If you’re looking to manage the risk faced by your company, but prefer more control than is offered by traditional insurance, a group captive may be right for you. With a group captive, you essentially form your own insurance company with other businesses. Each contributes funding to a pool of shared funds (the “captive”) and has access to these funds should the need arise. Group captives can be used to cover workers’ compensation, general liability, automotive liability, physical damage and even healthcare costs. It all depends on which options are needed by the participating companies.
Two different types of captives
When it comes to types of captives, you can choose a heterogeneous or homogeneous option. What’s the difference? A heterogeneous captive is made up of companies from different industries, helping spread out the risk experienced by each. Types of businesses often found in heterogeneous group captives include construction, manufacturing, retail, wholesale, distribution, and specialty risk contractors.
Companies participating in homogeneous group captives are within the same industry, and for this reason, they have similar insurance and risk management needs. However, this presents another advantage because homogeneous group captives allow companies to creatively customize their captive based on the unique needs of their industry. Types of businesses often found in a homogeneous group captive can include trucking/transportation, general contracting and construction, roofing, and oil and gas.
Advantages of group captives
Captives help companies spread risk and gain greater control over their insurance and eliminate insurance market volatility. The good news is that unused funds are the property of the group, and all members can gain back unused funds, plus income from investments. This is in direct contrast to traditional insurance, in which companies pay premiums, but the carrier retains unused funds.
Because companies have the opportunity to receive money back, it’s a huge incentive to strategically manage risk within their business. This level of control and management helps create stronger, healthier companies.
Need guidance managing risk?
Odell Studner can help. From captives to cyber insurance, we’ll help you understand the risks faced by your business, and form a plan to manage them. To learn more, contact us today!