Adam Perea, VP of Elite Risk Insurance, and Bruce discuss captives as an insurance strategy, highlighting the importance of proper structuring and understanding total cost of risk. They explore the complexities, benefits, and risks of captives, emphasizing the need for long-term commitment and comprehension of the involved complexities.
Captives are not always cheaper, but can strategically lower the total cost of risk through proper structuring and risk pool participation.
Creating a captive involves assessing current policies and safety protocols to compare the cost of transferring risk to self-insuring within the captive, requiring businesses to have the capital or premiums to cover potential losses.
Deep dives
Understanding captives as a risk management strategy
Captives can be used strategically to lower the total cost of risk, although it is a misconception that they always result in cheaper insurance. While captives may offer cheaper premiums for specific lines of coverage, they require proper structuring and risk pool participation. When using a captive, businesses become responsible for the entire risk and need to have the capital or premiums to cover potential losses.
The process of creating a captive and considering risk transfer
Creating a captive involves a process of assessing current policies, loss runs, and safety protocols to compare the cost of transferring risk to the commercial market versus self-insuring within the captive. Larger deductibles can save premiums, but businesses must have the capital to cover losses fully. Elite risk advises clients on the best options for their specific needs.
The complexity and pitfalls of captives
Creating a captive means starting an insurance company, which requires compliance and capitalization. It is not as simple as just buying reinsurance, as there are thresholds and regulatory considerations. Captives are long-term plays and require commitment. While some administrative burden is involved, businesses can engage captive managers to handle day-to-day operations.
In this podcast episode, Adam Perea, VP of Elite Risk Insurance, discusses captives as an insurance strategy with Bruce. While captives may not always be cheaper, Adam and Bruce emphasize the importance of proper structuring and understanding total cost of risk. Adam explains the captive creation process, the need for long-term commitment, and the potential administrative burden.
Jeff Kleid, Founder
VCL Risk
800-979-0176
jdkleid@eliterisk.com
Get the Snipd podcast app
Unlock the knowledge in podcasts with the podcast player of the future.
AI-powered podcast player
Listen to all your favourite podcasts with AI-powered features
Discover highlights
Listen to the best highlights from the podcasts you love and dive into the full episode
Save any moment
Hear something you like? Tap your headphones to save it with AI-generated key takeaways
Share & Export
Send highlights to Twitter, WhatsApp or export them to Notion, Readwise & more
AI-powered podcast player
Listen to all your favourite podcasts with AI-powered features
Discover highlights
Listen to the best highlights from the podcasts you love and dive into the full episode