Webinar Preview: ‘When Captive Insurance Makes Sense’

Once a seemingly exotic alternative to traditional group health insurance and carrier-provided property and casualty coverage, Captive Insurance has long since moved into the mainstream — for small as well as large and midsize businesses.  

From the outset reasons for considering a Captive have been fairly constant:  

• The possibility of significant savings;  
• Increased control of claims and risk management strategies; 
• Customized coverage; 
• Greater transparency;  
• The opportunity to earn dividends based on the program’s experience.  

As healthcare costs — including those for pharmacy — have continued to skyrocket, the urgency to control healthcare and pharmacy spend has elevated as well, and Captives have surged in popularity. And with good reason. 

As my colleague Karin Landry, Managing Partner of Spring Consulting, an Alera Group Company, told the International Risk Management Institute (IRMI) publication Captive.com in 2023, by funding employee benefit risks, employers can save over 10% compared to going to the commercial market. 

More recently, attorney Amanda Luby advised her fellow lawyers in an article for the Florida Bar Journal, “… in today’s ever-hardening commercial insurance market, captive insurance companies can become life-savers for middle-market businesses. Lawyers who represent such businesses, regardless of the industry, need to understand why and how captives can help their clients.” 

Educational opportunity 

If you haven’t considered joining or creating a Captive for your business, it’s probably time to ask yourself why. Even better, commit yourself to learning about whether your organization is well-suited to a Captive solution by registering for the next event in Alera Group’s Engage series of employee benefits webinars, “When Captive Insurance Makes Sense.” 

During this one-hour webinar, from 1-2 p.m. CT on November 21, our Captive Insurance experts will explain how Captives work, their advantages and disadvantages, and what factors determine whether a Captive solution is best for a given business.  

Focusing primarily on employee benefits solutions — especially those covering healthcare and pharmacy spend — we’ll present case studies that demonstrate how Captives have benefitted their members, and we’ll touch on the ways a Captive can help manage the cost of property and casualty (P&C) risks. 

You’re certain to come away with a strong understanding of whether the Captive alternative is right for you and your organization. 

Time for a re-evaluation? 

Over time, businesses evolve and market conditions change. Earlier this year, Alera Group presented an Engage webinar titled “Finding, Using and Transitioning Out of a PEO” for growing businesses. Some participants had grown to the point where they were considering assistance with their employee benefits program from a professional employer organization (the “PEO” in the webinar’s title); others had reached a size that made moving on from a PEO to a traditional brokerage a possible option. 

The point is, what might have been the best option a few years ago might not be the best option now. 

Even if you’ve previously considered and rejected Captive Insurance as a risk management solution for your business, it may be time to reconsider. The world has changed a lot over the past few years, and chances are your business has too. Captives have evolved some as well, and our webinar will explore recent developments. 

“We have seen circumstances where the captive concept can take several years to develop within a company,” the assistant director of Vermont’s Captive Insurance Division in the Department of Financial Regulation recently told Risk & Insurance magazine, “while in other cases, market conditions can accelerate the process.” 

Captive case study 

While Captive Insurance is the best option for many companies, it is not a simple solution. Consider the process Alera Group followed in enabling a consortium of colleges and universities to come together to create a better healthcare program, which has provided qualitative improvements and quantitative savings using a Captive-based approach. 

We conducted an extensive feasibility study to identify the appropriate funding structures to meet the consortium’s goals, then worked with the group’s members to establish specifically underwritten coverage for their self-insured health plans along with a Stop-Loss Insurance program leveraging the Captive. 

The program has driven significant savings and consistently reduced the healthcare trend for its members.  

Other advantages the member have experienced through their membership in the Captive: 

• The ability to negotiate lower fees from third-party administrators (TPAs); 

• Better pricing, with less volatility; 

• No payment of profits and carrier taxes on the base level of claims; 

• Reduced pharmacy costs; 

• Ownership of a large portion of savings resulting from the program; 

• The potential for a dividend payment from Captive surpluses; 

• Population health management. 

Making an informed decision 

Our November 21 webinar won’t get into the level of detail outlined in the case study, but it will help you to decide whether an assessment of Captive Insurance feasibility is your logical next step. Given the number of organizations that have determined a Captive solution is best for them, we’re sure you’ll consider it time well spent. 

REGISTER FOR THE WEBINAR 

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: 

• Prabal.lakhanpal@aleragroup.com 
• Connect with Prabal on LinkedIn