The Timeline for Onboarding a Client into a Captive

You may have heard of captive insurers but are unfamiliar with how to get your clients to be part of one. It’s not like traditional insurance, where you quote a client, have them sign a contract, and repeat on renewal.

Captives are different since they involve forming an insurance company. The process might sound complex or intimidating. It’s a little more challenging, but nothing is impossible to learn. Forming or joining a captive involves a few extra steps to ensure your client is a good fit. 

This guide will explain the step-by-step process of onboarding a client into a captive. You’ll learn why the process takes 60-90 days, what can slow it down, and how to make it smoother. 

Why Does Onboarding Take 60-90 Days?

Bringing a client into a captive is about far more than switching insurance policies. You’re forming an insurance company–or having them join a group captive–and ensuring they’re the ideal fit. This takes some extra time. Here’s why:

• Data Collection: This is the hardest part. Many businesses don’t always have their risk data readily available. There’s no reason you wouldn’t get all of their data, but it can be challenging and take time.

• Captive Formation Requires Underwriting and Compliance: Captives require regulatory approval and structuring before coverage can begin. 

• Educating Stakeholders: Business owners, CFOs, and risk managers must understand what they’re joining, how it works, and how stronger safety and risk management programs make them better in a captive. 

• Aligning the Right Group: For group captives, all members must be approved to ensure compatibility and financial stability.

Step-By-Step Process to Onboard a Client into a Captive

Here is each step you will go through with your client(s):

Step 1: Prequalification (Weeks 1-2)

The goal is to determine if the business is a good fit for a captive. 

Here are the key actions:

• Gather preliminary financial and loss data (ballpark figures are OK at this stage). 
• Prequalify the client based on cultural alignment, financial stability, and willingness to engage in risk management. 
  • To make prequalification easier, use our Captive Insurance Prequalification Checklist.

Why does all of this matter? Not every business is a good fit for a captive. A rough sense of the financials upfront lets you and your client know whether or not they qualify now. That, and you can have an idea as to how they could qualify in the future.

Another action you can take at this stage is to use a pricing calculator. This tool shows upfront costs, underwriting profit, and maximum out-of-pocket costs. 

Step 2: Data Collection and Submission (Weeks 2-4)

The goal is to gather detailed risk data for underwriting.

Here are the key actions:

• Request 5 years' worth of loss runs, audits, and policies for the lines of business going into the captive.
• Produce detailed payroll, revenue, and safety programs. 
  • Specifically, with safety programs, you want to be informed whether they have programs in place or are ‘just lucky.’ Luck isn’t good enough. 
• Work closely with the captive manager to format data correctly. 

Common roadblock: If you’re not the incumbent agent, getting the loss history can be a headache. The information is there. However, if your client doesn’t track this data well, it can be time-consuming (and sometimes aggravating).

Step 3: Underwriting and Feasibility Review (Weeks 4-6)

The goal is to confirm that your client’s business is a strong candidate for the captive.

Here are the key actions:

• The captive team reviews loss history, financials, and overall risk profile.
• Determine financial requirements and commitments. 
  • This will be all capital contributions, collateral, and ongoing financial obligations.
• Conduct individual and group performance modeling (if applicable).

If the money doesn’t make sense, then a captive likely doesn’t make sense for your client. This step confirms whether a captive is a viable option for your client. 

Step 4: Formal Proposal and Education (Weeks 6-7)

The goal is to make sure your client fully understands the captive structure.

Here are the key actions:

• Present a formal proposal outlining costs, potential returns, and risks.
• Conduct a Q&A session with the business owner and decision-makers.
• Address concerns about capital contributions, assessments, and claims management.

Captives are all about transparency. You want your clients to be as well-educated as possible. Most businesses don’t fully understand their insurance policies, let alone captives.

Step 5: Binding and Legal Formation (Weeks 7-9)

The goal is to finalize legal and financial agreements.

Here are the key actions:

• Secure funding for capital contributions and collateral.
• Complete regulatory paperwork and approvals.
• Prepare for the official launch of the captive. 
  • If a group captive has already been established, it’s establishing your client as a member.

At this point, your clients are committing real money. They must fully understand what they’re signing up for. 

Step 6: Captive Activation and Initial Operations (Weeks 9-12)

The goal is to transition to active risk management. 

Here are the key actions:

• Issue policies and begin claims processes.
• Conduct initial group meetings to establish best practices. 
• Implement ongoing reporting and performance monitoring. 

Remember, captives are a long-term financing strategy. It’s more than placing coverage. Businesses need to be ready to engage in active risk management. 

What Can Slow Down the Process?

Here are the most significant issues agents face during this process:

• Data Delays: This is the number one issue. Getting clean and accurate data from clients can be the most time-consuming portion.

• Wrong Timing: Getting a client to launch or become a member of an established captive on renewal can be a mistake. Sometimes, it is difficult to deal with clients who are in “traditional insurance mode” and resistant to change.

• Stakeholder Misalignment: If the CEO, CFO, or risk manager aren’t on the same page, you can expect some pushback that will delay the process.

How to Make the Process Smoother

You have the knowledge now that you can implement with clients later. Here’s what you can do:

• Get Preliminary Data Quickly: Even rough estimates can help determine if it’s worth proceeding.

• Educate Your Clients Early: The sooner your clients understand captives and the information they need, the easier their transition can be.

• Use Pre-Submission Strategies: Having more applications than available spots can help launch a strong group captive.

Need More Information On This Process? No Problem!

Onboarding a client into a captive isn’t complicated, though it has a structure. These six steps have been laid out so you can understand the process and how to use it effectively. If you can anticipate challenges, start gathering the information to save you and your client time and frustration.

Captive Coalition’s purpose is to educate independent agents and their clients on all things captive insurance. The onboarding process is essential in helping your clients get into a captive and stop buying insurance every renewal season. 

Are you looking to identify your best clients for a captive insurer? Then, begin step one by identifying your best clients. If getting the necessary documentation becomes difficult, read our guide on how to obtain information like loss runs.

If you read this guide and still need help from someone, that’s okay! Schedule an appointment with one of our Captive Insurance Consultants at Captive Coalition!