Captive Insurance Strategies for Middle Market Success: Empowering Independent Agents with Risk Control and Profitability

Middle market business owners and decision-makers are more open than ever to solutions that give them greater control over their insurance costs. While guaranteed cost programs remain the default option, they often lack the flexibility and long-term savings that high-performing businesses crave. That’s where captive insurance comes in—a powerful but often misunderstood tool that enables clients to turn insurance from a sunk cost into a strategic asset.

Independent agents are perfectly positioned to bring this solution to their best clients. But doing so requires more than surface-level knowledge—it requires confidence, clarity, and a roadmap. In this post, we break down a recent conversation with Warren Cleveland, founder of Captive Coalition, to uncover how agents can lead with captives, retain top accounts, and drive profitability for both their clients and their agencies.

Why Independent Agents Should Understand Captive Insurance

Captive insurance allows a business to become its own insurance company by funding its own losses through a controlled structure, often with shared risk among like-minded peers. Yet many agents avoid the topic due to perceived complexity or lack of training.

“The captive is not the answer to help them get better—it’s the reward for already being good.” – David Carothers

Not understanding how captives work can be the difference between keeping your largest account—or losing it to a competitor who comes prepared. And with so many agents still focused on quoting and renewals, mastering alternative risk transfer strategies is how producers stand out.

Who Makes a Great Captive Candidate?

Before approaching clients about a captive insurance solution, it’s essential to qualify them properly. Captives are not a fix for poor performers—they’re a tool for those already committed to risk control.

Ideal captive candidates typically:

Spend between $300,000 and $1 million in total premium across comp, auto, and general liability
Have five to ten years of clean loss history
Embrace a culture of risk management and safety investment
Are willing to take calculated risk and adopt an entrepreneurial mindset
Have tried deductible or self-insured retention (SIR) programs in the past

Red Flags to Watch For:

A 1.7 mod with no strategic plan to improve
Minimal or no investment in safety protocols, onboarding, or training
An attitude that risk management doesn’t work
Dependence on PEOs as a Band-Aid, rather than addressing root causes of loss

Captive Insurance vs. Traditional Programs

Traditional guaranteed cost programs may offer predictability, but they also remove an employer’s ability to control long-term costs. Captives, on the other hand, reward operational excellence with reduced premiums and potential profit-sharing.

With captives, premiums are based on actual loss experience, not industry-wide trends. This distinction is particularly valuable in the middle market, where companies often feel unfairly penalized for market-wide claims.

Captives can also accommodate a more tailored risk financing strategy:

Guaranteed Cost: Best for risk-averse or high-loss companies
High Deductible: Good step toward risk retention
Captive: Ideal for well-managed, stable companies who want a seat at the underwriting table

The Power of Contractual Risk Transfer

One of the most overlooked areas in captive readiness is contractual risk transfer (CRT). If your client is working with subcontractors or vendors, the presence (or absence) of properly executed agreements can drastically affect their claims experience.

“We had a client with $1.2 million in premium and $1.2 million in retained claims—all because of subcontractor agreement failures.” – David Carothers

What to Check:

Are subcontractors naming your client as additional insured?
Is there a waiver of subrogation in place?
Are coverages primary and non-contributory?
Are COIs verified and tracked correctly?

Agents who can help clients tighten these areas not only reduce their loss exposure but make them better candidates for a captive. For a deeper dive, check out Noel McCall’s contractual risk transfer course, which has helped multiple producers land new business with improved CRT knowledge.

Structural Breakdown of a Captive

Understanding how a captive is structured demystifies the process and gives agents language to speak credibly in front of clients. Here’s a simplified breakdown:

Key Components of a Captive:

Fronting Carrier: Provides the insurance paper and pays claims above the retention layer
Captive Layer: Holds the retained risk, funded by members’ premiums
Reinsurance / Quota Share Layer: Shares losses within the retention to reduce volatility
Excess Insurance: Protects against catastrophic loss severity or frequency
Domicile: Legal home of the captive (e.g., North Carolina, Vermont, Tennessee)

Warren Cleveland’s firm prefers quota share captives because they’re more accessible. For example, an AB captive may require $227,000 in collateral, while a quota share model requires just $50,000 for the same client—making it easier for agents to bring clients in early.

Tools and Education for Agents

Captive Coalition is built on five core tenets, all of which empower independent agents:

They only work with independent agents
Business owners can’t join without an agent
No BOR poaching allowed
No in-house producers to compete with agents
The client always belongs to the agent

To help agents succeed, Captive Coalition offers a free Learn Membership, which includes:

Webinars
Tools for evaluating captive candidates
Educational materials for risk and financial modeling
Access to captive experts for deal support

Agents can sign up at CaptiveCoalition.com/welcome.

“You don’t need to be an actuary—just credible enough to get the conversation started.” – Warren Cleveland

Strategic Opportunities for Agencies

Captives aren’t just good for clients—they’re good for agencies too.

Forward-thinking firms are leveraging protected cell captives under carrier umbrellas, where they contribute a fee (e.g., $50K) to access $1M in underwriting authority for preferred risks. These arrangements allow for additional profit-sharing beyond commission and give agents a chance to practice underwriting and risk selection.

Just remember: these programs are not a license to write everything. They require discernment, training, and a commitment to writing only clean, low-loss business.

Final Thoughts: Taking the First Step Toward Captive Confidence

Captive insurance is no longer just for Fortune 1000s. With tools like quota share models, improved education, and structured support, middle market producers can confidently bring captives to their clients—often before national brokers ever show up.

If you’re serious about leveling up your conversations, improving client outcomes, and insulating your book from the competition, there’s never been a better time to embrace captives as a core strategy.

Explore your free Learn Membership and

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