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Captives & Risk Retention Groups

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What Is A Captive Insurance Company and Risk Retention Group?
The word "captive" is a general term and usually refers to "self-insuring" in some manner. A captive insurance company ("captive") is an insurance company organized to cover the insurable risks of the parent organization and/or its affiliates. Thus, it is a captive of the company or group that it insures.

A Risk Retention Group (RRG) is one form or type of captive that is restricted to writing only liability coverage. A Risk Retention Group may have either state or federal charters. A federal charter allows the Risk Retention Group to write liability coverage directly in any state where it is registered without having to become licensed carrier in each state or use a fronting company. This can significantly reduce the cost and effort of crossing state boundaries. However, they are restricted to writing liability coverage.

Why Do People Use Captives and Risk Retention Groups?
According to industry data, currently over 40% of major U.S. companies own their own captive insurance companies. What these companies have learned is that there are many significant advantages including:

Gives you control over your claims: no one knows your business and industry better than you
Captures the investment income for you, not for a third-party insurer
Reduces costs by eliminating the large insurance company's profit margin and potentially high overhead
Offers flexibility to take advantage of lower rates during soft markets to build reserves for use to cover more risk when the market hardens
Allows you to purchase high limit ‘reinsurance' at wholesale because you benefit from your claims experience, not that of other companies that may have high claims: with better claims experience, the excess of net premiums over claims is retained to offset any future claims
The claims management process is more efficient due to dedicated nature of the captive

How Does A Risk Retention Group Work?
Risk Retention Groups are insurance companies. They are similar to mutual companies in that they are owned by their policyholders. Risk Retention Groups were enabled by the Federal Liability Risk Retention Act of 1981 to help business and professional organizations obtain liability insurance that had become unavailable or unaffordable due to the increasing numbers of lawsuits.

BHL works extensively with a wide range of Risk Retention Groups. Within the health care industry, BHL provides substantial experience and innovative solutions in the following two business segments that were facing relentless price increases:

General and Professional Liability Insurance for skilled nursing, assisted living, continuing care retirement communities, and related industries. Learn more.

Medical Malpractice Insurance for physicians and surgeons. Learn more.

Are you a physician, surgeon, medical administrator or long-term care owner/operator experiencing outrageous liability and malpractice insurance increases? We can help.

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