Who is a group captive not right for?
A poor claims history is the disqualifier.
According to Jack Meskunas, Managing Director at Oppenheimer, existing owners and the captive manager vet anyone joining a group captive, and the first thing they ask for is claims history. In his view a business with a severe or ongoing loss record does not belong in a captive, because the arrangement would not pay for itself at the premium that business would contribute.
The vetting is done by the people already carrying the risk. Meskunas describes existing owners, the insureds and the captive manager reviewing a prospective member, and claims history being the opening question.
The reasoning is arithmetic rather than moral. A business with a bad enough loss record would not pay for itself inside the pool.
Key takeaways
Existing owners and the captive manager vet new members, starting with claims history.
A severe or ongoing loss record generally makes a group captive unsuitable.
Meskunas describes better risks moving to captives as adverse selection in the commercial market.
He extends the point to what he says happens in the wider market. As captives take the better risks, the businesses that cannot control their losses remain in commercial insurance, which he characterises as adverse selection.
He is describing a pattern he observes rather than offering a market forecast. The useful part for a prospective member is narrower and more concrete: if your claims record is poor and ongoing, a group captive is likely to be the wrong instrument, and the existing members are the ones who will say so.
From the conversation
Jack Meskunas
Managing Director, Oppenheimer
“if someone has terrible claims track record, they don't belong in a captive”
This answer begins at 38:55 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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