top of page

Weathering the Storm: Captive Insurance as a Risk Management Solution for Manufacturers in a Turbulent Economy

The manufacturing industry is the backbone of many economies.

But in today's volatile economic climate, manufacturers face a perfect storm of rising costs, supply chain disruptions, and an increasingly complex risk landscape. Traditional insurance solutions, often burdened by rising premiums and limited coverage, might feel more like an anchor than a life raft.

This is where captive insurance emerges as a powerful tool for manufacturers seeking to take control of their risk management destiny.

The Squeeze is On: Insurance Costs and the Manufacturing Industry

The numbers paint a concerning picture. A recent study by the National Association of Manufacturers (NAM) found that manufacturers' insurance costs have skyrocketed by an alarming 12% in the past year. Our latest P&C Market Report, highlights that we’ve experienced 25 consecutive quarters of marketplace rate increases from 2018 to present and are expected to stay at elevated levels for the foreseeable future.

This significant increase, coupled with other economic pressures like rising material costs and inflation, is squeezing profit margins for manufacturers of all sizes, and forcing them to re-evaluate their risk management strategies.

Understanding Captive Insurance: A Proactive Approach

Many best-in-class manufacturing companies are increasingly considering alternative solutions such as captive insurance to gain greater control over their insurance programs. Captive insurance allows companies to create their own subsidiary insurance company. Instead of being at the mercy of traditional insurers with potentially inflexible policies and rising premiums, manufacturers can design a captive program specifically tailored to their unique risk profile.

Here's how captive insurance empowers manufacturers in the current economic landscape:

  • Cost Control: Captive insurance allows manufacturers to break free from the cycle of rising premiums dictated by a volatile insurance market. By retaining surplus funds within the captive, manufacturers gain greater control over their insurance costs and potentially achieve significant savings. This financial relief can be a game-changer in a tight economic environment.

  • Tailored Coverage: Unlike traditional "one-size-fits-all" policies, captives can be designed to address the specific risks inherent to a manufacturer's operations. This ensures they are adequately covered for the risks that matter most, avoiding unnecessary premiums for irrelevant coverages.

  • Enhanced Control: Captives empower manufacturers to manage claims processes and risk mitigation strategies directly. This proactive approach allows for faster response times, potentially leading to lower claim payouts and improved risk prevention strategies.

Key Considerations for Manufacturers

Before venturing into captive insurance, it's important to carefully consider these crucial factors:

  • Risk Assessment: Conduct a thorough risk assessment to identify and quantify potential exposures. This forms the foundation for designing a captive program that effectively mitigates risks and optimizes costs in the current economic climate.

  • Regulatory Expertise: Captive insurance is subject to specific regulations depending on the domicile. Partnering with an experienced captive provider ensures compliance with evolving regulations, allowing you to focus on core business activities.

  • Financial Stability: Maintaining a healthy financial standing is vital for the captive's long-term success. Partnering with an advisor with expertise in financial analysis and risk assessment helps establish optimal capital structures for your captive in this economic environment.

  • Claims Management Alignment: Within the captive, you have a dedicated claims team directly invested in your company's success. They become an extension of your risk management team, working diligently to ensure fair and efficient claims resolution, minimizing losses as if it were their own money on the line.


Investing in Your Future: Partnering for Success

Today's economic and risk landscape demands a proactive approach. At Cottingham & Butler, we empower manufacturers with the education and resources needed to navigate these complexities. As a leading provider of captive insurance and risk management solutions, we offer a proven path to success.

Our Expertise, Your Advantage

Cottingham & Butler isn't just another insurance broker. We have a distinguished captive track record dating back to 1993, managing 12 successful captive programs with over 360 members. Our industry-leading 99% renewal retention rate speaks volumes about the value we deliver.

Selective Membership, Exceptional Results

We understand that a captive's success hinges on a strong foundation. That's why we meticulously select members with a like-minded focus of safety and results, a positive loss history, and financial stability. This selective approach, combined with our in-depth captive knowledge, has resulted in loss ratios significantly lower than the industry average.

In short, by partnering with Cottingham & Butler, you gain access to:

  • Decades of Captive Management Experience: Leverage our proven track record to design and implement a captive program that optimizes your risk management strategy.

  • A Selective and Collaborative Community: Benefit from a network of like-minded manufacturers who share best practices, fostering long-term success.

  • Industry-Leading Loss Ratio Performance: Our deep understanding of captive structures and selective membership approach lead to demonstrably lower risk profiles for your captive.

Don't weather the storm alone. Partner with Cottingham & Butler and emerge stronger in any economic climate. Contact us today to explore how a captive insurance solution can empower your manufacturing business.


bottom of page