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Understanding Your Options: Standard Market, Self-Insurance, and Captive Insurance Programs

In the ever-changing realm of business, choosing the right insurance program structure is far from a routine decision; it's a strategic move that can make or break your financial health.

Did you know that in the U.S., companies allocate an average of 9.7% of their total operating costs to employee benefits? That's a substantial investment, and making an informed choice is imperative.

To successfully navigate this complex terrain, employers must grasp the fundamental distinctions between the Standard Market, Self-Insurance, and Captive Insurance programs and uncover the potential benefits they hold. It's not merely a matter of compliance; it's about leveraging opportunities to optimize your benefits and safeguard your financial well-being.

Standard Market Insurance

The Standard Market is the most conventional route for obtaining insurance. It operates as you might expect: you purchase a policy from an insurance carrier, pay regular premiums, and they assume the risk. This structure is ideal for small to medium-sized businesses and offers a degree of simplicity and predictability in premiums.

Benefits of Standard Market Insurance

  • Stability and Predictability: Premiums in the Standard Market are usually more stable and predictable, making it easier for businesses to budget for insurance costs.

  • Access to Options: You have access to a wide range of insurance providers and policies, allowing you to find the right coverage for your needs.

  • Regulatory Oversight: There's a level of regulatory oversight that ensures consumer protection and standardization within the industry.



Self-Insurance is an arrangement where businesses take on a greater portion of their own risk. Instead of paying premiums to an insurance carrier, they set up their insurance fund to cover claims. It provides greater control over the plan's design and can be an attractive option for larger enterprises.

Benefits of Self-Insurance

  • Cost Savings and Control: Self-insured businesses can save on administrative costs and have more control over the claims process.

  • Flexibility: Self-insurance offers flexibility in plan design and customization to tailor coverage to the specific needs of your business.

  • Lower Long-term Costs: Over time, self-insurance can lead to lower costs for businesses with a good loss experience.


Captive Insurance Programs

Captive Insurance is a distinctive and tailored solution where businesses establish their insurance entities, exclusively owned, and controlled by the businesses themselves or a group of related entities. This approach can be especially advantageous for businesses with significant risk management needs.

Benefits of a Stop Loss Captive

  • Optimized Risk Management: In the realm of benefits stop loss, Captives offer a highly customizable and direct approach to risk management and loss control. This means that you have more power to fine-tune your risk strategies to suit the unique needs of your employee benefits program.

  • Tailored Underwriting and Claims Management: Captives grant you the flexibility to exercise greater control over underwriting and claims management processes. This translates into policies that are specifically tailored to the specific requirements of your employee benefits program, helping you align coverage precisely with your employee population.

  • Significant Cost Savings: The potential for substantial cost savings is a standout feature of Captive Insurance in the context of benefits stop loss. Moreover, these savings might extend to profit-sharing arrangements among members, amplifying the financial benefits of this structure.


Choosing the Right Program Structure

Choosing the right program structure depends on various factors. Consider the size of your business, risk tolerance, industry, and long-term goals when making a decision.

Two icons indicating Cottingham & Butler's captive results, encompassing $280 million in dividends returned to members and 380 captive members served.

Cottingham & Butler is a leader in providing a full range of alternative risk solutions, customized to each of our client's individual needs. Offering member-owned, group captives since 1993, and managing 11 captives with over 380+ members, we have proven knowledge and experience to help clients lower costs, reduce risk, and achieve long-term stability.

Our captives have experienced a renewal retention rate of 99%. Our successes come from the dedicated team that understands the captive structure while being extremely selective in the companies we consider. Our in-depth knowledge and selectivity have made our loss ratios significantly lower than the industry average.

In summary, the choice between Standard Market, Self-Insurance, and Captive Insurance is a pivotal decision for your business. Each program structure has its unique advantages, and the right choice depends on your specific situation.

We encourage businesses to carefully assess their insurance needs and make well-informed decisions. We are here to assist you in selecting the right program structure that aligns with your business goals. Feel free to reach out to our Employee Benefits experts for additional guidance and advice.


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