CAPTIVE INSURANCE Improve Your Operating & Financial Performance EXPLORE
CAPTIVE INSURANCE2021-10-14T11:17:46-05:00

As industry leaders, M.E. Wilson has been helping provide alternative insurance solutions, such as Group Captives, that help reduce clients total cost of risk while maximizing their profits.

Group Captives 101:

Group captives are independently owned and operated insurance companies that provide insurance to, and are controlled by, their owners.

A captive insurance company analyzes and insures the specific risks of its owners, typically reducing operating costs, and returns underwriting profits and investment income in the form of dividends

Advantages of group captive membership:

  • Greater claims management

  • Lower costs of protection

  • Insuring risks that may otherwise be uninsurable

  • Improved cash flow

  • Enhanced control & incentives for effective risk management

  • Direct access to reinsurance

  • Ability to tailor your insurance coverages

  • Potential tax benefits

A member-owned group captive is an ideal form of alternative insurance for companies or organizations that shows commitment to safety with solid safety programs in place, average or better than average loss histories, and pays a combined premium for Workers Compensation, General Liability, and Automobile Liability in excess of $100,000.

  • Construction
  • Warehouse & Distribution
  • Sales & Services
  • Transportation
  • Manufacturing

  • M.E. Wilson currently manages clients that are involved in Captive arrangements.
  • Data that is needed to submit to the Captive company will be compiled and submitted by M.E. Wilson.
  • On staff claims manager that helps manages claims along with Captive Claims Admin, Gallagher Basset.
  • On staff risk manager approved by Captives Resources to assist with Risk Profile.
  • Help clients understand financial implications and their performance in the captive program.
What types of coverage do captives provide?2021-10-14T11:40:20-05:00

Group captive insurance is most often used for standard casualty lines like: General liability, Product liability, Professional liability, Commercial Auto, & Workers’ Compensation. Of these lines of coverage, Workers’ Compensation coverage is the most common risk pooled in a group captive.

Why should my company join a group captive?2021-10-14T11:35:24-05:00

The insurance marketplace commonly goes through its “hard” and “soft” cycles where premium fluctuations have little relation to individual loss experience. These swings can be avoided by joining with other like-minded, successful companies to create your own group captive insurance company, making your costs more predictable and stable. In this way, you can lower your costs and earn investment income — both benefits you won’t receive from a traditional insurance company.

Am I putting my company at financial risk by entering a captive?2021-10-14T11:35:57-05:00

If it is done properly, you are not. If all you were doing is paying a premium into a fund in a bank and hoping your losses didn’t exceed the fund, then yes, it would be very risky. If, however, the program is structured properly, using a licensed admitted insurance company to act as the fronting company who actually issues your policy, and if a financially strong reinsurance company is used to insure the catastrophic losses, the risk is minimal. Under this concept, the assumption of risk occurs only in the smaller, predictable layer. By cutting fixed costs and earning investment income, financial risk is reduced, and the bottom line is enhanced.

Besides the premium, what will be the contribution to capital and surplus?2021-06-14T11:46:27-05:00

Typically, each member contributes $36,000 as capitalization. $100 is for a common share of stock and $35,900 is redeemable preference shares. Your company will earn investment income on the $35,900 for the entire period of time they are in the captive. Each member also posts a letter of credit to collateralize any possible assessment in the program, as well as to provide additional capital in the company. The amount of the letter of credit is specified in your proposal.

If you withdraw, how and when will capital and surplus contributions be returned?2021-10-14T11:41:38-05:00

Capital and surplus are returned when all policy years for which your company participated are closed.

If profitable, when will the group captive pay out dividends?2021-10-14T11:39:20-05:00

When declared by the group captive’s Board of Directors, members that have profits in their respective loss funds will have these profits returned to them, along with the investment income earned for that policy period, less any risk sharing. Generally, returns begin three years after the end of a policy period; this is the Board’s decision.

If there is profitability, will this result in a decrease in premium rather than dividends?2021-10-14T11:37:20-05:00

The captive’s independent actuary develops funding for losses. Over a period of time, generally three to five years, captive pay-in premiums should decrease if losses are less than the amount members pay into loss funds. Conversely, if losses exceed funding, premiums will need to be increased. If the captive Board declares a dividend, members may choose to use this cash toward their premium costs.

How do I get started?2021-10-14T11:43:01-05:00

M.E. Wilson Company partners with Captive Resources, LLC, one of the country’s largest captive consultants, to guide companies through the group captive analysis process.

Our staff will meet with you to describe the captive program in more detail, outline the underwriting and member selection process, and determine if the group captive is right for your company.

MEMBER BENEFITS

• As an owner of a captive, you have control over your insurance destiny.

• Policies are issued and reinsured by nationally recognized A+ rated insurers.

• Unused premium dollars are returned to members in the form of a dividend.

• Initial premium pay-in amounts are often less than conventional insurance programs.

• Premiums are based on your company’s loss experience.

• Captive participants earn investment income on the dollars in their loss fund.

• An independent risk control assessment is performed by Risk Consultants, Inc. To qualify for captive membership, the company must score an 80 or better.

• Enhanced risk control programs help reduce your losses, improving your dividend and ultimately reducing your upfront premiums.

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