In 2001, we had a number of clients that were evaluating group captives, seeking an alternative to traditional insurance to gain access to underwriting profits as a result of their commitment to safety and loss prevention. They turned to us as their valued insurance broker for strategic advice on which option to select based on size and structure. During this process, we came to the realization that we could take the reins and developed our own group captive. This provided us the opportunity to structure it in a way that best suited our clients and their unique needs.
In order to start a group captive, two things are required: client support and captive structure. We had the client support from the start, with eight clients included as founding members of Graham’s group captive. Clients for our group captive are usually entrepreneurial in nature with good loss histories and a strong commitment to a holistic safety culture.
The companies involved in the program share in the risk with an insurance carrier/reinsurer by taking on a reasonable and predictable amount of risk that is funded through their premium payments, which gives them the opportunity to receive up to 60% of their unused premium dollars back plus investment income. They must be fully committed to operating as safely as possible to fully realize the rewards of the program. The saying “more risk, more reward” is true here, and these clients needed to establish a safety culture that positions them for optimal success.