Exploring the Benefits and Considerations of Member-Owned Group Captives in a Hard Insurance Market

Understanding Captive Insurance

A captive insurance company is a risk-management arrangement that functions like self-insurance. While 'single-parent' captives are typically feasible only for large, well-capitalized companies, associations or groups of companies can join forces to form a captive to provide insurance coverage. Professionals such as doctors, lawyers, and accountants have formed many captives.

Evaluating the Financial Costs and Benefits

A recent paper by Dr. Patricia Born, the Midyette Eminent Scholar of Insurance at Florida State University and Triple-I Non-Resident Scholar, delves into the financial considerations for these companies. The paper, 'A Comprehensive Evaluation of the Member-Owned Group Captive Option,' explains how mid-sized companies seeking to lower their insurance costs and control other aspects of their insurance program might consider the costs and benefits of group captive insurance arrangements.

Captives in the Current Hard Market

The paper outlines numerous benefits of group captive membership, including greater control over risk management concerns and lower insurance costs. It includes information on the types of companies that use member-owned group captives; the various types of captive arrangements; how they are currently used; where they are located; and legal and regulatory compliance concerns. It also offers several case studies. 'Group captives have become an attractive risk management option for a growing number and type of companies,' the paper concludes. 'The current hardening in the traditional insurance market makes captives even more enticing and suggests the captive industry will see more growth in the form of new captive formations and increasing group captive membership.' A hard market, known in the insurance industry as a seller's market, describes situations when insurance is expensive and in short supply.