Article

This leading independent hospitality operator manages a large portfolio of hotels and properties across the United States. With operations spanning multiple states and over 120 locations, the company specializes in providing exceptional guest experiences while maintaining rigorous operational and safety standards.

Captive Insurance Solution Provided

Policy Structure: C.I. structured and placed a primary $5 million per occurrence / $5 million aggregate General Liability (GL) policy tailored to the hospitality industry's unique exposures.

Captive Retention: The captive retained 100% of the risk, allowing for maximum premium retention and opportunity for underwriting profit

Carrier Paper: The policy was issued on A- AM Best, IX rated surplus lines paper, ensuring lender acceptance and compliance

Deductible Structure: Deductibles were strategically set at levels acceptable to lenders and property management partners, balancing risk retention with financial prudence for the hospitality portfolio.

Premium Flow: Approximately $2.6 million in gross written premium (GWP) is retained by the captive annually, representing over 80% of the total $3.13 million GWP and maximizing retention of underwriting profit on premium at risk.

Key Features and Strategic Benefits

1. Enhanced Control and Customization

The captive reinsures the fronting carrier, allowing the company to participate directly in claims management and implement risk mitigation strategies tailored to hospitality-specific exposures including slip-and-fall claims, liquor liability incidents, and guest injury scenarios.

By using a captive, the insured has the flexibility to adjust coverage terms and risk appetite as their portfolio evolves and market conditions change, rather than being constrained by rigid commercial market offerings that often exclude or heavily restrict hospitality risks.

2. Financial Impact

Captive retention of >$2.6M GWP annually enables the captive to keep 100% of underwriting profit, directly reducing their net total cost of risk and improving bottom-line profitability across properties.

Surplus generated in the captive can be invested over time, providing an additional income stream through investment returns and supporting long-term financial resilience as the hospitality portfolio grows.

3. Lender and Regulatory Compliance

Policies are issued on highly rated surplus lines paper, ensuring compliance with lender requirements and facilitating continued access to capital markets and financing options for property acquisitions and renovations.

The use of a fronting carrier ensures regulatory compliance across all jurisdictions in which properties operate and allows the captive to issue certificates of insurance as required by third parties, guests, and business partners.

4. Risk Management and Claims Control

This captive structure empowers the hospitality company to influence claims handling, including the ability to select counsel and manage litigation related to guest injuries, property damage, and liability claims—which can lead to lower claim costs and improved outcomes.

The captive's direct involvement in risk management encourages a proactive approach to loss prevention and safety across all properties, including guest incident protocols, staff training, and facility maintenance programs, further reducing claims frequency and severity.

5. Long-Term Strategic Advantages

As the captive accumulates surplus from profitable underwriting years, the company can distribute dividends back to ownership, reinvest in property improvements and safety enhancements, or expand coverage to additional lines such as workers' compensation or property insurance.

The captive structure provides a buffer against insurance market volatility—particularly critical in the hospitality sector, which has experienced significant commercial market rate increases and coverage restrictions in recent years—reducing exposure to sudden premium escalations.

Program Summary Table

Feature	Details
Policy Limit	$5 million per occurrence / $5 million aggregate
Captive Retention	100%
Carrier Paper	A- AM Best, IX surplus lines
Total GWP	$3,130,000
Captive Premium Retention	~$2,600,000 GWP (>80% of total premium)
Lender Acceptance	Yes, with compliant deductible structure
Key Benefits	Underwriting profit retention, claims control, investment income, surplus growth
Regulatory Compliance	Achieved via fronting carrier and surplus lines paper
Strategic Impact	Lower total cost of risk, improved risk management, enhanced guest safety protocols

By partnering with Captives Insure, this hospitality operator successfully implemented a captive insurance solution that delivers superior control, transparency, and financial benefit compared to traditional insurance. The program not only meets lender and regulatory requirements but also positions the company to maximize underwriting profit ($2.6M+ retained annually), invest surplus, and strengthen long-term business resilience while maintaining exceptional standards across the entire portfolio of premium hospitality properties.