Request a quote

Is a Captive Worth the Risk?

February 14, 2024 / Carley Skidmore

No one wants to pay more for less, which is the unfortunate reality of today’s insurance market. With rising premiums and limited capacity of coverage, many property owners and developers are turning to alternative solutions in managing risks.

One popular option to the traditional insurance carrier is a captive. A form of self-insurance, a captive enables you to underwrite your own insurance rather than paying premiums to a third-party insurer. In fact, approximately 90% of Fortune 500 companies today use captive insurance as part of their overall risk program.

Once the captive is established, it essentially operates like a typical insurance company in terms of regulatory requirements with you as your own insurance entity. When claims are kept to a minimum, you receive the profits vs. the insurance carrier. In turn, you will be responsible for potential claims that may arise. However, those losses can be offset by the premiums you pay, the reinsurance you secure, and investment capital earned through your captive.

In the current hard market, captive insurance can cover high deductibles on existing coverage with traditional carriers or help obtain coverage that may not otherwise be available or affordable. Whether it’s property damage from a hurricane to the environmental impact of a major mold infestation, captives cover some risks that traditional insurance does not. It can also offer more control over claims along with greater profit and cost savings – particularly for commercial property owners and developers.

But a captive is not without its share of challenges or limitations. As the owner/insured of the captive, you must still comply with all federal and state insurance laws and regulations, in addition to risking your own capital or collateral in the event of a catastrophe or series of events that pierce your maximum loss fund. You also need to plan ahead for the added challenges that may result from lack of insurance expertise (as you get up to speed) and/or restricted market access, though service providers exist to help through such issues.

As captives continue to gain momentum in the commercial real estate market, there’s no better time to discuss your options. Together, we can determine if a captive, group captive, protected cell or simple large deductible program might work best for you.

At CREIS, we exclusively address the coverage needs of today’s commercial real estate market along with the potential benefits of Alternative Risk and captive insurance options to the latest trends, regulations, and market dynamics. Let’s talk about your real estate risks and the best approach to managing those risks today.

How can we help

We’d be happy to assist you or point you to the Signers National group that best meets your needs.