Captive insurance in the transportation sector: managing rising risk costs

Jeremy Colombik (pictured right), managing partner for Management Services International, and Adam Perea (pictured left), EVP Captive Services for Elite Risk Insurance Solutions, look at how captives can help tackle some of the current challenges facing the transportation industry.

Transportation companies are operating in one of the most challenging insurance environments in years. Rising claim severity, nuclear verdict exposure, repair inflation, litigation costs and tightening capacity have made commercial auto and related coverages more expensive and less predictable. 

For fleet operators, the challenge is no longer just finding insurance; it is finding a way to manage risk costs over time without sacrificing control or operational flexibility. 

That is where captive insurance solutions are becoming a relevant solution for the sector. A captive allows an insured to retain a meaningful portion of risk within a structured programme, often alongside a fronting carrier and reinsurance support. 

Rather than rely entirely on the traditional market, transportation companies can use a captive better to align premiums with their own loss experience, safety practices and long-term risk strategy. 

The sector is a strong candidate for this approach because loss performance is highly operational. Safe-driving culture, maintenance discipline, telematics, driver training and claims management can all materially affect outcomes. 

Captive programmes reward that discipline by creating a structure in which better performance can translate into more favourable balance sheet results, improved stability and greater control over retained risk. 

Another important advantage is predictability. Traditional insurance pricing can swing sharply from year to year, especially for fleets with good internal controls but unfavourable industry-wide conditions. Captive structures can help reduce that volatility by allowing the insured to participate more directly in its own underwriting results and risk-financing strategy. 

For transportation companies seeking a more strategic alternative, MGAs offer a structured fronted programme that combines an AM Best-rated fronting carrier, reinsurance capacity and captive participation in the deductible layer. The programmes can be designed for insureds with at least $500,000 in premium and a minimum deductible of $250,000 and it allows an existing captive manager to remain in place. 

That flexibility can be especially valuable for operators that already have a captive but want a more efficient fronted structure. 

In today’s market, captive insurance is no longer just a niche concept for large corporations. For transportation companies with strong risk management practices, it can be a practical tool for managing rising insurance costs, improving alignment between safety and cost and creating a more resilient long-term programme.

Jeremy Colombik, is managing partner, for Management Services International. He can be contacted at: Jeremy@themsicorp.com

Adam Perea is EVP Captive Services for Elite Risk Insurance Solutions. He can be contacted at: aperea@eliterisk.com

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