The commercial insurance and employee benefits marketplaces have become significantly disrupted by a variety of factors in recent years: social inflation, upward medical trend, low interest rates, damaging natural disasters and nuclear verdicts to name a few. As advisors, our ability to mitigate these external forces is limited. In an effort to combat the shrinking market capacity and increased premium trends, we’ve been working diligently over the past year to formalize a new captive option for our clients. CG Captive Solutions is a wholly owned protective cell captive giving clients more market access as an alternative or supplement to the traditional insurance marketplace.
Captives have the unique ability to enable clients to sell third party risk to their customers. A great example of this is in the property management world. Owners of apartment buildings, senior living facilities, or multiple investment property owners have the ability to sell renters insurance and tenant legal liability policies to their customers directly using a captive to distribute the policies; then benefiting from the underwriting income.
Medical trends and the cost of employee benefits continue to rise. Captives are becoming more and more popular in the employee benefits space as a buffer between the insureds partially self-funded layer and the stop gap. This can be beneficial to insureds for two reasons. First, taking on more risk in this “buffer” layer can create additional cost savings on the cost of stop-gap coverage. Second, using a micro-insurance company, such as a captive, to finance your risk allows you to reap the same benefits that an insurance company does by reserving for losses in that buffer layer on a pre-tax basis.
Christensen Group has partnered with Strategic Risk Solutions, the largest independent captive manager in the United States. A dedicated captive manager at SRS will function as the compliance arm of the captive.