Knowledge Corner

Captive insurance offers companies greater control over how they finance and manage risk. For organizations with strong safety performance and predictable losses, a captive can provide a more strategic alternative to the traditional insurance market.

What Is a Captive?
A captive is an insurance company owned by a business or a group of similar businesses to insure their own risks. Instead of paying premiums to a traditional insurance carrier, you fund your own insurance program and use that money to pay

• claims
• administrative costs
• required reserves

When a company participates in a captive, it agrees to take on a defined level of risk. If losses are lower than expected, the unused premium stays within the captive and benefits the captive owners rather than a traditional insurance carrier. Over time, this structure can turn insurance from a pure expense into a long-term financial asset.

Why Companies Use Captives
Traditional insurance pricing is driven by the carrier’s overall profitability and market conditions— not just your company’s performance. In a captive, pricing is more stable and directly tied to your own loss history and risk management efforts.

Captives allow companies to: 

• Share in underwriting profits when losses are controlled

• Earn investment income on premium dollars

• Increase limits or enhance coverage where the traditional market is restrictive

• Gain greater control over risk financing and claims strateg

For organizations with strong safety cultures and predictable loss performance, captives can reward consistency in ways traditional insurance cannot.

Types of Captive Insurance Programs
There are several types of captives, but the most common structures include:

• Single-entity captives: Owned by one company and used to insure its own risks. These captives offer maximum control but typically require greater scale, capital, and administrative commitment.
• Group captives: Owned by multiple companies with similar risk profiles that pool their risks together. Group captives create a peer environment where members are accountable to one another and benefit from shared best practices.

Beyond the financial structure, group captives often provide access to a network of peers—business owners, CFOs, and safety leaders who collaborate and learn from one another on loss prevention and claims management.

A Key Consideration with Group Captives
In a group captive, members share risk. If one member experiences a significant loss, the other members may be required to help cover it. That’s why selecting the right captive is critical. You want one with strong safety culture, disciplined underwriting, and effective oversight. The most successful group captives are characterized by:

• Strong safety cultures across all members

• Disciplined underwriting standards

• Active loss control and claims oversight

• Transparent financial reporting and governance

Captive insurance is not the right solution for every company. For organizations committed to safety, financial discipline, and long-term risk management, a well-structured captive can be a powerful alternative to traditional insurance.

Not sure whether a captive is the right strategy for your organization? TSIB can help evaluate whether a captive aligns with your company’s risk profile and financial goals. Connect with one of our Captive Specialists to start the conversation.

TSIB’s Risk Consultants are currently servicing the following locations:
East Coast: New York City, NY; Bergen County, NJ; Fairfield County, CT; Philadelphia, PA
Texas: Austin, San Antonio, Houston, Dallas
California: Orange County, Los Angeles County, Riverside County, San Bernardino County, San Diego County

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