For a ground-transportation operator running a fleet of more than 300 power units across multiple markets, commercial auto liability was one of the largest fixed costs on the books — and, in the traditional market, one that returned nothing when loss experience ran favorably. Every premium dollar left the business permanently, regardless of how well the fleet performed. Captives Insure designed a single-line captive program to change that equation.
Social inflation continues to be one of the most discussed topics in today's environment. Carriers are attempting to find ways to mitigate nuclear (and thermonuclear) verdicts to protect their balance sheets and insureds have the same desire as one significant loss can threaten the ability of the business to remain solvent. Even with the appropriate risk management procedures in place, one accident can result in millions of dollars paid and result in markets retreating from certain lines of business, trades, and jurisdictions. Even if the carrier remains on the risk, the premium needed to account for this potential loss severity, even for best in class operators, can be onerous. Profitability across a carriers portfolio can be impacted by a few small operators that were hammered by a thermonuclear verdict. This results in all businesses regardless of loss experience to be impacted by rate increases and limitations in capacity
Every well-run captive has a captive manager at its center. It is one of the most important relationships in the structure and, for organizations new to the concept, one of the least understood. The manager is neither the owner nor the insurer; it is the professional firm that keeps the captive operating, compliant, and financially sound year after year. Understanding what the captive manager does — and, just as importantly, what it does not do — is essential to understanding how a captive program actually functions
Ask most executives what their insurance costs, and they will point to the premium. It is the number on the invoice, the figure in the budget, the line item finance reviews at renewal. But premium is only one component of a broader and more revealing measure: the total cost of risk. Organizations that manage to premium alone are optimizing a single variable while ignoring the system it sits within — and in doing so, they often overlook the largest opportunities to reduce what risk actually costs them
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 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
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