Butler University Uses Captive Insurance for Experiential Learning

Butler University's captive insurance program gives students practical experience with underwriting, actuarial analysis, governance, and risk financing, while also demonstrating the operational support required to sustain a university captive, speakers said during the 2026 Vermont Captive Insurance Association conference.

The session, "Educating Through Experience: Butler University's Student-Run Captive," featured Thomas Faulconer, clinical professor at Butler University; Claire Richardson, senior captive consultant at Hylant; and Nicole Sanders, consulting actuary at Pinnacle Actuarial Resources.

The panel discussed how Butler uses its captive as an educational tool, how the program has evolved, and what the university has learned from the operational challenges it has faced.

Combining Education and Risk Financing

Butler formed its captive in Bermuda in 2017, in part to give students in its risk management and insurance program practical experience.

Before redomesticating to Vermont, the captive insured animal mortality, certain university property, and liability risks arising from Butler's Real Business Experience program, a program where teams of students develop and operate businesses over the course of a semester.

Students in an insurance company operations course have helped underwrite coverage for those businesses. They have also served in roles such as CEO and chief financial officer, reviewed the captive's finances and underwriting information, worked with service providers, and presented to its board.

Ms. Richardson participated in the program while attending Butler. She said students worked in teams focused on finance, loss control, marketing, and project management, giving them experience with both captive operations and professional presentations.

Ms. Sanders said the captive also introduces students to insurance concepts such as incurred but not reported reserves, loss development, actuarial pricing, and reserve analysis.

Operational Support Remains Essential

Following a strategic review, the captive redomesticated from Bermuda to Vermont in November 2023. The university also changed the captive's name, structure, and service providers. Its move from a single-parent captive to a sponsored cell structure was intended to provide more flexibility for the program's future development.

Mr. Faulconer said the transition took place during a period of staffing changes and shifting responsibilities at the university. With several changes occurring at the same time, the captive encountered operational difficulties that highlighted the importance of leadership continuity and administrative support.

The experience also showed that a captive insurance company cannot operate separately from the university's broader insurance program. University leaders need to understand why the captive exists, how it works, and what role it plays in the institution's risk-financing strategy. Commercial insurance purchases and captive coverage must be coordinated to avoid gaps, duplication, or decisions that limit the captive's effectiveness.

That coordination requires communication among university leadership, risk management, the captive board, and service providers. Ms. Richardson said captive managers, consultants, actuaries, and other advisers can help explain the program's purpose and provide the information stakeholders need before making decisions that could affect its operations.

The panel's broader point was that institutional support is essential even when a captive has educational and financial value. Changes in personnel or responsibilities can disrupt the program if ownership of key decisions is unclear or if the captive is not fully integrated into the university's insurance planning.

Evaluating Coverage Opportunities

As part of the strategic review, Butler examined whether adding coverages could improve the captive's financial performance and create more opportunities for students to participate in its operations. Students worked with the captive's advisers to analyze auto physical damage and general liability, including the potential pricing and cost savings for each coverage.

Ms. Sanders said the pricing method depended on the coverage and the available data. For animal mortality, Butler did not have enough historical claims information to use its own experience. The actuarial analysis therefore relied on industry information and the insured value of each animal.

The university had more experience available for auto physical damage, allowing the actuaries to use that information to price the frequency layer. Industry factors were then used to evaluate higher limits that were not supported by Butler's own loss history.

General liability required a different approach. The actuaries used Butler's commercial premiums and industry factors to estimate the cost of the portion of the risk that the university would retain through the captive.

The review found that moving auto physical damage into the captive did not offer clear savings at the time. General liability showed more potential, although Butler had not added the coverage as of the conference session.

Mr. Faulconer said the work remained valuable even when a proposed coverage was not implemented. Students gained practical experience reviewing exposure and loss data, evaluating retained risk, considering premium requirements, and presenting their findings to university stakeholders.

Keeping the Captive Aligned with University Goals

Ms. Richardson said universities use captive insurance companies for many of the same reasons as other organizations. These may include greater control over coverage, the ability to retain underwriting profit, more predictable budgeting, access to reinsurance, and greater stability through commercial insurance market cycles.

A university may also have risks arising from its particular operations and educational programs. Connecting the captive to the institution's enterprise risk management strategy can help identify gaps in the commercial market, finance retained risk, support loss-prevention efforts, and evaluate coverage for emerging exposures.

Strategic reviews give the captive board an opportunity to determine whether the program still serves the university's needs. The review may consider emerging risks, capital and financial performance, regulatory and governance requirements, and whether the captive remains aligned with the university's objectives.

The panel said this work should continue after the captive is formed. As the university's risks and priorities change, its board and other stakeholders should reconsider the captive's coverages, funding, structure, and operations.

At Butler, the captive's value is not limited to its financial results. It gives students direct experience with insurance company operations and an opportunity to work with captive managers, actuaries, and other advisers. The university's experience also shows that sustaining such a program requires administrative support, coordinated insurance decisions, and a clear understanding of the captive's role.