724.612.4995 Phil@medTRANSltd.com
What is captive Insurance, in simple ENGLISH
A captive insurance company is a licensed and regulated insurance company owned by a business (or individual) in which issues various insurance polices to it’s owner.   In SIMPLE ENGLISH, when you’re a business owner and you need to cover risks to your business, you either buy a commercial policy from a commercial carrier, or you can pay premiums to your captive to protect your business against those risks.
Your Business
Common Ownership
Your Insurance Co.
Your business is exposed to risks everyday.   Some risks are common to all businesses, therefore a commercial carrier will offer off-the-shelf policies.   Risks specific to your businesses needs require customized policies.   Commercial carriers don’t issue custom policies.
Your insurance company is in the business of issuing customized insurance policies.   Captives are well suited to cover GAPS in Coverage and/or deductibles with commercial policies or risks a commercial carrier does not want to issue.  When an employer can’t buy an insurance policy for their risk, they are simply Self Funding that risk on their balance sheet.
Incentives to Captive Participation
Advantages to captive insurance far out weigh disadvantages when proper planning is involved

Common Advantages to captive Insurance

Common Disadvantages to captive insurance


Lower Insurance Costs

Insurance premiums must be adequate to meet claims demands which is #1 priority for ALL INSURANCE Co.  In addition, much like a commercial carrier, a captive insurer is also in the business of being profitable.   The big difference between the two is a commercial carrier inherently has cost centers captives do not have, such as acquisition/marketing costs, overhead and profitability requirements to satisfy shareholders (not policyholders).

Cash Flow

Commercial carriers rely heavily on investment income.  Premiums paid are likely paid well in advance of claim payments which may or may never occur.   The time between a claim being incurred and paid could be as early as 60 days to 6 months or more.   Therefore, the business advance funds a risk and allows the insurance company to earn investment income on those funds.


Risk Retention

By having lower embedded expenses, the captive is able to offer a greater level of protection to the business because it can purchase more coverage; if that is the desire of the business.


Customized Coverage

When the commercial market is unwilling or unable to provide coverage, the business is left to self-fund that risk.  By self-funding a risk is not always the best accounting solution.   A captive can issue policy types for certain risks the business is self-funding today, or, maybe a commercial policy does not cover or excludes a certain type of risk from a common policy.  The captive can cover these commercial policy gaps as well.


Risk Management Focus

When a business is involved in a captive, it’s economic interest tends to shift toward mitigating the risks of the business, WHY, because if the business can effectively prevent a risk from occurring, it stands to financially gain by lowering insurance costs.   In other words, if you pay a commercial carrier $100,000 premium and have no claims during that policy year, it’s not likely you’ll see any of the $100,000 in the following year.   With a captive, if you pay $100,000 premium and have no claims, you will have insurance company underwriting profits.

Underwriting Benefit over Time

A common expression within captive insurance is 2 out of 5 years will be more costly then expected.   But, over a 5-10 year period, the unit cost of insurance can and will decrease by way of underwriting profits earned by the captive.   With medTRANS, our unique structure allows members to realize underwriting profits faster then traditional group captives.

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