Pros and Cons of Comm. Captive Insurance

[Indiana_Adam]

I'm running into several of these larger companies being with a captive insurance group based out of the country. I need some ammo to help at least get the opportunity to bid for the business.

Any of you commercial guys familiar with these captive groups and had any luck breaking up these relationships?

I spoke to a senior UW with one of our brokers and gave me a bit of info on them, specifically that with rates where they are now, it is usually cheaper to go with a standard carrier/broker and offers better coverage than these captives right now.

Any insight would be greatly appreciated.

 

[reedrhoden]

That's a really loaded question most insureds big enough and with a large enough risk appetite would be well served in a captive. They own part of the company and are incentivized by keeping claims low. The dividends in good years can be substantial and we all know if you have a bad year with a standard carrier they're going to get off of it anyway. It's coming out of one pocket or the other. May as well be eligible for dividends in the good years. Why not familiarize your self with captives and be able to offer it as a service to your client.

 

[Indiana_Adam]

Unfortunately, I dont have access to any of these captives(that I know of). I'm not opposed to the idea, but I also have little to no power on who we contract with. Do you know of any good sources where I can get a better understanding of these captives and where/how to access them?

Is that something an angent can AOR?

 

[reedrhoden]

Best bet is to find out what carrier they are using to back the program. The captive will technically be the primary carrier but generally the insureds will need 'A' paper so they'll use a carrier like Zurich, Swiss Re etc... As backing. Then you can search for access to the carrier. Another option would be to find a large agency that has a captive division to team up with. Large national/global agencies like Ghallager, Marsh, AON etc... Usually have entire divisions dedicated to the creation and management of captive programs. Make a friend there and team up. Good luck!

 

[Indiana_Adam]

Reed, thank you for the information. I did some researching yesterday(while home with a sick kiddo) and it seems like the captive setup is a sweet deal for the parent company and those large enough to go that route. However, if you aren't the parent company and just a member of the group paying premium, then I don't see the perks being any better than going with a mainstream carrier. Have you done a good bit of work or are experienced with these Captive setups? Would you have some time in the future to chat so I can pick your brain? This whole introduction of captive companies just blew my mind and made the P&C world that much larger...that's awesome and a little overwhelming.

 

[reedrhoden]

I'm by no means an expert but I've done a fair amount of it. I used to have several large ready mix contractors in a captive.