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Is a Group Captive Right for Your Business?

Captive insurance providers have been enjoying rising popularity for the last half decade as more and more established businesses find savings and more varied coverage options through ownership of their own providers. There's more than one way to run a captive, though, and the right business structure can have a huge impact on your costs and options. In general, these insurers come in two types, those with single parent companies and those that are owned by groups of companies they write policies for. Other vital choices include deciding which policies and coverage options you need the captive to create and which ones, if any, you will still purchase from outside providers. So what advantages do you enjoy with each option?

Benefits of a Single-Parent Approach

Single-parent captives answer to no other company and also cover no other clients, so they are quite similar to self-insurance in many ways, including costs. The benefit is that you enjoy sole control over the captive's business policies and administrative decisions. Your business also enjoys any dividends that come about because you, the client, overpays beyond what the captive needs to maintain its cash reserves. It's the choice with the most control, for the companies that have the resources to finance it.

Benefits of Group Captive Ownership

When you share ownership with another business, you also share expenses and costs of administration. This means a little more time negotiating the terms the captive operates under, but it also means you don't need nearly the up-front investment that a solo captive requires. Group captives also give you the chance to access the exact policy provisions you need, and the best part about them is that if you wind up with a high claim count during one year, the risk is shared among the pool of other owner companies, so it's less likely to have an impact on the parent companies by depleting cash reserves in a way that requires more working capital.

Who Benefits From Captive Insurance?

Every business and employee that is covered by policies from a captive insurer winds up benefiting, because the streamlined cost structure and custom coverage allow for options that are often cost-prohibitive through other plans. For policies like employee health plans, that can mean providing a lot of extra options that seemed out of reach before investing in a captive. For liability plans, it can mean being able to access the coverage you want instead of the coverage you can afford, providing you with better protection when the unforeseen happens.