What is a captive insurance company?

A captive insurance company is a company that shares in the insured risk of its owners and is controlled by its participants, in this case, the owner/members. Participating members both technically own the majority of the company through B-shares (shares do not come with actual value attached to them) and reap the rewards of any annual profits (generally, future savings). Distribution of any annual profits is determined by a Captive Advisory Board. Typically, an Advisory Board decides to lower prices or keep prices stable by directing reserve funds to benefit the owner/members.

Participation is simple. All plan participants become owners. To the establishment of your plan you will sign a Joinder Agreement of the Captive.

The role of the Advisory Board is to be the voice of the owner/members and to represent their interests. The Advisory Board will review annual audits and have access into captive financials. The Advisory Board will also make decisions on how to manage annual profits of the captive, such as allowing them to build and grow in a reserve fund, or to apply them to reduce or stabilize monthly costs.

A reserve fund is money that accumulates from any profits realized. Funds grow when medical costs are lower than the amount taken in from members/owners. The monthly payments collected from each member should cover 100% of anticipated claims. Therefore, if claims are only 80% for the year, the captive would keep the remaining 20%  for a reserve fund, or other purposes, as decided by the Advisors Board.