Employee Benefits Captive Insurance Co's, The Next Big Thing?

Captive insurance companies have been around for many years. The use of these facilities for employee benefits has just recently been explored. What companies are finding out is these member owned insurance companies can work quite well for employee benefits, especially health insurance. The set up is usually as follows, the employer becomes the first layer insurer who cedes second layer risk to their own captive. The captive buys reinsurance to cover catastrophes. This arrangement works quite well. The employer sees most of their cost savings in the first working layer. If claims can be reduced by wellness initiatives then this layer can become very profitable. The interesting thing about health insurance captives is that the larger the risk of employees the more predictable this insurance line can be. As many mid market employers begin to understand this, I predict we will see more group employee benefit captives who can control their working layer claims and be able to cut their health costs down immensely. Until next time be careful out there and know your risks. K

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