How Employee Benefit Group Captives Work

Retain a portion of your insurance carrier’s profits

Employee benefit group captives give small to midsize employers a way to gain control of the cost of employee benefits. When employee claims are extensive, your group captive absorbs the shock. When employee claims are modest, you essentially pocket a portion of the profit that would normally have gone to an insurance carrier.

In a nutshell, the basic concept of a group captive is as follows:


  • Each employer is responsible for covering its smaller and more predictable claims.
  • Each employer has its own Third Party Administrator to handle its own claims processing, ID cards, and preferred provider contracts


  • Each employer pays into the group captive "pool" to cover medium sized claims.
  • If the dollar amount of these "in-the-pool" claim payouts exceeds the amount that has been put into the pool, the group shares the loss (up to certain thresholds)
  • And vice-versa: if "in-the-pool" payouts are less than the balance in the pool, the group shares the profit

Insurance Carrier

  • Each employer pays an insurance company a premium to cover catastrophic claims
  • The insurance company provides protection in cases where an individual's claims exceeds an annual cap, or the sum total of all claims exceeds an annual cap

Cost Comparison: Group Captive vs. Traditional Insurance

When you join a group captive, your minimum expense for claims and overhead could theoretically be as low as 15% of what you would normally pay a traditional insurance carrier—but that’s in the  extremely unlikely situation where there are no claims. On the other hand, your maximum exposure for claims and expenses is typically about 115-120% of what you would normally have paid a traditional insurance carrier. Most of the time, the number will fall somewhere down the middle.

Please note: The above description and example are conceptual in nature and do not accurately or fully describe many of the more technical aspects of the program, and should not be relied upon as such. There are many variations to the program structure, and each program is unique.