How is a group captive different from simply self-insuring?
Self-insured often means uninsured. A group captive is owned by its members.
According to Jack Meskunas, Managing Director at Oppenheimer, people who say they are self-insured frequently mean they carry no policy and would absorb a loss themselves. He describes that as gambling with the balance sheet rather than insurance. In a group captive, by contrast, the members are both the insureds and the owners, which he says generally aligns everyone's incentive to control risk.
Meskunas recalls people saying they did not need insurance because they were self-insured. What they usually meant, in his telling, was that they had deep pockets and would replace the car or repair the house themselves if something went wrong.
His objection is definitional. Insurance exists to remove or lower a risk in exchange for premium and a defined amount of coverage. Absorbing a loss on your own balance sheet does neither, whatever it is called.
Key takeaways
Saying you are self-insured often describes having no insurance rather than a funded arrangement.
In a group captive, members are both the insureds and the owners.
Meskunas says claims are generally lower because members have a direct incentive to control risk.
A group captive works differently because ownership and coverage sit in the same hands. Meskunas describes it as the insureds being owners and the owners being insured, which he says removes both the reason and the opportunity for insurance fraud, since defrauding the insurer would mean defrauding yourself.
He adds that captive claims are generally lower, in his experience, because members are acutely aware of their risks and spend time learning to control them. He is careful about why: the risks do not go away, people are simply more careful, and there is a profit incentive because whatever premium is left after claims may be surplus.
From the conversation
Jack Meskunas
Managing Director, Oppenheimer
“Captives have much lower claims in general because they're acutely aware of the risks and they spend a lot of time learning how to control them.”
This answer begins at 5:56 of the full conversation. Watch or listen to the whole thing.
The views expressed are those of the featured guest, drawn from a recorded conversation, and reflect their own professional experience. Nothing on this page is insurance, tax, legal, or investment advice. Consult your own advisors about your specific situation.
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