20222 continues to be a hard insurance market for traditional insurance carriers. While the foundation for this existed pre-COVID, the economic hardships created by the pandemic will prolong the hard insurance market we find ourselves in today.
While hard markets pose a significant challenge for conventional insurance programs, they also represent an opportunity for captives. The inherent difficulties of a hard market (market uncertainty, uncontrollable pricing, etc.) are precisely why captives are a great fit for best-in-class companies regardless of market conditions. Rather than a predicament, we see the situation as the perfect opportunity to help companies find a more stable insurance option.
Forecast: 2022 Insurance Market
Unfortunately for insureds and brokers alike, the hardening market doesn’t appear to be going away. 2022 promises to be a challenging renewal year for companies with conventional insurance programs. Regardless of loss records, very few insureds will see their premiums renewed “as is.”
“In this market, carriers are trying to capture rate increases across casualty lines,” said Mike Foley, President of Captive Resources. “This often leads to execution error, where attractive risks get swept up in the rate wave and experience unnecessary rate increases. Many accounts with excellent loss experience will be presented with significant rate increases, due to the market cycle.”
Protecting Your Company for the Long Term
The hardening market presents the perfect opportunity to educate companies on the benefits of member-owned group captives. The companies that are best suited to thrive in a group captive share characteristics like:
- Entrepreneurial: Willing to take control of their insurance program to benefit the company’s bottom line.
- Assertive: Willing to become owners of their own insurance company and contribute to the effective management of the captive.
- Safety-conscious: Willing to do what’s necessary to improve their loss records and improve their organization’s overall risk control.
Joining a group captive can help insulate companies from the ebbs and flows of the traditional commercial insurance market.
Group captive members are able to enjoy more stability and predictability than conventional market insureds, due to several foundational components of the captive model:
- Customized Pricing: Each company’s premium is based on its most recent five years of loss experience (rather than more generic rates in the conventional market).
- Unbundled Services: Captives outsource support services, which reduces overhead costs and makes it easier to change providers and optimize services.
- Profit Potential: Members earn dividends from their unused loss funds, which further incentivizes them to control their losses.
Group Health Insurance
If you have over 50 participants in your current health insurance plan and are tired of rates increasing, group captives could be a solution.
The same issues impacting property/casualty are hurting your benefits renewal. Can group purchasing help?
For companies that focus on loss control, having a safe workplace and wellness, group captives typically lead to very attractive pricing at any point across the commercial pricing cycle. This is particularly true when rates are increasing across the board for all industries.