What Is Captive Risk Management?

Alternative risk transfer models exist to help companies find risk management solutions beyond traditional insurance because a traditional policy from a major insurance provider is not always the most cost-effective tool for that goal. It’s often an important part of things, but even when insurance policies are the way to go, captive insurers can often provide cost-competitive risk management that is more closely tailored to a company’s needs, especially if that company has a truly unique business model. Captive risk models provide versatility and control while instituting a few cost-saving models.

How Captive Companies Save Businesses Money

A captive insurer is essentially a company you own for the purpose of providing your businesses with insurance. You can set them up with a single parent company or multiple parents, too, so businesses that can not afford this form of risk management individually can often access it through a broker by partnering with other companies who share their insurance needs. This allows each parent company to invest less up front while enjoying the coverage, because the costs of insurance are reduced for each member of a risk pool as more members are added. With traditional insurance, you can’t choose the risk profile of the other pool members, but captive insurance brokers work hard to match companies with similar risks so they make solid partners in the captive venture.