Embracing Control and Ownership of Group Captives Across Coverages

Editor 's Note:This article, provided by Captive Resources, LLC, examines the advantages of group captive insurance. It highlights how member-owned captives give organizations greater control and transparency, reduce costs, provide dividend potential, and foster collaboration—empowering companies to strengthen risk management strategies and achieve long-term financial stability across both casualty and medical stop loss programs.

A volatile insurance market. Social and economic inflation. Higher claims costs.

Today's complex business environment is challenging leaders to find creative approaches to running an organization, including facilitating innovative approaches to risk management. Forward-thinking leaders seeking to address these challenges and safeguard their organization's long-term stability are increasingly adopting a strategic approach to their insurance programs via member-owned group captive insurance.

While group captive insurance is designed for best-in-class risks (i.e., companies focused on continuously improving workplace safety and employee health), the model is still inclusive and versatile, allowing companies from different industries and of various sizes to participate.

The group captive model extends across multiple coverages, including casualty lines (workers compensation, general liability, and auto) and health benefits. Organizations that participate in both casualty and medical stop loss (MSL) group captives can experience myriad advantages including, but not limited to, the five highlighted here.

No. 1: Increased Control over Insurance Programs

In the member-owned group captives we advise, captive members are equal owners of an insurance company. By transitioning from the traditional market to a group captive, companies transition from passive buyers of insurance policies to active owners of their own insurance company.

The ownership structure offers member-insureds unique control, embodying dual roles as both insureds and owners that have an active role in the captive's decision-making process. The structure also allows group captives to remain agile and make necessary changes (e.g., adding/changing support service providers) as circumstances evolve.

While there are some differences, ownership and control functions similarly in both casualty and MSL captives, ensuring the benefits are realized across both types of programs.

No. 2: Transparency into Data and Financing

As owners, group captive members enjoy increased transparency into their insurance programs than they would in the traditional market. Here's how that increased transparency plays out for MSL and casualty captive members.

Benefits of Transparency in Casualty Captives

Group captive member-companies benefit from increased transparency into where dollars are spent in the running of the captive. They can track how much has been paid in claims, what remains in reserves, and what portion may be returned later as dividends if claims are lower than expected. Even before joining the captive, members can see a percentage breakdown of where premium dollars go—how much goes into loss funds, operating costs, risk control, administration, and more. Members can also participate in the claims process—the captive offers them insight into how claims are being managed and resolved, as well as active participation working with third-party administrators to move claims to closure.

Benefits of Transparency in MSL Group Captives

Those benefits extend to MSL captives, where access to claims data is critical for controlling spend. Data transparency allows members to identify cost drivers, detect patterns, and understand where the most controllable claims (i.e., predictable plan risk) come from. From there, the company can implement customized cost containment strategies to address the underlying causes of the most common and expensive claims.

For example, a member of one of the MSL group captives we support used claims data to identify several costly prescriptions driving disproportionate spending. Thanks to the increased control afforded by the captive, the company was able to onboard a new pharmacy benefits manager (PBM) and implement a PBM carve-out that resulted in nearly $250,000 of savings in just 9 months.

No. 3: Lower Costs

Though group captives are a long-term strategy, many members realize financial incentives from the onset. Group captives have several features to help members control insurance costs, including premiums based on individual performance, lower operating costs, and resources to help members mitigate claims costs.

Achieving Lower Costs in a Casualty Captive

In a member-owned group captive, premiums are derived from each company's individual loss experience and exposures, allowing members to reduce their premiums over time through improved risk-control practices. To that end, group captives also provide a wealth of resources to help members improve risk management practices, make their workplaces safer, and minimize claim costs.

In addition, minimizing overhead and spreading costs among members means lower operating costs.

Achieving Lower Costs in an MSL Captive

MSL group captive members enjoy similar premium savings. According to a Mercer survey, the cost of health benefits is on track to increase 5.8 percent in 2025, up from 4.5percent in 2024. But companies can bend that trend and control the significant percentage of healthcare spend that comes from the accumulation of smaller claims. This is often referred to as "controlling the other 80 percent" (i.e., the costs MSL captive members and other self-insured companies retain, rather than passing them to an insurer).

Through the MSL group captives we support, owners can control spend through targeted cost containment strategies and strategic vendor partnerships. The cost containment strategies allow members to target specific cost drivers, and vendor relationships give member-companies the resources and the partners needed to implement those strategies. A strategic approach to health and wellness management, including predictive modeling, claims negotiation, integrated clinical support, and advanced care solutions can yield significant savings.

No. 4: Dividend Potential

In both casualty and MSL group captives, members are eligible to earn dividends when they control costs. Here's how it works: The captives we support determine each member's premium through actuarial analysis. While there are slight differences across captive models, essentially, members can earn dividends if they outperform actuarial projections in a given underwriting year. Those dividends include investment income and account for any risk sharing among members.

How this Benefits Casualty Captive Members

Due to the long-tail nature of workers compensation and other types of casualty claims, casualty group captives take a few years to begin paying out dividends. However, once they do, those dividends can be quite beneficial for members. According to a study of 15 mature casualty group captives we advise across 233 closed accident years, members earned $1.3 billion in dividends, or 23 percent of the $5.6 billion paid into loss funds.

How this Benefits MSL Captive Members

MSL group captives offer similar dividend potential. Across the MSL group captives we support, 15 percent of premiums were available to be returned to members in the last 5 years. Because the claims process is typically shorter than on the casualty side, MSL captives have historically paid out dividends soon after closing out an underwriting year.

No. 5: Collaborating with Fellow Members

Collaboration is a primary catalyst for success in a member-owned group captive. While members may have day jobs at different companies, they are also co-owners of an insurance company with a shared interest in seeing their business partners succeed. Additionally, group captives can achieve economies of scale by pooling resources and leveraging group purchasing power, which can help them secure favorable rates and desired coverage terms.

Through workshops and board meetings, captive member-companies share best practices, discuss health and safety trends, and learn from one another. These sessions between best-in-class, forward-thinking companies encourage member-companies to continually refine their risk-management approach.

The impact of this collaboration was evident in a recent case study featuring a company that has been a long-time member of both a casualty and MSL group captive. During its group captive tenure, the company has substantially reduced its audit factor across casualty coverages while limiting its healthcare premium increases to well below market averages.

The company's CFO attributes much of this success to collaboration with other members. As he succinctly put it: "We share our successes and failures."

*The information in this article applies to member-owned group captives advised by Captive Resources and may not apply to other group captive programs.