Captive Insurance for Contractors

Well-run contractors with steady, controllable losses often pay more into the traditional market than they get back. A captive lets a contractor own part of the insurance equation — and keep the underwriting profit and investment income that would otherwise go to a carrier.

Short answer: A captive is an insurance company you (or a group of like-minded contractors) own. You pay premium into it, it pays your claims, and unused claim dollars plus investment income can come back to you instead of staying with a standard carrier. It tends to fit established contractors with strong safety records and roughly $150K+ in annual premium across lines like workers' comp, general liability, and auto.

How a captive works for a contractor

  • You fund a layer of your own risk — predictable, working-layer losses are paid from your captive; catastrophic losses are reinsured above it.
  • Profit follows performance — control claims through safety and return-to-work, and the savings accrue to the captive's owners rather than the carrier.
  • Underwriting + investment income — reserves held for future claims can earn investment returns that belong to the members.

Group vs. single-parent captives

  • Group captive — you join with other safety-minded contractors to share economies of scale and spread risk. The usual entry point for a mid-size contractor.
  • Single-parent (pure) captive — you own the whole captive. More control and upside, but it needs larger premium and more administration; better suited to bigger operations.
  • Cell / rent-a-captive — a lower-commitment way to participate through a segregated cell without forming your own company.

Who's a good fit — and the trade-offs

  • Good fit: financially stable contractors, below-average loss ratios, a real safety culture, and enough premium to matter.
  • The upside: lower long-run cost, cash-flow benefits, transparency into your own loss data, and a return of unused premium.
  • The trade-offs: a capital commitment, exposure to a bad claims year, more involvement than a guaranteed-cost policy, and a multi-year mindset.

See the broader program on the captive programs page, or watch the short how-a-captive-works explainer.

Curious whether a captive fits your books?

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FAQ

How much premium do I need before a captive makes sense?

As a rough guide, contractors with about $150,000 or more in combined annual premium across workers' comp, general liability, and auto — and better-than-average loss history — are the typical candidates. A feasibility review confirms the fit.

What's the difference between a group and a single-parent captive?

A group captive is owned jointly by several companies that share scale and spread risk; a single-parent captive is owned entirely by one company for maximum control. Most mid-size contractors start with a group captive.

What happens in a bad claims year?

Your captive bears losses up to its retention, so a bad year can reduce or eliminate the return of premium and may require additional capital, while reinsurance caps the catastrophic exposure above the working layer. That risk-sharing is why captives suit financially stable, safety-focused contractors.

Educational information only; not a quote, tax, or legal advice. Captive structures involve capital commitment and risk, and suitability depends on your finances, loss history, and a formal feasibility study. Figures are general industry guidance, not a promise of savings. Focus West Insurance Solutions, San Diego, CA (CA Lic. #0M32679). Related: captive programs · captive explainer · contractor overview.