Guest Perspective
By Kevin Cunningham Risk Financing, Part 3 of 3
Benefits of Member-Owned Captive Insurance
Using AI for Risk Mitigation in Alternative Financing
Crane owners’ participation in a member-owned group captive is a legitimate risk management arrangement. Group captive insurance programs have thrived since their emergence in the 1980s due to hard commercial insurance market conditions at that time, similar to today’ s market.
The growth in group captives has continued across the U. S. marketplace due to key considerations:
• Market shortage of cost-effective crane coverage for individual insured programs.
• Recurringly rising costs and self-insured retention levels year over year.
• The need for new innovation in risk mitigation.
• A fresh alternative to stale existing options.
Group Captive Operating Characteristics
Member-owned group captives utilize a professional insurance captive management company that takes responsibility for the day-to-day operations of the captive including corporate governance, regulatory reporting, cash management, accounting, audit and tax coordination, providing the registered office and all corporate administration functions including compliance.
Additionally, the various functions of the captive insurance company, such as claims management, lost control, policy issuance, arranging reinsurance and actuarial services are“ unbundled” to industry specific professional service organizations and administered by industry recognized and licensed specialty insurance organizations.
While the captive administration firm manages the day-to-day operations of the captive, each participating member company has a say in the decisions facing the captive. Typically, the captive’ s board of directors is made up of all members, who each receive one vote on all operational decisions, regardless of their company size. Captive company bylaws address various organizational concerns, such as process and standards for allowing additional companies to buy in and become an equal shareholder of the captive.
Benefits of Group Captive Membership
The package of benefits provided by a member-owned group captive can be significant for crane owners. There are six major benefits in participating in a member-owned group captive:
Greater Control: One of the
1 greatest benefits of a member-owned group captive as compared to traditional insurance is that it provides member companies with significantly greater control over their unique risk management
Editor’ s Note: This is the third edition in a three-part series for Crane Hot Line readers to identify the merits of alternative risk financing, as compared with the volatility in traditional property-casualty insurance for today’ s business owners in our crane, rigging and specialized transport( CR / ST) marketplace. As the final part of our series on alternative risk financing, this edition focuses on captive features, benefits and the inherent flexibility by integrating Artificial Intelligence( AI) for enhanced risk mitigation.
concerns. The“ unbundled” structure in group captives allows for crane owner members to help design risk mitigation plans as a required tool to reduce losses.
Lower Costs of Protection:
2 According to the highly recognized Insurance Information Institute( III), member companies in group captives experience lower costs of insurance for three main reasons.
First, premiums to the captive are based( only) on the individual member company loss experience, which the member company can control and reduce.
Secondly, the cost of protection is reduced significantly when traditional insurers( loading) costs are excluded from the premium calculation.
And lastly, group captive member companies have proven to be safer than the average company according to data from the Bureau of Labor Statistics, III and Captive Resources-based market research reports.
Improved Claims Handling
3 and Reporting: In the group captive, member companies have greater involvement in claims management, influencing claims-management strategy and ultimately have a direct impact on claims-management costs.
In a traditional insurance arrangement, crane companies must rely on the overly reactive traditional insurance claims model. Group captives unbundle each facet of the claims management process to derive a more cost-effective claims outcome with litigation containment functions built into the hybrid captive
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April 2025 • www. cranehotline. com