Companies of all sizes can minimize risk and maximize profits with a captive insurance program.
Companies that have stood the test of time for more than 100 years must be doing something right. Brands such as Coca-Cola, Kellogg’s, JC Penney and Boeing Aircraft are iconic examples of businesses with staying power. They know their product, and they understand their customer. Many business-savvy individuals might be surprised to know, however, that a very special type of insurance arrangement has also been around for over a century: the captive.
The beauty of this type of insurance is that it meets the risk management needs of its client exactly where and how it should, regardless of the client’s size, niche market or unique risks. Clients are actually members, which are in fact, owners of their own insurance program. As the Center for Insurance Policy and Research aptly states, “a captive is a wholly owned subsidiary created to provide insurance to its non-insurance parent company (or companies).” eMaxx Assurance Group of Companies is a provider of captive insurance solutions, maximizing insurance through technology + risk management.
Captive programs are synonymous with self-insurance. In effect, the insurer is owned completely by the insured. The benefits are numerous and touch three main areas: capital, control and coverage. Capital goes hand in hand with risk management—often one of the chief purposes of establishing this arrangement in the first place. Companies can achieve lower costs by implementing state-of-the-art tech-enabled risk management platforms. Financial control is another key benefit. Members take part in controlling their destiny, serving on governing boards and making decisions on risk management and claims. Moreover, coverage is available for industries such as energy, towing, construction and crane & rigging, among others. Programs are designed expressly for the particular business’s risk exposure.
In the past few years, members of captive insurance programs have seen up to a 46% reduction in frequency and significant impact in the severity of claim outcomes. According to A.M. Best, the number is growing. Currently, 7,000 of these subsidiaries function globally (up from only 1,000 in 1980). They operate like any other commercial coverage company, subject to state regulations.