How does a captive work?
The operations of a captive are similar to those of a national insurance company. A captive can insure just about any type of risk for the parent company, including workers’ compensation, general liability and automotive coverage. A captive issues direct policies to the insured company, collects premiums and pays any claims. A construction company can form its own captive or work with other construction companies to form a group captive that covers the risk of multiple organizations. Another variation is the “rent-a-captive,” an insurance company owned by a third-party sponsor such as an insurance broker. The sponsor insures the risk of many companies. Why is it so captivating? Typically, financing risk in a captive lowers overall costs and helps a construction company stabilize costs over the long haul, because it’s less susceptible to the ups and downs of the insurance industry. Captives also can enable your business to obtain insurance coverage — at a lower cost — that might other
