Captives can be used to provide various types of coverage within the Employee Benefits space. One example is a “Medical” Stop Loss Benefits Captive.
A stop-loss captive works by pooling stop-loss claims at certain layers for multiple organizations into a single fund – the captive layer. Captive members are better equipped to manage payment exposure by transferring a portion of the risk to a separate entity via stop-loss insurance. From a practical standpoint, member organizations pay in a specified premium based on actual experience and losses, not the experience of the carrier's book of business.