JOINING A GROUP CAPTIVE

 

 

TURNING PREMIUMS INTO PROFITS

 

How do Join a Group Captive?

When considering making a move to a group captive insurance program, the decision-making process is different than renewing your business insurance in the traditional market, where price and service level are generally the driving factors. This is because a group captive program is a different method of purchasing insurance as it also establishes a separate mechanism for growing and preserving financial assets outside of your existing business.

In addition to looking at the premium and claims payment history of a business, the captive manager will look at a number of other operational factors, including:

  • Length of ownership
  • Financial strength
  • North American Industry Classification System (NAICS) Code

The full analysis and qualification process can take two to six months. For this reason, it is not recommended that the evaluation of a group captive program be conducted in conjunction with a business’ regular annual insurance renewal.

When determining the value and projected annual premium with a group captive program, it is important to understand that conventional bidding and negotiation of rates is not part of the process. Captives do not use the rates filed with regulatory agencies, but rather establish premiums, that are developed by an actuary using various calculation methods in determining your loss fund, sometimes referred to as a “loss pick”. These determinations use five years of claims and premium data to determine the premium amount and claims fund deposit needed to protect the other members of the captive.

These actuarial forecasts tend to be conservative (more expensive) in the early years of captive membership because, as most business owners are aware, captives have differing claims reserves and payment practices. As a business ages in a captive program, the claims experience becomes more predictable because the claims reserving and payment strategy is set by the captive owners. This results in more significant cost savings and asset growth over time.  (We will be going more in-depth into the actuarial review in the next chapter.)

The process of joining a captive will take between three weeks to three months depending on the complexity of the business considering the option and the workload of the captive management company.

 

Navigating Captives

SECTION 1

INTRODUCTION TO CAPTIVES

 

SECTION 2

CAPTIVE BASICS

 

SECTION 3

BENEFITS OF GROUP CAPTIVES

 

SECTION 4

TYPES OF CAPTIVES

 

SECTION 5

IS A CAPTIVE RIGHT FOR ME?

 

SECTION 6

HOW TO JOIN A CAPTIVE

 

SECTION 7

831(b) CAPTIVES

 

SECTION 8

HEALTH INSURANCE CAPTIVES

 

SECTION 9

TURNING PREMIUMS INTO PROFITS BOOK

Get in Touch

 

David Leng, CWCA,

CPCU, CIC, CBWA, CRM

724-863-3420 x 3329

dleng@duncangrp.com

 

John M. Duncan, Jr

CIC, CWCA

724-863-3420 x 3311

jduncan@duncangrp.com

 

 

© 2017 Premium Reduction Center, powered by Duncan Financial Group     •David Leng     •724-978-2139     •dleng@duncangrp.com