Heather McClure’s Article On Broker Collaboration Featured in Captive Review

In 2026 captives are no longer “alternative,” as it is widely estimated that 25% of premium placed in the U.S. is now with captives, and steadily rising. The days of a broker dismissing the idea by saying captives are too risky, that there would not be savings/revenue generated, or the mid-sized client’s premium spend is not enough, without outside collaboration from a reputable captive consultant, are over.

We have all experienced working with brokers who believe they can keep their clients from taking the concept of building a captive seriously, but we know that delay tactic does not last long. Another, more sophisticated broker eventually takes that business away, or a captive management firm will raise the question to the client of why their broker has never pursued the concept of captive coverage. However, brokers who can work in partnership to design captives can still gain a significant competitive edge over those who are not already on board.

A broker moves to a more impactful relationship, that of strategic partner, by collaborating to offer captives as a complementary and increasingly necessary risk-financing tool. Brokers can be integral by continuing to collaborate with the captive manager year-round to forecast markets, advise what lines should be considered for the captive, and as such, can stay an active participant in board level discussions. Understanding, analysing and matching captive and commercial programs to the client’s overall strategic plan is critical. Brokers and captive consultants should ask clients for these organizational published goals and continue to show themselves as valuable partners in achieving them.

Beyond traditional placement commissions, the brokerage can generate new advisory fees for added services. Working with the captive manager to brainstorm what is needed from the broker consultant, beyond just the carrier and loss data, is important.

Simply using the commission lost to the captive program or a percentage of the premium in the captive is not the answer for most sophisticated clients. Delineating the services the broker will provide to add creativity and technical skill is necessary. Clients want to see how the broker will work with, and not against, the captive design and management team.

Although captive management divisions owned by brokerages appear to have an easy referral chain to keep the work in-house, many clients prefer independent firms outside the broker’s organization. Getting advice from an expert whose fees are not linked to commercial coverages is something more and more clients seek as such independents are distinguishing themselves on this front. The perceived conflict is something a broker will need to deal with and develop relationships outside their own company to satisfy clients who want to seek this opinion.

Brokers will need to be able to discuss basic aspects of areas about which clients and prospects have initial questions. Often clients misunderstand the tax advantages of captives. Without giving tax advice, brokers need to know basics and be able to dispel any concept of forming a captive as a tax play.

Whether single-parent, group, cell or other structures, brokers should defer analyses to those captive managers who will rely on actuarial studies to inform recommendations. For example, often brokers look to the group captive option for lines that can be placed easily into an existing group program. As their knowledge of captives grow, clients then want to consider having a single-parent captive. Group programs can be beneficial, but need to be initially analyzed against the often more financially impactful single parent structure.

A broker collaborating with managers versus being an obstacle on captive placements allows a wider team to offer a strategic, customized and long-term insurance solution that strengthens relationships, positively impacts revenue and positions the broker as a true risk management partner to the parent organization.