DID YOU KNOW: What Is Captive Insurance—and When Is It the Right Fit?

Captive insurance is an alternative risk strategy that allows businesses to take greater control of their insurance programs. Rather than relying solely on traditional carriers, a captive enables commercial clients to self-insure a portion, or even all, of their risk.

In a captive structure, premiums are paid into the captive, claims are paid from those funds, and any unused reserves remain with the owners. This approach not only provides greater transparency and control over costs but also allows businesses to retain potential underwriting profits that would otherwise go to a traditional insurer. Captive Advisory Partners works closely with clients to design and manage programs tailored to their specific risk profile and long-term goals.

For agents and advisors, the next question is often: how do you know if a client is a good candidate?

Captives are often recommended for larger, more sophisticated businesses that want greater control over their insurance expenditure. In addition, captives can provide direct access to reinsurance markets, sometimes offering more competitive pricing and broader coverage terms than those available through retail carriers.

While not every client is an ideal fit, for the right organization, a captive risk solution can be a powerful tool to manage risk, reduce long-term costs, and create greater financial stability.

As insurance costs continue to rise, many mid-size commercial clients are exploring captives as an alternative risk strategy. A captive may be a strong fit for businesses with hard-to-place risks, those experiencing volatility in the traditional market, or organizations seeking a more strategic, long-term approach to risk financing.

While several factors influence the amount of capital required for a captive program, companies with at least $1 million in annual premium and a stable loss history are often strong candidates for further evaluation. (please review for edits – would like to provide some parameters for the reader)

If you have a client who might be a good fit, we encourage you to schedule a brief 15-minute introductory call with a CAP consultant to discuss potential options and next steps.

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