When a business purchases insurance, they are trading the unpredictable nature of potentially catastrophic losses for a more predictable expense, in the form of insurance premiums. However, insurance premiums can change due to claims filed, catastrophic events or rate increases, leaving some level of unpredictability for businesses to contend with. Captive insurance solutions can help businesses control costs in three ways.
Better Risk Management Strategies
Members of group captives are usually similar industries that face similar risks. Because all the members of the captive benefit when fewer claims are paid out, they are incentivized to share their most effective risk management techniques with other members of the captive.
Reduced Startup Costs
The experts at Caitlin Morgan Insurance Services recommend options, such as a protected cell captive, to clients who wish to keep their startup costs low. A PCC offers similar benefits as traditional single-parent and group captives.
When a business purchases insurance through a standard insurance company, the insurance company keeps any profits that exceed claims paid out. Members of a captive insurance company retain those profits.
Captive insurance combines the risk management benefits of traditional insurance with the degree of control afforded by self-insurance. This makes captive insurance a good option for companies that wish to control their insurance costs.