Group Captives For Small and Medium-Sized Companies

An article by Barney Dixon in Captive Insurance Times looks at the option of group captives. Big companies that can independently afford the risk generally opt for single-parent captives. Grouping with similar companies offers the benefits of captives for less capital. Small and medium-sized companies may find them a better option. The main ownership structures are “Owned” and “Rented.” In the member-owned model developed by Illinois-based consultancy Captive Resources, group captives are structured as reinsurance companies. They are owned solely and equally by the members, with each member holding a seat on the board. According to the consultancy, traditional insurers base premiums on industry averages and state rates, which often don’t reflect any individual company’s loss experience. The member-owned group captives they advise use a company’s most recent five-year loss history to determine premium, a better indication of loss experience. The consultancy also claims that the ownership structure of its group captives reduces overhead costs.