The following table describes the distinctions between the standard insurance market and captive insurance.
| Description | Captive Insurance Companies | Traditional Insurance Companies | Costs and Expenses | Generally lower operating costs and premiums actuarially based on individual loss history. Operating costs typically stable year to year. |
Operating costs generally not disclosed and premiums based on industry data. |
|---|---|---|
| Investments | Captive invests loss funds and any investment income is maintained for the benefit of captive owners. | Insurance company retains all investment income. |
| Cost Stabilization | Captive owners fund their own predictable losses while reinsuring catastrophic exposures, and premiums can be stabilized through loss control. | Premiums increase and decrease based on insurance cycles, not individual’s loss experience. |
| Risk Profiles | Captive owners may decide which risks are acceptable and evaluate prospective members.* | Insurance company selects only those classes of risk that conform to its "standards". |
| Choosing Services | Captive owners decide which services will be purchased, promoting cost effectiveness. | The standard market avoids providing individual services on a fee basis. |
| Claims | Greater control over claims adjudication, including:
|
Less control over claims adjudication. Claims are typically handled by the insurance company. |
* Subject to final approval by the program insurer.