CAPTIVE INSURANCE
Captive Insurance :
An Alternative To Traditional Workers ’ Compensation
What is captive insurance and why might you need it ? Captive insurance is insurance that is provided by a captive insurance company ( captive , for short ). Captives are wholly owned and controlled by their own insured members rather than by outside carriers . They choose to put their own capital at risk , believing that they can generate profits by instituting measures to help better control expenses . Unlike traditional insurance policies , where policyholders are beholden to an insurance company ’ s rates , captives ’ insurance policies allow policyholders to manage their premiums — and ideally lower them — by proactively managing their losses .
Say you are insured for workers ’ compensation through a traditional policy and worked extra hard to keep your losses low last year by enhancing workplace safety and instituting more rigorous employee training programs . Not only will the benefit of those losses be unrealized by your company in the form of reduced premiums , but you could actually face a premium increase if others in your risk pool have had increased losses or if overall administrative costs have risen . Why should all that hard work in controlling your losses not be rewarded ?
Through captive policies , you can benefit from your hard-earned loss reduction by sharing in the profits that your efforts have generated . Captives offer a number of monetary benefits , including the potential for lower up-front costs , increased investment income and additional tax breaks . They can also allow you to provide coverage under policies that are not widely available in the commercial market .
Here ’ s another positive : captives are administered by third parties who are appointed by the captive ’ s own members . These arrangements generally translate into first-class customer service due to the strict quality controls and high efficiency standards of the third-party administrators . Captive members also have access to professional risk management consultants who are tasked with working with you on proactive strategies to reduce risks and claims moving forward . In addition to reducing costs and optimizing cash flow , captives provide stable coverage from year to year , minimizing your need to constantly research new options .
SOME CAVEATS Of course , captive policies are not for everyone . Take your time in figuring out the right direction for your company and be sure to ask a lot of questions . Without careful due diligence , you could end up involved in captives with unsafe risk pools , outstanding tax liabilities , undercapitalized reserves or ambiguously drafted policies that may leave you in the lurch . Not all agencies are experienced in selling or administering captive-based alternatives , which means you may be limiting your options without even realizing it .
JGS Insurance can work with you to determine whether captive-based alternatives are right for you and help you avoid common pitfalls should you decide to move forward . We know the market well and will help you steer clear of risky options that could potentially bring down your business . If you end up deciding to stay with a traditional insurer , know that we will always be working “ behind the scenes ” to help you find the best coverage available for the coming year !+
Ryan Hager is the third generation to enter into the family owned and operated JGS Insurance . At JGS Ryan has worked with both family owned businesses and large corporations to provide them with Captive Based Solutions . Ryan specializes in providing proactive services to his clients to reduce their losses and premiums in order to gain control of their insurance destiny .
BY : RYAN HAGER , JGS INSURANCE
30 | SPRING 2017