The "Captive Alternative"

While costs in these economic times continue to be scrutinized across many sectors, companies engaged in trucking, manufacturing, or other industries that need to buy insurance coverage would be wise to step back and analyze that cost and see if it makes sense to explore establishing a captive program to self-insure certain aspects of their business.  Despite having favorable loss experience and being a longstanding policyholder, many companies still experience sizable annual premiums increases as they in part have to subsidize the adverse experience of other policyholders. 

The  traditional thought has been that only Fortune 500 Companies have explored and utilized the captive alternative, essentially self-insuring the risk within their organization by forming their own offshore captive insurance company.   However, in today's environment with insurance costs continually escalating, coupled with the fact that there are now 30 U.S. jurisdictions with domestic captive laws, the captive alternative for companies of all sizes and industries has been made a lot easier.  More often today, smaller to mid-size organizations and affinity groups are forming their own onshore captive with the funds that would otherwise go to third party insurers and other service providers. 

Too often, companies pay significant insurance premiums when they in fact could retain that risk within the organization through a captive insurance company.  In fact, companies can reduce their insurance costs and if the organization does a good job of loss control, it can even make a reasonable return in a relatively short period.  Overall, by forming a captive, an organization can reap numerous benefits such as coverage stability, better risk management, tax savings, as well as curtailing their insurance costs over the long-term.