Every risk a captive considers writing sits somewhere on a spectrum defined by two variables: how often losses occur, and how large they are when they do. Frequency risk describes exposures that produce many small, predictable claims. Severity risk describes exposures that produce few claims, but potentially catastrophic ones. Understanding where a given line falls on this spectrum is the starting point for structuring any captive program — and it dictates almost everything about how that program should be capitalized, reserved, and reinsured.
The captive conversation almost always begins the same way: an organization is frustrated with the commercial market. Rates have climbed for several renewals in a row, terms have narrowed, and the premium check no longer feels connected to the company's own loss experience. This inevitably drives the insured to question if they should just insure the risks themselves
A regional habitational property manager operating a multifamily portfolio across the five boroughs of New York City — with additional exposures in Westchester County and northern New Jersey — already owned and operated its own captive insurance company. The captive allowed the business to retain its own premium and underwriting result rather than surrender them to the commercial market. What it lacked was the one thing its lenders and contractual counterparties insisted on: coverage issued on AM Best-rated paper
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The feature appears in Captive Insurance Times' July 2026 edition, which brings together reporting, interviews, and analysis from across the captive and reinsurance community. The full issue is available on the publication's website
A large residential window installer operating in the state of Florida partnered with Captives Insure (C.I.) to restructure its general liability program around a wholly owned captive insurance company. The client carries a substantial general liability exposure inherent to residential construction and had historically ceded the full economics of that risk to the commercial market. Through a fronted captive structure, the client now retains over 80% of gross written premium within its own captive — capturing the underwriting result of a well-managed book of business while maintaining A-rated paper for its contractual and statutory obligations
Every organization finances its risk somewhere along a continuum. At one end, risk is transferred almost entirely to a commercial carrier for a fixed price. At the other, the organization retains and funds nearly all of its own losses. Most of the meaningful structuring decisions in captive insurance are, at their core, decisions about where on that continuum an organization should sit — and how deliberately it moves along it.
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