Employee Benefits
Benefits Captives: Your Business and What Your Competitors Are Doing
May 29, 2025
While it’s no secret among business and HR leaders that Captive Insurance has become the option of choice for organizations willing to take a non-traditional approach to managing employee benefits costs, some organizations remain wary. Alera Group’s recent webinar “Balancing Cost and Care: Could a Captive Solution Be the Right Fit for You?” dispels any exotic notions about Captives, outlining the forms they take, how they work and what kinds of businesses are best suited to them.
A recording of that webinar is available HERE.
Rise of the Captives market
In one form or another, Captive Insurance has existed as a risk management solution for many decades — originally for property and casualty coverage and primarily for large employers. But its viability as a solution for employee benefits and for midsized businesses has increased dramatically in recent years, fueled by volatility in the insurance market in general and by the skyrocketing cost of health insurance in particular.
As Alera Group reported in our 2025 Employee Benefits Market Outlook, “Despite inflation cooling, healthcare spending is outpacing GDP and continuing to drive premiums, as employers turn to self-funding and Captives to help contain costs.”
In short, there are two main reasons more businesses are opting for Captives and choosing Alera Group as their broker:
- Captive Insurance can provide significant cost savings opportunities, including underwriting savings, improved cash flow efficiency and elimination of volatility, and increased control over claims.
- Alera Group’s expertise in the space has brought market leading solutions to the table, with employers seeing substantial savings, over 20% in many cases.
According to the 2024 nationwide survey that informed our Market Outlook, 16% of businesses with 10-49 employees were self-funding or using some form of Captive for health insurance, with the percentage progressively greater for each size category: 19% for organizations with 50-99 employees, 33% for those with 100-499, 60% for 500-999 and 68% for companies with 1,000 or more.
Webinar highlights
In the webinar, we:
- Explain the basic concepts behind Captive Insurance
- Detail the options available in the Captive market
- Explore the pros and cons of those options.
A Captive, we note, is an entity that a business may establish on its own or in partnership with a third party to insure or reinsure risk. Captive Insurance offers a strategic way for employers to reap the benefits of self-insurance while creating a tool to manage volatility and create budget certainty.
Customizable options
How a Captive is structured depends on its owner or, if it’s a Group Captive, by its members. At a high level, there are three basic forms:
- Cell Captive: A turnkey solution, structured to allow clients to leverage the benefit of a Captive program in an efficient “ready-to-go" manner. The Captive structure is usually created and owned by a third party, with individual businesses’ participating in program cells segregated from its fellow members. This reduces the administrative burden but does restrict members’ control.
- Group Captive: Owned by its member businesses, it requires sufficient funding to pay out claims but also affords members greater control over how it pays claims and provides the flexibility to build programs for other offerings, such as voluntary benefits.
- Single-Parent Captive: Usually established by individual employers to fund its risks. This can include both employee benefits and property and casualty risks.
The range of structures a Captive may take can be designed specifically for the needs and goals of its owner(s).
Whether Captive Insurance offers the right employee benefits solution for your business depends on a number of factors, including your appetite for risk and how much you value the ability to control costs. At Alera Group, our Captive Insurance specialists work with clients to find the solution that best suits them — whether that solution is a form of Captive or in the traditional carrier market.
Learn more
Alera Group’s expertise in Captive Insurance solutions uniquely positions us to consult with organizations on alternative funding solutions to meet their business needs — not only for employee benefits but also property and casualty insurance.
Our Benefits Benchmarking webpage is a one-stop resource to:
- Arrange a complimentary benchmarking analysis to see hour your business stacks up against other employers of your size, industry and geographic location;
- Access the webinar recording of webinar “Balancing Cost and Care: Could a Captive Solution Be the Right Fit for You?”;
- Download our 2024 Healthcare and Employee Benefits Benchmarking Report and, after its release next month, the report’s 2025 edition;
- Obtain our brochure on the value and application of benefits benchmarking;
- Register for our June 26 webinar introducing the 2025 Healthcare and Employee Benefits Benchmarking Report.
VISIT THE BENEFITS BENCHMARKING PAGE
About the author
Prabal Lakhanpal
Senior Vice President
Spring Consulting Group, An Alera Group Company
As vice president of Spring Consulting Group, Prabal Lakhanpal provides technical and business consultation in the areas of employer-sponsored and voluntary employee benefits, product development, technology solutions and risk-funding solutions, as well as Captive Insurance. He undertakes strategic projects to help find innovative solutions for clients in a variety of industries, sizes and functions. Prabal joined Spring Consulting in 2015 after earning his master’s degree in business administration from Babson College. He is also a graduate of the University of Delhi. He has worked as a consultant and adviser to clients in various industries and sectors.
Contact information:
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