Which of your company’s captive insurance coverage risks keep you awake at night? Is it the fear that one of your employees will seriously hurt himself/herself on the job? Is it the fear that one of the governmental agencies will come to your company, perform an inspection, and find something to fine you for? Is it the fear that you can’t afford the coverage you need/want. Or is it just the knowledge that something totally out of your control could show up and threaten the long-term viability of your business? These fears are exactly the kinds of ideas that can be resolved through an alternative risk funding structure.
Captive insurance, especially, is the perfect vehicles for insuring risks that are not available in the commercial market, for covering risks that may be excluded in a standard commercial market, and for creating an affordable structure to create reserves losses that might not be affordable in the commercial market. Captives also provide a level of control over the process that is not available in the commercial market.
Examples of Captive Insurance Coverage
Worker injury coverage, for example, is a complex captive insurance coverage that may cause a lot of uncertainty. No business owner wants any of their employees injured on the job, but accidents happen. Whether you live in a state that requires workers’ compensation insurance or you live in a non-subscription state and you just want to provide a level of security for your employees, you want to know that your employees are not going to suffer because of an accident, but you don’t want to be taken advantage of. If you self-insure a layer of your worker injury insurance, and form a captive to manage that risk, you have the best of all worlds: you create an insurance premium that is tax deductible, you control the pre-event and post-event procedures through your risk management and loss control practices, you assure that your employees are treated the way you want them to be treated for their injury, and with favorable loss experience you recoup the underwriting profit.
Workers’ compensation is what is known as a “controlled” line of business, meaning that states dictate the terms of the coverage. Another controlled line is auto liability. These coverages cannot be totally insured through a captive insurance structure in the middle market segment because the total exposure would be prohibitive. But by taking the “working layer”—that limit where most of the losses occur—you can substantially reduce the cost of catastrophic coverage.
While controlled lines of coverage are somewhat complicated in that they require excess participation, or in some cases “fronting carriers” that will issue policies on behalf of your captive, other coverages may not be so complicated.
Cyber exposures are currently a huge unknown. What kind of captive insurance coverage does your business need? What will it cost if your business is targeted? Who do you turn to if your business is attacked? In this instance, VCM can help you craft a policy that will cover the exposures you may have, establish a premium for the exposure, and set aside reserves for future losses.
Risk retention groups are limited to certain liability coverages—those that have the most long term and financially devastating effects.
Generally speaking captive insurance coverage options include the following:
Medical Malpractice Liability
Workers’ Compensation High Deductibles
Employee Benefits High Deductibles
Auto Liability High Deductibles
Windstorm High Deductibles
Property High Deductibles
Contact us to talk about the exposures that keep you awake at night and how we can best turn those concerns into captive or risk retention group insurance coverages.