commitment to safety with lowered premiums.
  • Joining an insurance pool with safety-conscious companies. Commercial carriers consider industry losses as a whole when calculating premiums – which can result in higher costs for companies with lower-than-average losses. Group captives focus on filing the insurance pool with companies that address losses with prevention first. 

The structure of group captives incentivizes safety, prevention, and planning ahead – creating not just lower premiums, but a safer working environment as well. 

Is enrolling in a group captive right for you? To learn more, get in touch with the team at Odell Studner today!