Learn About Captives
Captives 101
Information about Captives and How they’re structured.
Captives 101:
What is Dealer Management Group?
Dealer Management Group was created to provide the Automotive Industry with viable insurance alternatives in a volatile market. Founded by a group of Dealers, DMG offers a unique opportunity to those who outperform their peers in the industry.
What is a Captive?
A captive is an insurance company owned and operated by its members. Captives are typically formed by companies when insurance for certain risks is difficult to secure through the traditional insurance markets. Captives are formed by large entities or groups of medium to large companies.
Why Should I Consider Captive Insurance for my Dealership?
Your dealership has all the tools necessary to drive business growth; however, unpredictable and ‘’out of control’’ insurance costs can be a roadblock to your success. You deserve an insurance solution that delivers a competitive price and the coverage you need to protect your assets. This allows you to accurately predict expenses and increase profits. A captive insurance program can deliver on both and provide you a return on your premiums for solid claims experience.
What are the advantages?
Joining a Captive can provide your dealership with protection, stability and control. To view all of the advantages of joining a captive…
Who Pays If I Have a Loss?
Your eligibility to participate in the captive is predicated on having good loss history and effective risk control programs. Nonetheless, losses may occur. The captive is structured to provide coverage for losses within a set threshold determined by the captive’s Board of Directors. Losses falling within this range will be paid from the assets each member’s actuarially established allowance for projected losses. Large losses exceeding the captive’s retention levels will be offset through the purchase of reinsurance. There are further safeguards to ensure payment of claims in the event multiple captive members suffer unexpected large losses. In the event a member’s cumulative losses exceed their total loss funds, the excess losses will be shared with other captive members. This risk-sharing mechanism will be determined based on the needs of the captive members and established in the captive shareholder agreement. As a last resort, financial support is included from an insurance carrier whom the captive will select to “front” the overall program.
If I Have Few or No Losses, When Do I See My Savings?
The time elapsed from the date the loss actually occurs to the time when all claims have been settled varies from weeks to months to years, depending on the nature of the claim. Consequently, the captive defers distribution of “unused” premiums for a period of time to make certain sufficient funds are available to pay for the respective year’s claims. At the time period when the Captive’s Actuaries are confident of the disposition of that year’s claims, they will advise the Board to return the outstanding contribution balance to each Member.
This process ensures funds will be available to meet the captive’s claims demands without jeopardizing its financial integrity. As loss reserves are based on actual losses during prior years, current favorable loss results accrue to each Member’s bottom line.
HOW TO JOIN dEALER mANAGEMENT gROUP
Joining the Captive is a process of determining your qualification, and then deciding if you and your dealerships are a good fit. Every member added is individually selected and approved by the member committee. Start the member questionnaire to determine if you qualify >