How adding A- (Excellent) rated fronting to a client's existing captive solved the rated-paper barrier that was blocking lender and contractual acceptance — while preserving roughly 85% of gross written premium inside the captive the client already owned
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.
An unrated captive cannot, on its own, issue policies that satisfy A-rated-carrier requirements — Captives Insure (C.I.) closed that gap by fronting the $5 million per-occurrence / $5 million aggregate general liability program through an A- (Excellent) rated carrier and reinsuring 100% of the risk back to the client's captive. The result: fully compliant, lender- and contract-acceptable coverage, with roughly 85% of gross written premium still retained inside the captive the client already owned.
Residential and habitational general liability in the New York metro area is among the most difficult casualty risks in the country to place. The combination of a plaintiff-friendly statutory regime, aging housing stock, urban security exposures, and accelerating litigation severity has pushed standard-market carriers to reduce appetite, layer on exclusions and sub-limits, and raise rates well beyond general inflation. For operators of any scale, renewal frequently means fewer viable markets, higher retentions, and coverage that is narrower than the exposure it is meant to address.
New York's Labor Law §§240 and 241 — the so-called "Scaffold Law" — sits at the center of the problem. It imposes effectively absolute liability on owners and managers for gravity-related injuries to workers, regardless of the injured party's own conduct. Routine maintenance, repair, and renovation work can therefore generate outsized verdicts against a property owner with little available defense, a dynamic that is close to unique to New York and that reinsurers price accordingly.
Layered on top of that are the exposures characteristic of older, dense residential portfolios: lead-paint tail liability on pre-1960 building stock; habitability, mold, and water-damage claims; and, in urban multifamily settings, assault, battery, and negligent-security allegations that are frequent and severe. Social inflation and the growth of third-party litigation funding have further extended settlement timelines and lifted verdict values, particularly in the plaintiff-favorable venues of New York City.
The rated-paper barrier: Many well-run operators respond by forming a captive to retain their own premium and underwriting result. But a captive alone does not solve the compliance problem: lenders, mortgage covenants, and contractual counterparties almost always require coverage on AM Best-rated paper, and an unrated captive cannot issue it. Without rated paper, even a well-capitalized captive cannot be used to satisfy those obligations — which is exactly the gap this engagement addressed.
C.I. structured an occurrence-based general liability program that gives the operator direct participation in its own underwriting economics, while ensuring the coverage is issued on rated paper that meets every contractual and statutory obligation the business faces.
Writing New York habitational GL through a captive is only viable when the coverage grant is deliberately paired with a rigorous risk-management framework. This program is built around exactly that discipline: a focused coverage form supported by contractual risk transfer that pushes higher-hazard exposures onto rated third-party paper, and documented physical controls that hold down frequency and severity.
The operator runs a formalized contractual risk-transfer program for all third-party service providers — landscaping, snow removal, security, and more — through a master services insurance addendum. It mandates A- or better carriers, defined limits (GL $1M/$2M, umbrella $5M, auto $1M CSL, statutory WC), specified ISO forms, and additional-insured, primary & non-contributory, and waiver-of-subrogation endorsements in favor of the owner parties. An override clause supersedes conflicting terms, and identical requirements pass down to every subcontractor. Higher-hazard functions — including on-site and armed security — are transferred to insured, contracted vendors rather than retained.
The portfolio carries documented, portfolio-wide physical controls: 100% camera coverage with multi-year retention, controlled key-fob or keyed access at every location, and doormen or on-site and live-in staff at select buildings. These controls are backed by formalized handbook and HR governance and professional third-party management — the operational evidence that supports favorable underwriting treatment against habitational benchmarks.
Key Advantage: The program's coverage form is intentionally focused, and higher-hazard exposures are addressed through contractual transfer onto rated vendor paper rather than absorbed into the captive. Aligning the coverage structure with the operator's demonstrated controls is precisely what makes a captive solution workable for a New York habitational risk — the retained risk matches the risk the operator actually manages.
The retained economics the client's captive was built to capture remain fully intact under the fronted structure. The captive retains roughly 85% of gross written premium — net of a fronting fee of approximately 10% of GWP, a program fee of approximately 5%, and a nominal ceding fee. Broker commission on the program is 0% of GWP. Adding rated paper did not cost the client its retention; it made that retention contractually usable.
Because the captive participates at 100% of the ceded risk, favorable loss experience accrues entirely to the operator rather than to a third-party carrier. Premium not consumed by losses and expenses becomes retained underwriting profit — the direct financial reward for the disciplined risk transfer and physical controls the operator already funds.
Across policy years, retained premium and underwriting profit compound within the captive, building surplus and strengthening its balance sheet. That growing capital base can support additional coverage lines, improved reinsurance terms, and eventual distributions to ownership. Surplus is releasable from trust following policy expiration, subject to the fronting carrier's approval.
| Metric | Prior Captive (Unrated) | C.I. A- Fronted Structure |
|---|---|---|
| Rated Paper for Lenders & Contracts | No — unrated captive | Yes — A- (Excellent) fronting |
| Lender & Contractual Compliance | Not satisfied | Fully satisfied |
| Coverage Usable to Meet Obligations | No | Yes |
| Premium Retained in Captive | Yes | Yes — ~85% of GWP preserved |
| Underwriting Profit | Retained | Retained — 100% participation |
Result: The operator already captured its own premium and underwriting result through a captive it owned — but without rated paper, that coverage could not satisfy the lender and contractual requirements the business faced. By fronting the program through an A- (Excellent) rated carrier and reinsuring 100% of the risk back to the captive, C.I. made the coverage fully compliant and usable, while preserving roughly 85% of gross written premium and 100% of the underwriting result inside the captive the client already had. The value was not a new captive — it was rated paper the existing captive could not issue on its own.
C.I. provides turn-key captive insurance solutions that allow businesses to retain significant premiums, control, and underwriting profit within their own captive insurance company — all while providing A-rated paper to satisfy every contractual requirement.
Reach out to C.I. today for a no-cost evaluation of your program.
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