Should I Consider a Captive?

December 29, 2020

Construction worker lifting crane and using walkie talkie.

Image credit: Anupong+Sakoolchai/shutterstock.com

As a business owner, you have a lot to manage. Some things you might do on ‘auto-pilot’ just because you have always done them that way. Does renewing your insurance fall into that category?

Of course, having insurance to cover the myriad of risks is vital to any business. However, utilizing an alternate risk financing option may be able to serve your business better. A Captive may be one of the alternate risk financing options that you should consider.

A Captive is a legal entity, licensed as an insurance company, to insure a proportion of its shareholders’ risks. Simply, it is an insurance company owned by the Captive members (shareholders).

Here are some factors to consider when determining if a Captive is right for your construction company.

1. Control

With traditional insurance, you are reliant on the commercial insurance market to renew your insurance policy to protect your business. As a Captive Owner/Shareholder, you are in control. You can accept or reject prospective members into the Captive. You can also restrict members to those that are:

  • In your industry
  • Have similar safety programs
  • Have good loss history, etc.

Such control can limit your overall risk exposure. Additionally, the Captive can insure any risk it chooses and can customize the terms & conditions of its policies. This can lead to improved loss control efficiency and increase awareness of the causes that commonly produce losses.

2. Investment

A Captive’s investment program can be used to support the business of the Captive Owners. Under traditional insurance programs, you generally cannot control the investment of the premiums. So, any underwriting profits benefit the insurance company, not your business.

3. Coverage

The construction industry is fraught with risk. Contractors with unfavorable loss histories often cannot obtain coverage on the open market. Traditional insurance is also slow to keep abreast of new threats, leaving businesses with exposed risks. Captives solve both problems with tailored insurance unique to captive owners/shareholders.

Exploring an alternative risk financing option, such as a Captive may be something to consider. Even though it goes against the traditional method of insurance, it may ultimately be the best move for your company.

Download the Captive Benefits Flyer

If you’re interested in learning more about Captives, contact us today to speak with one of our Risk Advisors! TSIB’s Insurance Consultants are currently servicing the following locations:

East Coast: New York City, NY; Bergen County, NJ; Philadelphia, PA

Texas: Austin, San Antonio, Houston, Dallas

California: Orange County, Los Angeles County, Riverside County, San Bernardino County, San Diego County.

Topics: Captive

Written by The TSIB Team