The vast majority of Fortune 1000 companies utilize some form of captive insurance. The primary reason being that captives can lower the cost of insurance risks and, over time, provide stability in the budgeting and cash flow of a company’s insurance expense. As a licensed insurance company, a captive may provide its owners direct access to the reinsurance marketplace, which may provide some efficiencies in the wholesale purchase of risk transfer coverage.
In addition to traditional risks such as Workers’ Compensation, Auto Liability, and General Liability, a captive can insure additional “hidden risks” of the business. Such risks include Wage & Hour Litigation, Product Recall with Brand Rehabilitation, Regulatory/Administrative Actions, and Litigation Defense, among a host of other uninsured or underinsured exposures, in order to establish a more robust risk management program.