A Group Captive is an insurance company owned by its participating policyholders. Companies that join Group Captives are seeking the advantages of cost savings, insulation from market cycles, and greater ability to manage risk. They also have the opportunity to earn investment income and receive underwriting profits on the merit of their own performance.
A Group Captive can insure the collective risks of a group in either the same or different industries, trade associations or classes of businesses. It can divide the risk and spread the fixed cost of the Captive among the participants as owners in the Captive. This allows insurance to be tailored to the needs of each individual participant in the group. It can also provide significant savings.
Participants in Group Captives Receive These Benefits
Reduced insurance and operating costs
Less pricing volatility
- Premium pricing formulas and group purchase arrangements reduce premium costs to member companies
Opportunity to earn capital investment income and receive underwriting profits
- The captive structure limits a company's exposure to market risk. It is therefore possible to predict future costs on a more consistent basis
Increased control in managing risk
- As a shareholder in a group captive, your capital (premium) earns investment income and any unused loss funds are returned as profit distributions
- The captive has a democratic one member = one vote structure. Each captive member company is able to participate fully in all decisions regarding claims and risk control.
By Robert Holton, VP, Wealth Advisor, Cleary Gull Advisors, a Johnson Financial Group Company
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