Businesses must employ strategies to minimize risk. For many companies, that includes using a captive organization for insurance needs. Captives are specialty insurers who are made up of member companies. They have grown in popularity as more states allow their formation, and captives have been formed to cover an expanding range of company sizes and industries. That doesn’t automatically mean that every company should choose a captive, or that the one you are considering is a good fit for your risk management plan. These tips can help you when you are researching the best strategies for choosing the right captive organization for your needs.
Understand the Captive Structure
There are multiple variations of the captive model, with some types suitable for small- or mid-sized businesses. Understand the different structures and which ones are right for your company before making a decision.
Examine The Risk Strategies of Each Group
When you join a captive, you put your own capital at risk. It is imperative to find an organization that matches your approach to risk management and investing. Look at the captive’s risk profile, loss ratio and balance sheet for insight.
Determine Compatibility With Your Company
Just like any type of investment, captives are not for everyone. In researching your options, you may find that joining a captive is not the right move.
A captive organization can be a good solution for a wide range of companies. Be sure to conduct proper research to ensure success in choosing the right captive organization for your business.