What Is Captive Insurance?

Captive insurance is an alternative risk management solution where a business or a group of businesses form their insurance entity —Employee Benefits Group Captive. Unlike traditional insurance, where you pay premiums to third-party carriers, captive insurance allows you to retain and manage risks more effectively while also potentially sharing in underwriting profits and investment income.

Discover how a Health Insurance Captive Program can elevate your business.

This innovative approach provides significant advantages for companies aiming to enhance employee benefits while controlling costs. By pooling resources with other aligned companies, your business can reap the benefits of self-insurance without shouldering all the risk. This collaborative risk-sharing typically results in more predictable premiums and less volatility than traditional insurance models.

Additionally, this program allows businesses to tailor their health insurance plans to better suit the specific needs of their employees, boosting satisfaction and improving retention rates. With control over claims management and the ability to implement targeted wellness programs, a health insurance captive program gives businesses the tools to foster a healthier, more engaged workforce.

The Benefits of Captive Insurance

Captive insurance offers a range of advantages that make it an attractive option for many businesses, including:

Cost Savings:

By bypassing the traditional insurance market, companies can avoid excessive premiums, fees, and administrative costs, leading to significant savings.

Customized Coverage:

Captives can be tailored to cover specific risks unique to your industry, operations, and objectives, offering more flexibility than traditional policies.

Increase Flexibility & Control​:

Businesses gain greater visibility into their claims data and cost drivers resulting in better control over their provider network and Third-Party Administrator (TPA) relationships.

Risk Control:

Businesses gain greater control over their risk management strategy, claims processing, and policy design, allowing for a more proactive approach.

Improved Cash Flow:

Captives can help manage cash flow more effectively by minimizing premium volatility and offering stable, predictable costs.

Profit Retention:

Instead of paying premiums to a commercial insurer, captives allow businesses to retain underwriting profits and investment income, which can be reinvested into the business.

Frequently Asked Questions (FAQs)

What is a health insurance captive?

A health insurance captive is an alternative insurance model where businesses join to form their own insurance company to self-insure their risks. This allows companies to have greater control over their insurance policies, claims management, and cost structures.

How can a health insurance captive reduce costs for my business?

By pooling risks with other like-minded businesses, captives can achieve economies of scale, reducing administrative and management costs. Moreover, since profits typically retained by traditional insurers are kept captive, members can benefit from returned surpluses and lower overall insurance costs.

What are the risks and benefits of joining a health insurance captive?

Benefits: Increased control over insurance policies, the potential for cost savings, improved risk management, and the ability to tailor policies to specific needs.

Risks: Potential exposure to greater losses if the captive’s claims are higher than expected, upfront investment costs, and the need for ongoing management and compliance.

Who can join a health insurance captive?

Typically, mid-sized to large companies with a strong financial background and a commitment to proactive risk management are ideal candidates. Companies should also be willing to collaborate with other businesses to manage the captive.

How does risk sharing work in a health insurance captive?

In a captive, all member companies contribute to a shared insurance pool to cover claims. This risk sharing reduces volatility for any member by distributing risks across a broader base, potentially leading to more stable premiums and lower costs over time.

Can a captive insurance plan be customized to fit my company's needs?

Yes, one key advantage of a captive is the flexibility it offers. Members can work together to design coverage that specifically addresses their unique risks and requirements, unlike traditional insurance, which often offers a one-size-fits-all policy.

What is the process for joining a health insurance captive?

The process typically involves assessing your company’s insurance needs and risk profile, identifying an appropriate captive to join (or steps to create a new one), undergoing a feasibility study, and meeting regulatory requirements. Companies then pay into the captive to cover premiums and establish reserves for covering claims.

Explore Your Options with Tooher-Ferraris Insurance Group

Whether new to captive insurance or looking to optimize an existing program, Tooher-Ferraris Insurance Group is here to help. Our team of experts will guide you through the entire process, from feasibility studies to ongoing management, ensuring that your captive program delivers maximum value.

Contact us today to learn more about how captive insurance can benefit your business and to discuss your specific needs. Let Tooher-Ferraris Insurance Group be your trusted partner in risk management and insurance innovation.

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