Scenario: A Mid-Sized Trucking Company
Background
• Business: Regional trucking company with 120 power units.
• Annual Revenue: $30 million.
• Insurance: Commercial auto, general liability, workers’ comp.
• Premiums: Over $1.2 million/year.
• Claim History: Low frequency, well-managed safety program, but large deductibles and premium hikes due to industry risk.
Challenges Faced
1. Rising Premiums: Despite good loss history, premiums increased 15–20% annually due to overall industry performance.
2. Coverage Restrictions: The insurer limited certain coverages, like environmental cleanup and cyber risk.
3. Poor Claims Experience: Claims were being handled slowly, leading to driver dissatisfaction and litigation.
4. Cash Flow Strain: Large up-front payments were required, with little flexibility in terms.
Exploring the Captive Option
The owner consults a risk management advisor (Deerfield Risk Advisors) and learns about group captives, where multiple companies in similar industries band together. Initial steps included:
• Loss history analysis (5 years).
• Feasibility study.
• Review of capital contribution requirements
• Assessment of the group’s existing members and risk appetite.
Joining the Captive
The company joins a group captive that provides:
• Auto liability and physical damage.
• Workers’ comp.
• General liability.
Changes experienced:
• Premium stabilized and even decreased slightly.
• Claims management improved, with in-house adjusters aligned with the group’s goals.
• The company received dividends in year two from unused loss reserves.
• Increased involvement in peer benchmarking, leading to new safety programs.
Outcomes (3-Year Horizon)
• $250,000 in returned surplus from underwriting profits.
• 20% lower total insurance spend vs. prior trajectory.
• Improved safety scorecard and FMCSA compliance.
• Stronger control over claims and faster resolution.
This move to a captive didn’t just solve cost issues—it aligned the company’s risk management culture with financial performance. Captives work best when the business is proactive, financially stable, and views insurance as a strategic asset.
