Captive Underwriting Factors
| Factor | Favorable | Unfavorable |
|---|---|---|
| Claims history | 3+ years of favorable experience | Recent large claims or trend |
| Industry | Low-risk (professional services, tech) | High-risk (manufacturing, construction) |
| Workforce demographics | Young, healthy workforce | Older workforce with chronic conditions |
| Health risk profile | Low chronic disease prevalence | High chronic disease prevalence |
| Stop-loss attachment | High attachment point | Low attachment point |
Risk Stratification
Risk stratification assigns each captive member a risk tier based on their underwriting profile. Higher-risk members pay higher premiums and receive a smaller share of surplus. Lower-risk members pay lower premiums and receive a larger share of surplus. Risk stratification ensures that each member pays a premium commensurate with their risk — preventing low-risk members from subsidizing high-risk members.
Underwriting Rigor
Pro Tip
Captive underwriting is more rigorous than commercial stop-loss underwriting. Captive underwriters review 3–5 years of claims data, conduct site visits, and evaluate the employer's health management programs. Employers who have invested in population health management, chronic disease management, and wellness programs are more attractive captive candidates — and may receive more favorable pricing.