Which Captive Insurance Structure is Right for You?

To be competitive as an employer, you need to offer your employees insurance, and in a lot of cases, you may even be legally required to provide insurance coverage to your workers. You may also need a range of other types of insurance products to protect your business from liability concerns as well as other issues.

You can buy into a traditional insurance plan, or you can take a different route and explore captive insurance structures. There are a few different types of options. Here’s a look at the most common captive insurance structures to help you identify what’s right for your business.

captive insurance structures

Single-Parent Captive

Sometimes referred to as a pure captive, single-parent captive insurance structures are when one organization forms a subsidiary to take care of its insurance needs. Typically, this option appeals to large companies that can pay millions of dollars into their insurance plan every year. The company gets the tax and investment benefits of those premiums, and it has a lot of flexibility because it doesn’t have to take into account the opinions of other parent members. However, the setup costs can be considerable.

 

Group Captives

Sometimes called a sponsored captive, a group captive has multiple parent organizations. Generally, this option involves a number of unrelated businesses coming together to form a captive insurance plan. If your business isn’t large enough to support single-parent captive insurance structures, you may want to consider a group captive.

Generally, companies that choose this arrangement pay about $400,000 to $1.5 million in annual premiums, but that’s just a sample range and the numbers can vary. Because you have to meet the needs of all the members in your collective, group captives don’t offer you the same degree of flexibility as single-parent captives, but as a trade-off, they are less involved and more affordable to set up.

 

Association and Industry Captive Insurance Structures

An association captive is a type of group captive. However, these businesses are not unrelated. Generally, they are part of an association. For example, the downtown business association in a community may decide to work together to start an association captive. Industry captives are similar, but all the companies are in the same industry. When companies from the same industry work together, they can pool their resources to find insurance plans that may be hard for organizations in their industry to get.

 

Rent-a-Captive

A rent-a-captive structure allows businesses or other organizations to try out the benefits of captive insurance structures without making a major time or financial investment. Essentially, you access an existing captive, but you may also need to obtain reinsurance and provide collateral to prove that you aren’t going to create financial risk for the captive. Then, if everything goes well, you can move toward the more traditional captive insurance structures mentioned above.

 

Captive insurance structures offer unique and compelling benefits for businesses, professional associations, industry groups, and other organizations. To learn more and to talk about which options are the best for you, contact us today. At Venture Captive, we have the tools and experience you need.