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Captive Insurance Programs Offer Flexibility and Security

September 12, 2023

Does your company need a risk management vehicle that not only protects your company, but also provides financial flexibility and return-on-investment? Oh, and did we mention that you would also be the owner of this valuable risk management option?

Captive insurance programs are an attractive alternative to high premiums and deductibles normally associated with traditional insurance products. Captives are like ice cream – they come in many different flavors.

There are captives formed as groups that insureds can join and there are businesses with the necessary critical mass to form their own captive insurance program. Whether in a group or solo, captives are a form of self-insurance, which requires some capital or collateral outlay but allow the insured to efficiently assume some of its own risk.

Why Do Captives Make Sense?

Captives represent improved efficiency by removing the standard insurance market from the equation, so insureds keep what would otherwise be insurance company profit. Risk is mitigated and managed by purchasing reinsurance to cover exceptional losses.

Captive insurance is most often used for casualty lines of coverage. This broad category can include, among others:

  • General liability
  • Auto liability
  • Comp and collision
  • Workers comp

Oswald recognizes the value captive insurance programs offer. Our extensive pool of resources enables us to create captive products tailored to meet a client or group of clients’ specific risk management needs.

Captives were usually handled as a one-off and done as needed, but now companies are seeing the value in taking on some of their own risk and potentially benefiting from it financially.

Owning your insurance doesn’t mean you are taking on an administrative elephant that will tax your company’s time and resources.

There are also no limitations on geography, industry or company type, or kinds of coverages with captives. It can be owned solo, with partners, inside the U.S. or abroad.

Captives offer companies a variety of structures and approaches. There are standard, structured programs that can be selected but, if you can imagine it, Oswald can research it, put the math to it and identify solutions.

Who Are Captives Designed For?

Captives will appeal to business owners or entrepreneurs who have been frustrated finding affordable insurance that meets the specific needs of their operation or industry.

Why are companies looking to captive programs to better manage risk? The answer is simple: it puts them in control.

In a captive environment, insureds own the insurance company. Having control can lead to favorable contract terms, claims handling, fees management, commissions, etc. This can result in net effective cost savings and/or greater coverage creativity and availability for your organization.

Captive programs also deliver stability in coverage availability and premium reliability. As capital accumulates in the captive, the insured expands its ability to insulate itself from changes in the commercial insurance market.

How creative can captive programs be? With Oswald’s extensive experience and resources, they can be very creative. Consider the following examples from Oswald clients.

A manufacturing company sold a consumer product for more than a decade and the product began to fail. Flaws were showing up well after the product was installed and the manufacturer knew it would take multiple years and significant resources to correct the problem.

The solution: Oswald created a tax-efficient captive program that insured the specific product to protect the company against claims while not exposing the rest of the company.

In another case, Oswald was able to secure a captive program for a group of towing companies who individually found it very difficult to secure affordable insurance.

The insurance marketplace was simply not fair to these companies – premiums increased to seven figures – and they struggled with capacity.

The leading companies in the market decided there was a better way to do this and, by creating a captive program, they solved the capacity issue and achieved a far better outcome.

Turn to Oswald

Determining if a captive program is right for your business requires connecting with an experienced insurance partner who has the depth of resources and knowledge to fully vet your specific situation.

Oswald provides thoughtful, carefully researched and customized captive solutions that provide stability, control and positive financial returns.

For more information, please visit our Property & Casualty page or contact us below.

Direct line: 248-530-2483

Property & Casualty - Captives

This post was originally published in August 2019; updated September 2023.