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The following table describes the distinctions between the standard insurance market and captive insurance.
|Description||Captive Insurance Companies||Traditional Insurance Companies||Costs and Expenses||Generally lower operating costs and premiums actuarially based on individual loss history.
Operating costs typically stable year to year.
|Operating costs generally not disclosed and premiums based on industry data.|
|Investments||Captive invests loss funds and any investment income is maintained for the benefit of captive owners.||Insurance company retains all investment income.|
|Cost Stabilization||Captive owners fund their own predictable losses while reinsuring catastrophic exposures, and premiums can be stabilized through loss control.||Premiums increase and decrease based on insurance cycles, not individual’s loss experience.|
|Risk Profiles||Captive owners may decide which risks are acceptable and evaluate prospective members.*||Insurance company selects only those classes of risk that conform to its "standards".|
|Choosing Services||Captive owners decide which services will be purchased, promoting cost effectiveness.||The standard market avoids providing individual services on a fee basis.|
|Claims||Greater control over claims adjudication, including:
||Less control over claims adjudication. Claims are typically handled by the insurance company.|
* Subject to final approval by the program insurer.