Construction Group Captives For Contractors and Subcontractors

Insurance can (and usually does) comprise a substantial portion of the cost-side of a contractor's P&L. Because construction is a risk-driven industry by nature, many mid-size to larger contractors choose to explore alternative methods of financing risk such as Group Captives. A Group Captive offers a construction owner a method by which to have "skin in the game" with regard to his or her insurance program, specifically with regard to Workers' Compensation, Auto, and General Liability exposures. It is owned and driven by its members.

So what is a Group Captive?

It is an insurance company that provides insurance to the members that own it. Members share (to some degree) in the loss exposure of the group, but their primary means toward success lies in the management of their own losses. They also share in the investment and underwriting profits generated by the captive. The members of a Group Captive can be from different industries (a Heterogenous Group Captive) or from the same industry (a Homogenous Group Captive). In either case, successful members share very specific characteristics:

• They seek greater control over managing their insurance dollar
• They are best-in-class with regard to controlling losses - Not only do they "talk the talk", but they "walk the walk" when it comes to Safety.
• They want more transparency when it comes to how their money is spent. Group Captives "unbundle" services (loss control, claims management, administration, etc.) and, in conjunction with expected losses, create a much clearer picture of where a business owner's premium dollar is going.
• They take a long-term, strategic perspective. Membership in a Group Captive is not a short-term play. Members recognize that the advantages of Group Captive membership lie not in the potential savings gained over one year, but in the potential savings gained across many years. For successful members, Group Captives help to flatten out the cyclical nature of insurance pricing.
• They are entrepreneurs. The construction industry is full of risk. The upside to Group Captive membership is the potential savings and profit-sharing that can be returned to the member over time. But Group Captive membership is not for everyone...

So how do you know if a Group Captive is the right solution for your business?

• Do I have the commitment, drive, and entrepreneurial spirit to take a more hands-on role in my insurance program?
• Am I interested in having more control over how my insurance dollar is spent?
• Is my prior loss history favorable?
• Is my commitment to loss control and safety really as strong as I think it is? Am I willing to strengthen that commitment even more?
• Am I looking for specialized expertise to help me control a significant business expense?

JD Kutter works with several different Construction Group Captive providers. For more information, please contact Chris O'Hagan at (314) 444-4825 or via email at chris@jdkutter.com