Member-Owned Group Captives 101
Today, more than 51% of companies throughout the United States have entered into some form of
alternative insurance program. A member-owned group captive is defined as an insurance company
that provides insurance to and is controlled by its owners. These programs serve a broad range of
industries, empowering their members with the security and peace of mind that comes from greater
control over their insurance destiny.
Some benefits include:
Potential return of underwriting profit in the form of a dividend
Competitive overall premium; Initial pay in premium is often less than conventional insurance premiums
Potential investment income earned on the dollars in your loss fund
Enhanced loss control and risk management services
Enhanced claims management including a TPA selected by the captives owners
Long-term premium stability
To qualify, a company must show a strong commitment to safety, above average loss history, be financially sound and pay a combined premium for workers compensation, auto liability/physical damage and general liability/garage liability in excess of $100,000.
For those who qualify, a captive insurance program may provide a long-term, stable mechanism to control insurance costs and cope with changing market dynamics.
- Health Care
- Food & Beverage
- Roofing Contractors
- Real Estate
- Sales & Service
- Wholesale & Distributors
- Restaurant Franchises
Recognizing the need to bring a unique and differentiating approach to risk transfer for their clients, Arbor Insurance Group partnered with Captive Resources to place its first client into a member-owned group captive insurance program in 1997.
Since then, Arbor has provided alternative insurance solutions to a healthy number of businesses of all sizes and industries, ultimately, providing them stability and control over their insurance destiny. The member-owned group captive insurance concept reaches across a broad range of industries, empowering the members with the security and peace of mind that comes from greater control over their insurance destiny.
Members insulate themselves from the cyclical nature of the traditional insurance industry while reaping the benefits that may come with being an owner of an insurance company with safe, quality and like-minded businesses.
Captive Resources is an independent captive consulting company dedicated to empowering businesses to control their insurance costs and develop organizational cultures that exemplify the very best safety and loss prevention practices. Members of CRI captives come from a broad range of industries and from all regions of the country.
For over 30 years, CRI has provided companies the ability to become insurance company owners, rather than insurance company buyers, through the creation, development and oversight of member-owned group captive insurance companies.
CRI understands that the price of insurance purchased in the conventional market often includes markups to pay for the insurer’s acquisition costs, marketing expenses, high commissions, administration and overhead. Such pricing is specifically designed to deliver profit to the insurer’s bottom line. CRI’s goal is to help minimize those costs in order to enhance your bottom line.
Today, CRI has grown to become the indisputable leader in providing consulting services to member-owned group captive insurance programs, serving more than 35 captives that generate over $2.3 billion in premiums annually. CRI has become the largest, most experienced and successful U.S. advisor to member-owned group captive insurance companies. Over the past 35 years CRI’s guidance has helped to return in excess of $1.7 billion in dividends to member owners.
The Power of a Captive
|Traditional Carrier||Captive Program|
|Premium Available to Pay Claims||$100,000||$120,000|
|Claims in a Given Year||$35,000||$35,000|
|Your Business Profit||$85,000|
Why join a captive insurance company?
The insurance marketplace commonly goes through “hard” and “soft” cycles where premium fluctuations have little relation to individual loss experience. By pooling your resources and creating your own captive reinsurance company, these swings can be avoided, making your costs more predictable. Also, by pooling your resources, you can lower costs and retain investment income, both advantages your current insurance company retains.
Am I putting my company at financial risk by joining a group captive?
The simple answer is, No, you are not. If you were simply paying a premium into a fund in a bank and hoping your losses don’t exceed the fund, then yes, it would be very risky. Captive Resources’ client captives are structured properly, using a licensed and admitted insurance company rated A- or higher by A.M. Best, to act as the policy-issuing company and an equally strong reinsurance company to insure the catastrophic losses, so the risk is level and manageable. The captive only assumes risk in the smaller, more predictable layers.
Assuming the captive is profitable, will there be dividends? If so, when? Will there be some relationship between loss experience and dividends?
When declared by the Board of Directors, members who have profits in their respective loss funds will have these profits returned to them along with any investment income earned for that policy period. Generally, returns begin three years after the end of a policy period; this is a decision of the Board of the particular captive.
Will profitability (if any) result in a decrease in premium rather than dividends?
Funding for losses is developed by the captive’s independent actuary. Over a period of time, generally three to five years, captive pay-in premiums should decrease if losses are less than the amount being funded. Conversely, if losses exceed funding, premiums will need to be increased. If the captive Board of Directors declares a dividend from a particular member’s loss fund, members may choose to use this cash toward premium.
What problems will be addressed by Captive Resources that are not addressed through the normal insurance marketplace?
Captive Resources and Arbor Insurance Group develop specialized loss control programs tailored to members’ unique needs, special handling instructions for each member’s claim and unique coverage forms not available through the standard marketplace.
How are premiums developed?
Premiums are developed based on the last 5 years of your company’s historical information. A few major components include the last 5 years of loss history, last 5 years of exposures and last 5 years of premium history. Unlike the conventional marketplace, your premiums are NOT developed based on carrier performance, industry performance and losses; rather, premiums are developed primarily on your own company’s performance which, many times, may result in lower pay-in premiums than the conventional market.
In 1994 I was introduced to the member-owned group captive concept of insurance by attending an educational seminar sponsored by Arbor Insurance Group. The concept was new to them, as well as to me, but together we learned all we could. We were intrigued by the concept and potential benefits and decided to pursue this alternative to our conventional insurance program. After many discussions we had learned we qualified and were accepted into the captive. The captives are very discriminating as to who can enter their programs as only the cream-of-the-crop companies are accepted and equally so, Captive Resources, the captive consultant/manager is very selective when it comes to choosing what insurance brokers are able to represent their stable of captive programs. It is vital to the successful growth of the captives that they only let in the best of the best. As a long-term member of one of the largest captives I can tell you that not all insurance brokers are knowledgeable enough to truly educate prospective members on the captive concept and help them get into the right captive. Over the 20 plus years I have been working with Arbor I have gained a great deal of respect for their professionalism and knowledge in dealings with captive insurance. I would highly recommend them to anyone, and would be happy to talk to anyone who has additional questions about the value added by the advisors of Arbor Insurance Group and the captive programs of Captive Resources.
Randy L. Everett, V.P. CFO, Wilson Products Compressed Gas Co. Inc.
Arbor Insurance Group has always looked out for our company’s best interests. In doing so, they introduced us to the member-owned group captive concept. The various benefits of the concept intrigued us most specifically with the ability to gain control over our insurance program, earn back dividends from underwriting profits, stable premiums and be amongst a group of other like-minded business owners who too are committed to growth, safety and the ability to control our insurance. In 2007, ATAS International became members of one of the more well-known captived within Captive Resources which now is comprised of over 200 members across the United States. As a member for over 10 years, I can strongly encourage and recommend businesses of varying industries who are committed to and have a proven record of operating safely, to invest time into learning more about such an alternative insurance opportunity that can positively impact multiple aspects of your business including its bottom line. There are few brokers with the willingness or ability to introducer clients or prospective clients to such alternatives. Arbor Insurance Group never once hesitated in introducing this concept to ATAS, and we as a company have never wavered from our commitment to Arbor as our broker and trusted advisor. I strongly recommend both Arbor Insurance Group and the member-owned group captives of Captive Resources to those companies looking for a knowledgeable, professional and honest broker and an alternative insurance concept that can leave a very positive impact on your company.
Theodorus “Dick” A. Bus, President, ATAS International, Inc.
Arbor Insurance Group has been able to provide Baseline Contracting, Inc. with unique and cost effective alternatives to the standard insurance markets. Their service has been exceptional and the programs we are involved in provide protection against exorbitant price increases, allowing us to bid competitively without concern for future cost increases. Arbor has dealt with us professionally and has delivered on everything promised to date.
Bud Bauer, President, Baseline Contracting, Inc. / Siteline Services, Inc.
“Being a family owned and operated company we look to partner with service providers who have a similar mentality like us at Four Winds Concrete. Arbor Insurance Group displays that mentality in understanding the hard work, dedication, service, fairness and trust it takes to operate a business in today’s environment. Arbor has provided us unique and alternative ways of managing our risk as our company continues to grow. It is comforting to know that when a question, concern or problem arises, Arbor is always available and there to walk us through it. The Casilio family would happily recommend Arbor Insurance Group to any business looking for a true professional, fair and honest partner to represent their insurance and risk management needs.
Sherri Casilio, President, Four Winds Concrete, Inc. / West Truckers Franchise, Inc.
In 2016, Arbor Insurance Group approached us with the idea of joining an insurance captive. Arbor had been representing our company with commercial insurance for quite a few years and felt that it would be a good fit for us. We attended a meeting to learn about the concept. We were quite skeptical at first and asked a ton of questions. The team at Arbor was very patient and committed in answering them. It took us a year to get comfortable but we eventually decided that Arbor was right and made the decision to join the captive in August 2017. We’ve not regretted the decision. We were able to join the captive for a little less premium than we were already paying commercially and gained a lot of control over our future rates with good loss history. We look forward to a long relationship with Arbor and the captive we are an owner/member of. It’s been the best insurance move we’ve ever made and for the first time ever I’ve been somewhat enthused about buying insurance. We love working with Arbor as well as the folks in our particular captive. Their integrity, service commitment and professionalism are second-to-none.
Carl Swartentruber, Owner, Green Acres Outdoor Living, LLC.
We have been utilizing Arbor Insurance Group as our company’s insurance agency of choice for over 6 years now. To date, Arbor has expeditiously handled our account and has been professional and ethical in every aspect of their relationship with us. Every company hopes to have the opportunity to develop such a relationship with a service provider and I am more than happy to say the team at Arbor has become one of our company’s most trusted advisors. Arbor introduced the concept of a member owned group captive to our company a couple of years ago. The multitude of benefits discussed at the time during the educational seminar were very intriguing given the constant battle to keep traditional premiums from increasing in spite of having an excellent loss record. The potential to stabilize our premiums, realize a potentially significant return based on our company’s low loss levels, the ability to be a part of a group of safe and like-minded individuals and to finally experience the control over our insurance future led us to commit to and enter one of Captive Resources’ most well-known captive programs. As a newer member to the captive, I have no concerns with our future insurance programs thanks to the education and confidence both Arbor Insurance Group and Captive Resources provided to me. I have worked with and heard from many brokers in my 30+ years of doing business and can truthfully say there are little to no brokers with the knowledge, willingness or ability to bring such a concept forward to a company such as Wolverine Constructors. If you are a company considering an alternative such as a member owned group captive, I strongly encourage the use of Arbor Insurance Group as your source.