The primary purpose of a Rental Captive program is to return underwriting profit and investment income.
In the insurance environment today, brokers need to provide their clients and prospects cost effective options to traditional insurance. The alternative market has grown to approximately one half of all premium written by the property-casualty insurance companies. Rental Captive programs have become a proven cost effective approach for the funding of certain exposures within the alternative market, especially Workers' Compensation. This risk financing mechanism enables the insured to enjoy the benefits typically associated with equity captive ownership or self insurance without the legal, capital and administrative requirements.
The primary purpose of a Rental Captive is to contractually guarantee to the insured the return of underwriting profit (premium less expenses and losses) and investment income from the funds held by the Rental Captive based on the insured's individual loss history. Each participant of a KRM Rental Captive program retains a portion of their own risk on a loss sensitive basis. Through the Rental Captive, the insured participates in payment of losses as defined by a specific or per occurrence stop loss and an aggregate or frequency stop loss. The incentive is therefore given to the insured to take a proactive approach of controlling and reducing losses in order to receive the maximum financial benefits of underwriting profit and investment income.
Another added feature of a Rental Captive program is the ability to utilize an unbundled service approach to handling claims and loss control. The insured selects a Third Party Administrator (TPA) to handle the claims and loss control services of their program based on their own needs and requirements. In essence, the TPA works for the insured rather than the insurance company which is ideal for the insured in creating a successful Rental Captive program.
An alternative risk financing program allows the participant to enjoy greater stability of insurance coverage and pricing in the long run rather than subject to insurance company profit objectives and market swings. A KRM Rental Captive Program is also easy to implement and can become a valuable asset to the broker for generating new business and retaining renewals.