FCCS News & Insights

Captive Insurance Program Management

FCC Services has managed the Farm Credit System Captive Insurance Company for more than 30 years, delivering financial and operational benefits to the participating organizations. It also offers similar services to other groups of organizations, helping them pool their resources to access better insurance products at a lower cost.

“By aggregating individual companies’ insurance needs, we’re able to work with larger providers who offer better and even different products that wouldn’t normally be available to a single, smaller organization,” says Larry Larson, Executive Vice President of Risk Management and Insurance Services with FCC Services. “And because of the larger number of companies and individuals being insured through a single insurance package, we’re able to provide these improved products at a lower cost to the member organizations.”

Beyond reduced costs, there are other financial benefits to members of a captive insurance company. “Members of a captive insurance company invest money to cover future payouts, both upfront and annually, and that investment income is available to them,” says Larry. “Also, as premiums are continued to be paid in year after year without significant payouts, some of that capital can be returned to the members.” As an example, the Farm Credit Captive Insurance Company returned $7 million to its members in 2015.

Any group of related organizations can create a captive insurance company to access the benefits of aggregated purchasing and management, including more control over insurance coverage and services, and more stable and lower premiums. As an example, FCC Services is working with the Rural Wisconsin Health Cooperative (RWHC), a group of 39 hospitals in rural Wisconsin that was interested in discovering whether a captive insurance company could help them reduce workers’ compensation insurance costs. Now that FCC Services has completed the initial cost-benefit analysis, we’re working with RWHC to create a captive insurance company that will be managed by FCC Services, and provide the full range of captive management services: 

• Underwriting risks
• Issuing insurance policies
• Allocating and collecting premiums
• Adjusting and paying claims
• Investing funds
• Securing reinsurance or excess insurance
• Maintaining accounting books and other records 
• Paying all accounts payable obligations
• Making filings and providing statements as required by the Division of Insurance
• Arranging meetings of the Captive Governing Board
• Contracting for professional services on behalf of the Captive

FCC Services is also assisting a group of 1,200 non-profit organizations reduce their unemployment insurance costs.

Creating a captive insurance company is a complex undertaking, and while it offers significant benefits, it also carries some risks. FCC Services is available to discuss both the risks and opportunities with clients seeking to improve their insurance coverage, reduce their costs, and reap the financial benefits such an approach can provide.