Group captives for staffing

Are you tired of unpredictable renewals, insurance carrier declinations of placements restricting your growth, instability in rates, and waiting for your experience modification to catch up with your safety and risk management practices? Imagine having pricing expectations four months out from your renewal date, more flexibility in making placements and an insurance cost specific to your loss performance.

Does this sound too good to be true? Think again. Group captives make this all possible and are a hot commodity in the industry because of it.

Here are six advantages of group captives for staffing companies:

  • Predictable pricing – your insurance cost is almost entirely based on your individual performance which allows for early forecasting. A composite rate can protect you from unanticipated premium difference at audit due to reclassifications.
  • Ownership of an insurance program along with like-minded, best in class companies; whereas in the standard market you’re subject to rate increases based on how the industry as a whole (good or bad) has performed, not to mention state mandated rate increases.
  • Entitlement to the return of underwriting profits instead of the insurance carrier retaining the proceeds.
  • Generation of investment income on loss fund dollars. Even if you perform at expected losses, claims are not paid out immediately but over a period of several years. While loss fund dollars are on hand prior to payment, investment income is earned.
  • Authorization over program decisions – TPAs, safety services, discretionary use of loss control dollars, etc.
  • A broader underwriting appetite allows you to expand the nature of your placements giving you more growth opportunities.

While there is no barrier to exit a captive after the first policy term, a captive is ideally a long-term solution. Being such, consideration should be given to the following:

  • Collateral is required whether posted via a letter of credit or cash. You do earn investment dollars on cash collateral. You’ll need to analyze the opportunity cost of tying up cash or borrowing capacity.
  • If you exceed your expected loss funds dollars, then you may be in an assessment position as a captive is a loss sensitive program. Carefully review the program maximum.
  • Group loss sharing is a captive requirement although what comes along with this is individual protection on shock losses.

If you’re interested in a program and partnership that can provide visibility into your workers’ compensation costs and establish a long-term solution, contact a Marsh McLennan Agency (MMA) advisor. to discuss whether a captive solution is right for you.

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