Captive Insurance Companies Beating the Pants off of Standard Insurance Company Results

The latest results show that captive insurance companies are showing higher profits and better dividends than standard insurance company results. Why is this?  Well for one the insureds are the owners so they have plenty of skin in the game. Safety and risk management have to be a priority in order to have stellar results. Also every policy holder is engaged in the risk transfer process and understand what losses can do to profits. In standard insurance contracts the insureds don't own the company and usually do not participate in profits. When claims occur the losses are transfered to the insurance company. The insureds allow the company to adjust and pay the claim. The insured is involved by being on the sidelines. In a Captive insurance company the insured's can't afford to be on the sidelines that is why it works.  I believe captives will continue to grow and replace standard insurance contracts in the upper middle market over the next decade. We will see how it shakes out. Until next time be careful out there and know your risks.  K

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