Joining a Group Captive
How to Join a Group Captive
Joining a group captive is not a renewal decision. The review is more thorough, the premium is set by an actuary instead of bidding, and the process can take months.
Start a conversationThe Employer Success ProgramA different kind of decision
Deciding to move to a group captive is different from renewing your insurance in the traditional market, where price and service usually drive the decision. A group captive is a different way of buying insurance, and it also sets up a separate way to grow and preserve financial assets outside your existing business.
Along with your premium and claims history, the captive manager looks at a number of other factors in your operation, including:
- Length of ownership
- Financial strength
- Your North American Industry Classification System (NAICS) code
The full analysis and qualification process can take two to six months, depending on how complex your business is and how busy the captive manager is. For that reason, we do not recommend evaluating a group captive at the same time as your regular annual renewal.
How your premium is set
When you look at the value and projected premium of a group captive, know that conventional bidding and rate negotiation are not part of the process. Captives do not use the rates filed with regulators. An actuary develops your premium, using several methods to set your loss fund, sometimes called a loss pick. That work uses five years of claims and premium data to set the premium and the loss fund deposit needed to protect the other members.
These forecasts tend to be conservative, which means more expensive, in your early years. Your history up to that point was reserved and paid under someone else's practices. As you spend more years in the captive, your claims experience becomes more predictable because the captive owners set the reserving and payment approach. That is when the larger savings and asset growth tend to show up.
Keep in mind that the money comes back slowly. Dividends are returned over a number of years as each program year's claims settle and the year is closed, and members post collateral in the meantime.
Turning Premiums Into Profits
David Leng's book on captive insurance is written for business owners who are tired of the same insurance cycle every year. It explains how a business paying more than $100,000 a year in premium can take on some of its own risk in exchange for the potential rewards, and why captives have become the most widely used way to do that.
Where the Employer Success Program comes in
It starts with a Diagnostic and Plan. We read your loss runs, your mod worksheet and your key contracts, and we talk with the people who run the work. You get the pattern behind your claims and a short list of what's worth fixing first.
From there our claims, HR, safety and fleet people work alongside yours, and you get a Score Card at the start and every year after, measured against your own starting point.
Start with a conversation
Tell me what's going on. I read these myself and reply within two business days. If there's nothing worth fixing, I'll tell you that too.