Senior living and healthcare sectors face a myriad of complex risks that are constantly evolving. These industries must handle rising costs, navigate regulatory hurdles, and address new risks such as cybersecurity while maintaining the highest standards of patient and resident care. In this context, captive insurance emerges as a potential solution.

Unlock the Potential of Captive Insurance for Senior Care

How Captive Insurance Can Address Senior Living and Healthcare Risks

The senior living and healthcare sectors are grappling with a multitude of challenges. According to the American Health Care Association's "Access to Care Report 2024", access to nursing home care is being squeezed by workforce shortages, increasing inflation, and chronic government underfunding. In healthcare systems, the American Hospital Association reported that persistent workforce shortages, severe fractures in the supply chain for drugs and supplies, and high levels of inflation have driven up hospital costs. At the same time, hospitals face inadequate reimbursement from government payers and increased administrative burdens.One of the key solutions is captive insurance. A captive needs to be a response to a real challenge, not a solution in search of one. In the commercial insurance market, the cost of coverage has skyrocketed, and many standard products fail to reflect the actual risk profile of these sectors. This leads to overpayment for coverage that doesn't meet their unique needs. Additionally, there can be a lack of clarity in claim outcomes due to automatic denials and burdensome administrative requirements.A captive insurance structure allows these organizations to align their insurance programmes more closely with their actual risk profile, control costs, and ensure that their policies protect them from specific risks. The senior living and healthcare sectors are experiencing significant workforce shortages, and a captive can provide programme flexibility to attract and retain talent. Healthcare inequity also impacts these industries, and a captive can help ensure affordable care without compromising quality.Cybersecurity has become a top concern as telehealth services expand and more patient data is stored digitally. A captive can create bespoke policies for any coverages excluded in the commercial market. Inflation and high medical malpractice claim costs are straining these providers, but investment income from premiums can help offset rising costs. Through their captives, organizations can invest premiums in line with expected claim payout timelines to create an additional income stream.One of the standout benefits of a captive is the ability to adjust retention limits. We have seen hospital risk management teams use captive claims analysis to inform their risk management frameworks and procedures, resulting in significant reductions in accidents, claims, and insurance costs. With a captive, organizations retain underwriting profits that can be redirected to support hospital equipment, safety, or risk management initiatives.Captives also allow organizations to invest premium income and gain more control over claims management, potentially reducing legal and loss adjustment expenses. This leads to better claims outcomes and enhanced financial stability.For organizations considering a captive, Artex offers comprehensive advice. A detailed feasibility analysis of the current insurance programme is crucial to ensure the captive aligns with the organization's goals. Working with an experienced insurance broker and manager can provide valuable insights and support. Engaging with industry experts with prior sector-specific experience can offer real-world perspectives and guidance. Early preparation and strong governance, including having due diligence documentation in place and establishing a well-structured business plan, contribute to smooth operations and long-term success.In an environment of financial constraints and regulatory scrutiny, captives provide a strategic risk management tool. By reducing reliance on the commercial insurance market, improving cash flow through investment income, and customizing coverage, captives empower these organizations to adapt to an evolving risk landscape. The Cayman Islands offers unique advantages as a jurisdiction for captives, with the Cayman Islands Monetary Authority experienced in regulating both sectors and having appropriate risk-based capital requirements and investment guidelines.Captive insurance offers significant advantages that address financial stability and contribute to enhancing care for patients and residents. With the support of the Cayman Islands and expert guidance from professionals like Artex, senior living and healthcare organizations can confidently leverage captives to secure their future.Declan O'Neill, a client services director at Artex, can be contacted at: declan_oneill@artexrisk.com. Julie-Anne Pearson, an associate director - client services at Artex, can be contacted at: julieanne_pearson@artexrisk.com.Did you get value from this story? Sign up to our free daily newsletters and get stories like this sent straight to your inbox.