Captive Insurance

The captive industry is on the rise and showing no signs of slowing down. According to Captive Insurance Times, 14 billion dollars in premium income entered the captive market in 2020. Captive insurance premiums currently account for more than half of all commercial insurance premiums globally. With all the buzz about captives, you might wonder if it could help your construction business.

The best way to answer this question is to first define the captive insurance process. Captive insurance is a self-insurance alternative in which a parent company or group of companies create a licensed insurance company to provide coverage for itself.

There are many types of captives, but for this article, we’ll focus on group captives, which are the most common type of captive for middle-market construction companies. Group captives are owned and controlled by multiple non-related organizations. It is formed as an independent entity and insures its owners’ risks.

Group captives are ideal for construction companies because contractors pay high rates for the three coverages that are often included: workers’ compensation, general liability, and auto liability. Although a member is not required to have all three lines of coverage in the group captive, workers’ compensation is almost always included.

As you are aware, the construction industry is a very competitive one, and having a competitive advantage over your insurance costs can be a substantial benefit. Consider this: if your organization can pay 10% to 50% less for workers’ compensation than your competitors, how much work will you gain and how profitable will it be?

Finally, captives are significant because they provide control over your premiums, claims, and loss control resources, among other things. With greater control over your annual premium, it’s a CEO or CFO’s dream to be confident when budgeting or bidding work three to sixteen months in advance. Knowing that their renewal price is more consistent offers them an advantage in ensuring that the construction jobs are properly fit.