Public Sector +

Captives

A captive is a licensed insurance company created and owned by an organization to insure its own risks. Instead of purchasing coverage from a traditional insurer, the organization forms its own insurance company – typically domiciled in a jurisdiction with favourable regulatory conditions – to underwrite its unique exposures. Captives are especially valuable for large public entities or consortiums with stable risk profiles and sufficient capital reserves.

For municipalities, universities, healthcare systems, or other public bodies, captives offer several advantages:

• Cost control through direct access to underwriting profits
• Improved coverage flexibility for risks that are difficult or expensive to insure commercially
• Greater transparency and data ownership, allowing for more informed decision-making
• Long-term financial stability, as surplus funds can be retained or reinvested

Captives require careful feasibility analysis, regulatory compliance, and expert management – but for the right organizations, they can be a powerful tool to reduce volatility and take command of their risk financing strategy.

Reciprocals

A reciprocal insurance exchange is a group of like-minded organizations that come together to insure each other’s risks. Unlike traditional insurers, reciprocals are not-for-profit structures – governed by the subscribers (policyholders) and managed by an attorney-in-fact (AIF) who oversees operations, compliance, and claims. Each member contributes premiums into a shared pool, which is then used to pay claims and manage administrative costs.

Reciprocals are particularly well-suited for public sector organizations with similar risk profiles – such as school boards, municipalities, or healthcare systems – looking to share risk, improve long-term cost stability, and gain greater control over their insurance program.

Key benefits of reciprocals include:

• Member ownership and governance, allowing for tailored decision-making
• Premium stability over time, due to reduced reliance on commercial market fluctuations
• Return of surplus if claims are lower than expected
• Shared risk philosophy that encourages long-term, collective risk management

Reciprocals require thoughtful formation, legal oversight, and active participation from members – but they offer a powerful model for organizations seeking autonomy and alignment with others facing similar risks.

Risk Pooling

Risk pooling allows multiple organizations to combine their insurance premiums and claims experience into a single, shared program – spreading risk across the group and stabilizing costs for all participants. Pools are often formed by municipalities, school districts, or regional associations that share geographic proximity, similar exposures, or governance structures.

Unlike captives or reciprocals, risk pools do not require the creation of a separate insurance entity. They are typically managed by a third-party administrator or public agency and offer a streamlined way for smaller organizations to access coverage terms and limits that would be difficult to secure individually.

Advantages of risk pooling include:

• More predictable premiums, due to shared claims experience
• Enhanced buying power, which can reduce costs and improve coverage terms
• Administrative efficiency, especially when pools are professionally managed
• Peer collaboration, fostering shared learning and coordinated risk practices

For many public sector organizations, risk pooling offers a practical first step toward greater risk autonomy – without the complexity of forming a captive or reciprocal.