How captive and programmatic solutions can benefit policyholders amid welfare inflation and rising insurance prices: Risk and Insurance

As insurance costs rise, many are turning to captive and programmatic solutions to manage their risk transfer costs.

As markets tighten, insurers in every sector may experience large increases in premiums across lines. In recent years, as the insurance industry struggles to balance its books in the face of inflation and the effects of the COVID-19 pandemic, rate hikes have become the norm even for firms with good loss histories.

Take commercial auto and workers’ compensation lines, for example. A talent shortage in trucking has led companies to hire newer, less experienced drivers who may be more likely to have an accident. In addition, insurance companies consider the impact of social inflation on jury verdicts if a claim goes to trial.

The labor company is struggling with a similar talent shortage. As industries from construction to manufacturing struggle to attract and retain workers, they may be dealing with staffing issues and younger, less experienced workers — both of which could lead to an increase in injuries.

“It’s important to step back and look at what’s going on in the world overall,” said Alfred Bergbauer, head of multinational, closed-end, program and TPA services at The Hartford.

Frustrated with rising premium costs, many companies are considering offsetting solutions and programs for some of their exposures. These solutions help businesses get the protection they need at a lower cost than traditional insurance policies.

Big premium increase? Consider these 3 different types of insurance solutions

Alfred Bergbauer, Head of Multinational, Captive, Programs and TPA Services, The Hartford

Hard markets often draw increased attention to passives as a risk transfer solution. Brokers and agents may offer their insureds the use of captives to retain some of their exposure, especially if they see large premium increases.

“POWs is such a hot topic and it’s on everyone’s radar. Brokers talk about it; agents are talking about it,” Bergbauer said.

“We spend a lot of time with our captive managers researching customers to really understand what a group or individual and single-parent captive needs.”

Here are three different types of captives that businesses can consider if they want to self-insure some of their losses.

1) Single parent: The “leading captive solution”, so to speak, a single-parent captive is when a parent company insures some of its own risks.

When setting up a captive, a company will work with actuaries to value its losses within a retention layer that is funded by the customer through the captive. The insurer provides traditional captive insurance and issues policies in the jurisdictions where the parent company operates.

“Instead of exchanging dollars with an insurance company, you retain the working layer of losses yourself,” Bergbauer said.

2) Group: As with single-parent captives, group captives self-insure some of their risks. The difference is that a group of businesses, rather than a single company, work together to set aside funds to transfer risk.

Companies in a group may share similar risks, such as a group of architects coming together to self-insure some of their exposures, or they may come from different industries but share similar risk management philosophies. Members often go through an extensive vetting process to make sure they are a good fit.

“There is a strong vetting process,” Bergbauer said. “They want to look at their operations, they want to look at their safety procedures, they want to look at their driver training and safety records and really, really understand that this is a company that operates at the highest level of safety and care in their industry because they don’t want a bad operator to come in and cause more frequent or serious captive losses.”

Group members also share safety and loss control strategies with each other. Many have an inmate risk manager who can help facilitate best practice and the sharing of ideas.

“When it really works, it’s powerful and it’s a self-sustaining cycle of risk management with high value and feedback on how to be a better operator in your business,” Bergbauer said.

3) Agency: A captive agency is created for the clients of a specific agent.

“The most successful agents are comprised of customers who want to proactively use loss information and proximity to the claims process to develop risk improvement and mitigation plans to make their operations and products safer,” said Bergbauer .

Programs: what are they and how can they benefit the insured?

Another solution that insureds can turn to in tightening markets are programs. The programs provide customized insurance solutions for moderate to high risk exposures that may be difficult to place or that require specialized underwriting. These products are available on a cost-guaranteed or loss-sensitive basis to meet the risk appetite of individual clients.

“We have the ability to offer more flexible terms and conditions in a tight market, a more stable rating and in some cases increased capacity to best-in-class carriers in these mildly challenged risk classes,” Bergbauer said.

Hartford offers over a dozen open and administered programs serving industries that range from swimming pools and spas to railroad contractors and security guards. Open access programs are directly accessible to all agents, while managed programs are accessible through a designated program administrator or managing common agent.

With each of its programs, Hartford’s specialty underwriters learn as much as possible about their niche so they can properly price its exposures. Pool and spa underwriters, for example, undergo training to become certified experts by the National Pool and Spa Authority. Their high level of industry experience allows them to stay abreast of emerging risks and provide a high level of service to their clients.

“They often have the same training that their clients have,” Bergbauer said. “In each of these programs, our underwriters are immersed in these businesses and they attend trade associations and training events.”

Partner with the right insurer

Whether a business is considering a captive or programmatic solution, partnering with the right underwriter is key to success.

Hartford has over 30 years of experience in the Captives space. It works with its single parent, group and agency clients to ensure they use the best risk management strategies to keep their insurance costs low.

One of four insurers with a certified industrial hygiene laboratory, The Hartford engages in occupational health and safety reviews and air quality and product testing with its clients—and that’s just one of the risk management services it offers.

“We go very deep into our customers’ operations. We have resources to share with them,” Bergbauer said.

On the program side, Bergbauer said, businesses are seeing double-digit increases. Its specialist underwriters are committed to understanding industries and providing innovative insurance solutions. “Our teams identified an opportunity in the market.”

Captives and Programs clients benefit from The Hartford claims management services. Its claims professionals engage deeply with clients after a loss to help the company become whole again and consider any risk management strategies.

“Hartford has a solid in-house claims operation. We can offer that to programs and we can offer it on an addictive level,” Bergbauer said.

The claims team is aided in its efforts by the firm’s proprietary risk management information system analysis tool called Track Risk Explore Opportunities, or TREO. TREO allows policyholders to gain insight into the causes of their claims so they can better understand what is causing their losses and prevent them in the future.

Said Bergbauer, “We can offer a soup-to-nuts service for our customers.”

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Some coverages vary by state and may not be available for all businesses. All Hartford coverages and services described on this page may be offered by one or more property and casualty insurance company subsidiaries of The Hartford Financial Services Group, Inc. in Texas, Arizona, New Hampshire, Washington and California [In Texas and California, the insurance is underwritten by Hartford Accident and Indemnity Company, Hartford Casualty Insurance Company, Hartford Fire Insurance Company, Hartford Insurance Company of the Midwest, Hartford Lloyd’s Insurance Company, Hartford Underwriters Insurance Company, Maxum Casualty Insurance Company, Maxum Indemnity Company, Navigators Insurance Company, Navigators Specialty Insurance Company, Property and Casualty Insurance Company of Hartford, Sentinel Insurance Company, Ltd., Trumbull Insurance Company and Twin City Fire Insurance Company.] and its property and casualty insurance company affiliates, One Hartford Plaza, Hartford, CT 06155.

Hartford Financial Services Group, Inc. (NYSE: HIG) operates through its subsidiaries, including The Hartford Fire Insurance Company, under the brand name The Hartford®, and is headquartered in Hartford, Connecticut. For additional details, please read The Hartford’s legal notice at

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This article was created by R&I Brand Studio, a unit of Risk & Insurance’s advertising department, in collaboration with The Hartford. The editorial staff of Risk & Insurance was not involved in its preparation.

The Hartford is a leader in property and casualty insurance, group benefits and mutual funds. With more than 200 years of expertise, The Hartford is widely recognized for its excellent service, sustainability practices, trust and integrity.

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