Which Captive Insurance Coverage Is Right for You?

It’s no secret that finding the right type of insurance for your business can be a challenge. Any number of factors may play a role in determining the types of coverage that are available to you, as well as what types of premiums you can expect to pay. As an alternative to the traditional insurance market, an increasing number of companies are exploring the potential benefits of acquiring captive insurance coverage. Just as with other types of insurance, there is no one-size-fits all when it comes to captive insurance structures, and so it’s important to understand the various options in order to determine which is the best for you.

captive insurance coverage

Single-Parent Captives

For a large corporation, the single-parent structure is usually the best choice. It requires a significant investment to set up, as the captive is essentially its own company wholly owned by the parent. The captive then provides the insurance to the parent, as well as to any affiliates or subsidiaries of the parent.

This a great option for businesses whose annual insurance premiums on the open market are over $1.5 million. The parent needs to have the resources, not only to establish the company and organize it properly, but also to take a long-term view of the financial benefits, as these will increase over time.

The types of captive insurance coverage offered through this structure include just about anything that can be acquired from a private insurer, such as worker’s compensation, commercial liability, director’s and officer’s liability, property insurance, commercial auto insurance, and more. Additionally, single-parent captives can provide specialized coverages tailored to the parent’s specific needs. This includes things like terrorism insurance, cyber insurance, and other coverages that would either be prohibitively expensive or don’t exist on the private insurance market.


Group Captives

For companies with premiums in the $400,000 to $1.5 million range, the group captive insurance coverage option is often the best choice. These come in several forms, including industry captives, association captives, and risk retention groups. While the details of the membership may differ from one of these to another, the basic framework and benefits are the same.

In general, group captives are formed by multiple businesses that enter into an agreement to obtain their coverages from the captive, sharing the ownership and management responsibilities. These participating companies are often from the same industry or part of the same trade association, but this is not a requirement. The owners will usually hire an outside firm to manage the day-to-day operations of the captive, and the types of insurances offered are typically the same as those available from single-parent captives.


Rent-a-Captives and Protected Cell Captives

Rent-a-captives offer a way of acquiring captive insurance coverage to companies that would not otherwise be able to take on the financial burden of setting up a captive on their own. In these types of structures, an existing captive provides access to their facilities to another company, who pays a fee for this service in addition to any premiums for actual coverages.

Protected cell captives are essentially a type of rent-a-captive, although they include a more segregated cell structure within the larger company. Each cell is created and structured much like a single-parent captive, and these provide more protection than other types of rent-a-captives, including protection for each cell from liability for debts incurred by other cell owners.

The benefits of rent-a-captive structures are similar to those found in other types of captives, including more control over insurance coverage details and reduced overall cost. There may not be as much flexibility in the types of coverages available through rent-a-captives and protected cell captives as through the single-parent or group structures, but it is generally greater than can be found on the private insurance market.


Choosing Your Captive Insurance Coverage

Obtaining captive insurance coverage can be beneficial in many ways, but in order to gain the greatest possible advantage for your company, you need to choose the right captive structure. That being the case, it’s essential you receive the best advice as you explore your options, and the experts at Venture Captive Management have the industry knowledge and experience to provide just that.


To learn more about how we can help you obtain the right type of captive insurance coverage for your business, call us today at 770.246.8535.