The insurance your company is currently purchasing through the traditional market likely includes coverages such as general liability, property, workers’ compensation, product liability, directors’ and officers’ and auto. Many captive owners are perfectly comfortable with these coverages and wouldn’t consider moving them to a captive. However, there are times when the terms, conditions, or coverage levels that are available in the market do not meet a company’s needs.
Archive for October, 2016
There are likely risks your company is currently self insuring. Some of these risks are obvious to you; for example, you may decide that for certain risks where you have a history of frequent, small claims, you’d rather pay the claims directly instead of relying on insurance coverage. However, because you want to make sure you are covered in the event one of those small claims becomes a very large claim, you keep traditional coverage but maintain a high deductible. So, effectively, you are self-insuring your claims up to a certain “retention” level. You may even have excess or catastrophic coverage that goes beyond that initial policy limit.
At this point hopefully you are thinking a captive sounds great, but are wondering exactly what kinds of coverage can be written and what are the limitations? First, it’s important to understand that there are certainly types of coverages that are better suited for a captive. These are identified in the table below: