June 19, 2024

About Group Captive Insurance Companies

We will show you how to take control over your insurance costs and achieve meaningful controls in loss prevention.
Since 1972, we have designed transportation insurance programs. We have designed a trucker owned captive insurance Company with compelling benefits that allow you to reduce your total insurance cost, control your own rates, receive underwriting profit, receive investment income and more.

What is a Group Captive?

A Group Captive is an insurance company that is owned and man­aged by its member companies whose pri­mary role is to insure some or all of the risk exposure of its owner or owners. The captive collects the premiums, pays losses, and man­ages the daily opera­tions of the insurance company. Group Captives include companies of similar size and risk profiles that collectively create a business entity to act as the insurance company and share in one another?s insurance risk. The members have direct involvement and major influence over the major operations, including capi­talization, underwriting, claims management, safety man­agement, investments, and fixed costs.

Why a Captive?

Captive insurance companies are the risk management vehicle of choice for companies who wish to take control of their insurance and risk financing in a management effective and cost efficient manner. More and more companies with solid financial statements and superior risk management programs are moving to the captive alternative markets. As the best companies leave the commercial insurance market, the remaining market is adversely affected with increased prices, increased costs, and less overall market stability. Captives do not try to follow the soft or hard commercial insurance market. Instead they provide a long term, more stable, lower cost, controlled approach to risk financing in partnership with similar companies that share their commitment to aggressive risk management.

Who Can Qualify?

The Captive generally retains companies that are superior in every aspect of their operation. Since each member shares in the risk of others, it is imperative that the captive be extremely selec­tive when considering new members. The new company must have a strong moral commitment to the captive concept, excel­lent financial history, excellent loss histories, commitment to safety and loss management, and a desire to invest and partici­pate in a business ancillary to their normal business enterprise.

What are the Benefits of Participating in a Captive?

Reduce Total Cost of Risk – Membership in a captive requires a significant commitment to risk management. Rather than a conventional insurance company profiting from the member's superior operations and risk management programs and using those profits to subsidize the premiums of other less attractive companies, members of the captive can reduce their cost of risk when losses come in below the forecast.

Immediate Reward for Reducing Losses – Captive members can see the impact that an improved risk management program can have through lower premiums and dividends.

Greater Control Over Claims – Captive members have significant control in how claims are adjudicated and work with the claims adjusters to disburse your money.

Optimize Safety & Loss Control – Loss prevention services are tailored to meet the member's individual needs and the cost is included within the premiums.

Return of Underwriting Profits and Investment Income – As owners of the captive, members retain all of the underwriting profits and investment income ultimately lowering their cost of risk.

Cash Flow Management – In a Captive the member knows what their potential losses are and can manage the cash flow required to fund those losses in a more controlled manner.

Coverage Availability – Captives can tailor programs that might not otherwise be price competitive or available in the commercial markets.

Stability of the Pricing Cycle – ­With the group captive's buying power, there is less exposure to market pricing, so the captive avoids the impact of insurance company coverage or pricing fluctuations.

Access to the Reinsurance Markets – ­Captive insurance allows members direct access to the reinsurance market, which is a more cost efficient way of securing insurance.

Why the Cayman Islands?

The Caymans are the fifth largest financial center in the world and are home to more than 600 captives with more than $17B in assets. The captive laws in the Caymans offer an exception­al business environment and provide attractive benefits to captive members. In the Caymans, captives are not currently subject to corporate income tax, allowing the profits of the captive to earn surplus investment returns tax­free. The Cayman Island Monetary Authority governs the solvency and capital adequacy, the domicile political and economic stabili­ty, and the general infrastructure of the captive industry.

Captive Risk Financing

The fundamental principle of a captive insurance company is that insurance is a manageable cost. Premiums paid to conventional insurance companies are used to pay claims and the fixed costs to manage those claims. Premiums paid to the captive insurance company are generally used for the same purpose but with some important advantages.

1. If losses are less than expected, the surplus premium directly lowers the final cost.
2. If the fixed costs decrease, the savings directly lower the premium costs.
3. The investment income is used to lower the final cost.

Why are Costs Lower?

  • Premiums are determined actuarially based on both the owners experience and the experience of the group.
  • Only members with superior financial condition, loss histories and risk management programs are allowed to join the program thereby lowering the overall risk relative to a commercial insurance pool of customers.
  • The Captive's Safety Management Service team organizes and coordinates periodic risk reviews and tailors loss prevention services to meet the member's individual needs to create an optimal risk management program.
  • The Captive provides direct access to the reinsurance market, resulting in lower rates through the efficiencies of going direct.
  • As owners of the Captive, members retain all of the underwriting profits and investment income ultimately lowering their cost of risk.

Insured Coverages

Captives can provide coverage for several lines of insurance that are by nature, controllable, generally have a high frequency and low severity, can be managed and improved with aggressive risk management and claims management programs.

Truckers Liability Including:

  • Physical Damage

General Liability Including:

  • Products Liability
  • Completed Operations

Workers' Compensation Including:

  • State Statutory Coverage
  • Employer's Liability

Solution to Controlling Costs – Captive Losses

The Captive reinsures the policy ­issuing carrier for the first layer of any occurrence for each line of coverage. For example, the Captive may reinsure the fronting carrier for the first $300,000 of any claim. Each member is individually responsi­ble for the first portion of any claim. In this example, the member might be responsible for the first $100,000 of the $300,000 commitment by the Captive. The first $100,000 layer provides for the predictable, more frequent, and less severe claims. In the event a claim is greater than $100,000, the bal­ance greater than $100,000 is then paid for with the funds set aside in the $100,000 to $300,000 layer. If the individual com­pany does not have sufficient funds in this layer the group shares in the claim thus providing the risk­ sharing component that is necessary. The company then transfers the balance of any claim over $300,000 to the excess reinsurance company.

Captive Summary

Membership in a captive insurance company is limited to companies with superior financial condition, superior loss histories, and aggressive risk management programs. Every member is an owner with one vote per member regardless of premium volume. The company is managed by its members and operates with committee structure involving finance, underwriting, and risk control. Members of the Captive have strong moral commitment to the captive concept, excellent financial history, excellent loss histories, commitment to safety and loss management, and a desire to invest and participate in a business ancillary to their normal business enterprise. In other words, quality and commitment is more important than quantity.

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Since 1972, Allen Lawrence & Associates, LLC has been serving the insurance needs of businesses and individuals throughout the United States.
As a broker we represent you, the buyer of insurance, in the world insurance market. Our role is to assist you in evaluating operating risks and in preventing financial loss to you and your stakeholders..
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