Managing risk is crucial for contractors of any size. But big projects come with big risks. For large contractors and developers, the scale of projects means greater exposures and higher insurance costs.
Many large companies turn to alternative risk solutions to control costs. These programs can have major benefits. However, they require expertise and a strong financial standing.
Captive insurance
Large construction firms use captive insurance to control costs. With this approach, the firm creates a captive insurer to cover the risks it faces. Then, it pays premiums to the captive insurance company. These premiums accrue to pay claims.
This gives the firm more control over their insurance coverage and the premiums they pay. It can provide more stability while reducing commercial insurance costs.
Self-insurance retention programs
Self-insurance retention (SIR) programs are another option to optimize coverage and costs. With this program, a firm retains a set portion of the risk per claim. Then, it transfers the rest to insurers.
For example, let’s say you have $50,000 SIR and buy additional coverage up to $5 million per occurrence. If you have a $200,000 claim, you’ll pay the first $50,000, and your insurance policy will cover the remaining $150,000.
Retaining smaller, more predictable losses can reduce your premium and improve claims management.
Large deductible programs
When you choose a large deductible plan, you pay a higher deductible amount in exchange for reduced premiums.
In practice, this approach is similar to SIR because it involves risk retention. These companies retain the risk for losses smaller than your deductible. For many large contractors, the savings in premiums are worth the higher deductible.
Let the experts guide you
These alternative risk financing solutions can offer large contractors risk control and cost savings. However, they also have tradeoffs. It’s crucial to evaluate these options within the context of your specific risk profile and financial resources.
The right program can provide the coverage you need while helping you control insurance costs and minimize the impact of claims. Our experienced brokers can help you build an alternative risk program aligned with your business’s coverage needs, risk tolerance, and sources of capital. To learn more, schedule a free 30-minute consultation.