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A Definition Of Group Captives
business insurance

A Definition Of Group Captives

Insurance can be a difficult and expensive field to navigate, especially if you are the consumer. However, there are options on the market that make it affordable to you and give you a hand in decision making. This is an explanation of group captives.

What Is Group Captive Insurance

When you invest into an insurance company to own a piece of it, this means you are part of a captive insurance company. You have an equal say in the decisions made for the company and determine the coverage offered. If you do this as a group of people, you become a member of group captive insurance.

Types of Group Captives

There are two divisions in this type of company. Homogeneous captives are people involved in the same sort of business or happen to be involved in the same industry. Since they have much in common, they know what they need for insurance for their type company. Heterogenous are leaders who are part of a group captive company but are from different fields when it comes to business and industry. The companies might be the same size, allowing them to determine what insurance to offer.

Types Of Captive Plans

There are a few types of plans for group captives. Companies can decide to settle their initial losses by themselves instead of drawing from the collective fund. This is called a Frequency Fund. If more money is needed beyond the Frequency Fund, a group can adopt a Severity Fund to handle the additional claims. If you want to operate your insurance group like a standard company, you can run a Fixed Cost Contribution Fund. Your premiums go towards running the group along with the claims that the members submit. Whichever route you decide to go with, the decision must be determined by all the members of the captive since everyone gets an equal say in what happens.