What a captive is
Premiums for the risks inside a captive stay with a company the owners control, instead of going entirely to a commercial carrier. In return, the owners take on parts of the risk a carrier would otherwise hold, including claims and the cost of running an insurance company.
Not a deductible, and not a new carrier
A captive is different from a self-insured retention or a large deductible on a traditional policy. It is also different from switching carriers at renewal. The organization, or the group, owns an insurer.
Regulated, and capitalized
A captive is still an insurance company. It is regulated where it is licensed, and it needs capital. Those are reasons to study the idea carefully, not reasons to treat it as paperwork.
Two common forms
Other structures exist. The useful question is not the label. It is whether the organization is in a position to own part of an insurance company.
Single-parent
One organization owns the captive and uses it for its own risks. This is the form most people mean when they say “our captive.”
Group
Several organizations share ownership. They may work in a similar field, or they may simply be large enough that a shared structure is worth discussing. A group captive still has owners, capital, and rules about who can join.
Why a larger group looks at one
None of these outcomes is guaranteed. A difficult loss year is still a difficult loss year, and the owners feel it more directly when they own the company paying the claim.
A say in how a layer of risk is financed
Organizations usually raise the question when losses have been steady and the commercial price no longer seems to track them.
A place for risk they are willing to keep
A captive can sit next to coverage the organization still wants a carrier to take. It does not have to replace the rest of the program.
A longer view than one renewal
A captive is judged over years, not against a single quote. That is also why it is a poor fit for an organization that needs this year’s premium to be as small as possible.
What it does not do
It is not automatically cheaper
Owning an insurer adds cost: capital, regulation, and administration. A lower premium on a spreadsheet is not the same thing as a lower cost over time.
It does not cover every line by default
Benefits, property, liability, and workers’ compensation each have their own rules. Some lines fit a captive more readily than others. A captive does not, by itself, replace the policies an employer still needs to buy.
It does not replace the broker relationship
Many organizations that use a captive still buy coverage from carriers for the risks they do not want to keep, and they still need someone to place and service that coverage.
How we can help
South Texas Risk Management is a brokerage and consulting firm. We do not form captives, choose where one is licensed, or manage a captive’s daily operations.
What we can do is sit with the program you already have. We look at the coverage, the losses, and the budget, and we talk through whether a captive is a question worth pursuing — or whether the traditional program should stay as it is. If it belongs in the conversation, we help you see how it would sit next to the rest of the insurance you buy, and we stay with the planning, placement, and service around that program.