Workers Comp Captive Insurance
A question from one (and I love to hear from our blog readers) of our readers on Workers Comp Captive Insurance arrangements –
We are a smaller employer with less than 100 employees. Our E-Mod/X-Mod sharply increased from .8 to 1.3 over the last two years. Would our small size and high E-Mod keep us from exploring a captive for Workers Comp?
Being a smaller employer or having an increasing E-Mod/X-Mod would not prevent you from exploring a captive. There are three areas that may help in your search
- Rent-A -Captive
- Association Captive
- Similar Employer Group Captive
A Rent-A-Captive is also known as a Protected Cell captive facility. It is basically a captive that is broken down into unlimited mini-captives (Cells). Each cell within the Rent-A-Captive facility can be rented for a fee. Each cell stands on its own within the overall captive. The main thing to watch out here for is the co-mingling/breaching of the assets of one cell with another cell within the captive. This protects each insured’s assets from each other, and makes sure that the failure of one cell does not effect other cells within the Rent-A-Captive. This is usually regulated by law.
The Association Captive and the Similar Employer Captive are both just renamed versions of the Rent-A-Captive. A few of the associations and employer groups such as construction have sponsored great captives. Rent-A-Captives have been in existence since the 1970’s.
The bottom line is that Rent-A-Captives for Workers Compensation make even the smallest employers have an alternative to the regular insurance markets.