A stop loss / benefits captive is a structured risk-financing arrangement in which multiple employers (or sometimes a single large employer) participate in a licensed insurance company — the captive — to collectively finance and manage stop loss risk for their self-funded health plans.
Instead of purchasing traditional stop loss coverage entirely from a commercial carrier, employers share a layer of risk through the captive while still maintaining catastrophic protection through reinsurance.
In a traditional stop loss arrangement:
In a stop loss captive:
It blends risk sharing, risk retention, and risk transfer.
A captive is a licensed insurance company formed to insure the risks of its owners or members.
Captives can be domiciled in places such as:
They are regulated insurance entities but designed for structured risk financing rather than traditional commercial underwriting.
Each participating employer:
If claims are favorable:
If claims are adverse:
This creates a shared-risk pool among like-minded employers.
Underwriting Profit Participation
Reduced Volatility Over Time
Pricing Stability
Transparency
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