Captive management insurance policies are a unique option for insureds who want autonomy in addressing risks. An insurer who assumes risk issues a traditional insurance policy based on the characteristics of their client. The client then pays monthly premiums in exchange for coverage. Conversely, a captive management program provides similar coverage options, but the insured owns and manages the policy. Although this type of coverage is unconventional, it can benefit businesses and insurers.
The Upsides of Captive Management Insurance
Consider the following four benefits.
Increase Control with Captive Management Solutions
One of the tremendous benefits of a captive management program is the greater degree of control that it affords to your clients. These policies are often called “self-insurance” because the insured’s assets and capital fund them. Along with this investment comes greater leverage in executing policy management tasks. A captive management policy might also afford insurers more control. When you partner with your insured, you can mitigate risks more directly and thus control liabilities more effectively.
Gain Leverage When Negotiating With Underwriters
An insured may also want to use a captive management program because of the leverage it offers when negotiating with underwriters. Although the insured owns this type of policy, your clients will rely on underwriters to cover specific exposures indicated in their policy. The insured’s policy ownership allows them to negotiate favorable rates and ample coverage. Rather than simply paying for policies pre-determined by an underwriter, captive management policies empower insureds to access more flexibility throughout the underwriting process.
Insure Against a Wide Range of Unique Risks
Yet another benefit of a captive management policy is the wide range of risks that it can cover. Standard insurance policies often have strict limits on liabilities, but captive policies can circumvent many of these limits because the insured owns, funds, and manages their own policy. It allows your clients to allocate capital toward covering exposures other insurance policies would be unlikely to cover. This benefit is particularly attractive for clients who work in high-risk industries and niche markets.
Mitigate the Assumption of Risk with Captive Management
In addition to the myriad benefits that a captive management policy can offer your clients, this type of coverage can also benefit you. Indeed, insurance agents can see lucrative rewards from underwriting captive programs because insureds mitigate their own risk. Because the policy’s value comes from funding from your client instead of you, clients have more motivation to employ stringent risk reduction strategies. With lower risks and less capital investment, this is a win-win for insurers and insureds.
