This is a concept that is continuing to shake up the short-term commercial insurance industry. For years now consumer watchdogs have publicized their concerns on how the conventional insurance markets have been taking consumers, both commercial and domestic, for the proverbial ride. Every single year now, the big players continue to hike their annual premium rates at above inflation rates. This seems wholly unfair to the prudent business owner who has hardly claimed a day in his life.
Captive insurance industry vehicles are giving standard insurance policies a run for its money. They simply cannot compete right now. The irony for them is that they simply cannot afford to reduce commercial insurance premiums. Even the reinsurance markets are finding that they have to operate in challenging environments. Speaking of which, all it takes is just one natural disaster to wipe out a single fund, to the tune of billions.
Remember Exxon Valdez? Enough said. But in the process, such a wipeout is putting innocent bystanders on the spot. These are the commercial clients that have played by the rules, accepting and adhering to the risk management recommendations made by their assessors or underwriters. And for what? Only to lose out? No. Never, never and never again need it be necessary. The initial startup costs into the captive insurance market will have its costs.
But as any bespoke or value based investor will tell you, you need to remain focused on the long-term objectives and potential outcomes. Captive insurance allows the business owner to be free and independent from all the others. Never, and never another day needs to go by where he finds himself having to unfairly pay for the claims of others who should have known better and taken care.