Many customers want to market their insurance program to what is called the Alternative Risk Transfer marketplace. This market is usually comprised of Single Cell Captives, Group Captives, and Rent-A-Captives. There are five attributes to this marketplace and they are as follows:
Captive owners have much more to say in their insurance program when it comes to claims, loss control, and expense ratios.
Captives often build very large pools of capital that, if not paid out in the form of claims, gets returned to the captive owner.
Investment Income and Underwriting Profits
Loss funds grow on a tax-deferred basis and in some cases underwriting profits can be withdrawn tax-free depending on your premium volume when (831B) rules apply.
Many times the captive option is less expense than purchasing traditional insurance, and has less volatility than the open marketplace.
Captives base the premium of a particular account on the loss experience of that account; whereas, the traditional market bases your premiums on underwriting appetite, class rating, losses, investment portfolio, individual underwriter biases, etc.