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Workers Compensation Captives – Are They Worth Exploring?

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Workers Compensation Captives – A Legitimate Yet Complex Alternative

Workers Compensation Captives have come to the forefront as a possibly viable alternative for Workers Compensation coverage.  Last week, I decided to explore Captives further by attending the CICA conference in Tucson, AZ.x

Picture Of Pointing Finger Workers Compensation Captives On Insurance Text
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After attending many of the sessions, I came away with a few thoughts and questions. I thought I would briefly cover them.

Are captives for every company? No, as it is a form of modified self-insurance, a small company could not survive the impact of a very large claim or a number of claims over a short amount of time.

What companies would find it the most advantageous to use captives? For Workers Compensation, I would say a very large company that does not have enough assets in a certain state to qualify for self-insurance. A great example is a very large trucking firm that has a large home office complex with terminal in multiple states.

Is there one domicile that is better for captives than the others? No, I do not think there is one domicile that is superior to another in every instance. I do like the offshore domiciles. As I have said very often, a stroke of the President’s pen, a ruling by the IRS, or a bill passed by Congress could change the onshore domiciles overnight. That would not happen with an offshore domicile.

 

 

Renting Workers Compensation Captives resort
Wikimedia Commons – Venturalofts

Are rent-a-captives still a viable option? I think this is the forefront of future Workers Comp insurance arrangements. Renting a cell from a captive allows the same right and tax advantages as owning a regular captive. The fixed or overhead costs would be much smaller than starting a captive.

What is the one main disadvantage to captives? I think it is a very simple concept that has been complicated as a profit motive for companies. The more complicated it seems, the more pseudo-knowledge is produced. Captives are not that complicated.

Where can someone learn about captives quickly? Google Workers Compensation Captives, there are hundreds of websites with a large amount of free information.

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James Moore

Raleigh, NC, United States

About The Author...

James founded a Workers’ Compensation consulting firm, J&L Risk Mgmt Consultants, Inc. in 1996. J&L’s mission is to reduce our clients’ Workers Compensation premiums by using time-tested techniques. J&L’s claims, premium, reserve and Experience Mod reviews have saved employers over $9.8 million in earned premiums over the last three years. J&L has saved numerous companies from bankruptcy proceedings as a result of insurance overpayments.

James has over 27 years of experience in insurance claims, audit, and underwriting, specializing in Workers’ Compensation. He has supervised, and managed the administration of Workers’ Compensation claims, and underwriting in over 45 states. His professional experience includes being the Director of Risk Management for the North Carolina School Boards Association. He created a very successful Workers’ Compensation Injury Rehabilitation Unit for school personnel.

James’s educational background, which centered on computer technology, culminated in earning a Masters of Business Administration (MBA); an Associate in Claims designation (AIC); and an Associate in Risk Management designation (ARM). He is a Chartered Financial Consultant (ChFC) and a licensed financial advisor. The NC Department of Insurance has certified him as an insurance instructor. He also possesses a Bachelors’ Degree in Actuarial Science.

LexisNexis has twice recognized his blog as one of the Top 25 Blogs on Workers’ Compensation. J&L has been listed in AM Best’s Preferred Providers Directory for Insurance Experts – Workers Compensation for over eight years. He recently won the prestigious Baucom Shine Lifetime Achievement Award for his volunteer contributions to the area of risk management and safety. James was recently named as an instructor for the prestigious Insurance Academy.

James is on the Board of Directors and Treasurer of the North Carolina Mid-State Safety Council. He has published two manuals on Workers’ Compensation and three different claims processing manuals. He has also written and has been quoted in numerous articles on reducing Workers’ Compensation costs for public and private employers. James publishes a weekly newsletter with 7,000 readers.

He currently possess press credentials and am invited to various national Workers Compensation conferences as a reporter.

James’s articles or interviews on Workers’ Compensation have appeared in the following publications or websites:

  • Risk and Insurance Management Society (RIMS)
  • Entrepreneur Magazine
  • Bloomberg Business News
  • WorkCompCentral.com
  • Claims Magazine
  • Risk & Insurance Magazine
  • Insurance Journal
  • Workers Compensation.com
  • LinkedIn, Twitter, Facebook and other social media sites
  • Various trade publications

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