Members of a professional association often face common risks that are unique to their trade or industry. An association captive insurance company may offer these members a cost-effective vehicle for insuring against their specific potential losses and liabilities.
A captive has the flexibility to tailor underwriting decisions to meet its members’ needs. This customization can provide the insureds with coverage and limits that may be difficult or expensive to procure in the conventional insurance market. The captive also establishes and manages uniform procedures for processing claims and can adopt appropriate loss control measures to reduce claims.
By controlling these critical underwriting decisions and administrative processes, the captive realizes cost savings that translate to lower insurance premiums for association members. Members also benefit financially as underwriting profits and investment income on reserves may be available to fund member activities and benefits.
The experts at Caitlin Morgan advise that an association and its members must carefully evaluate the factors involved in forming an association captive insurance company. There are licensing, tax and regulatory considerations that will require attention. The association will also need to gauge the commitment of its members and the likelihood of raising the necessary capital. By undertaking a thorough analysis, an association and its members can reach an informed conclusion about the feasibility, costs, and benefits of forming a captive.