Captive
and rent-a-captive insurance programs are
an alternative to traditional fixed-cost insurance
products. Captive insurance programs grant employers
the ability to retain the profits normally assumed
by the insurance carrier. These programs can take
the form of either a single
parent captive that is utilized by a single
employer, or a group,
or member owned, captive that is shared by
two or more unrelated employers.
The key advantages
of a captive insurance program are reduced insurance
costs, greater control, and greater flexibility
in choosing service partners.
Captive insurance
programs can be more expensive if losses exceed
expectations. Therefore, captive programs are
typically advantageous when an employer is:
Able to control or reduce losses
through proactive management
Financially strong
Willing to understand the nuances
of a more complex insurance program
Under these circumstances,
the ultimate cost is generally lower.
