In short

• A key role for brokers is to advise companies on the advantages and disadvantages of self-insurance, including setting up a captive model to manage self-insurance risk.
• Self-insurance may be an option for frequent, low-severity losses and for hard-to-insure risk. 
• Self-insurance is not a strategy that suits every business. Brokers should only suggest self-insurance to companies that have both a strong financial position and suitable risk-management maturity.

When it is done well, self-insurance offers control, cost savings and flexibility. When done poorly, it can expose businesses to financial strain and operational risk.

For brokers, understanding deductibles, aggregates, self-insurance retention (SIR) and captives is just the beginning. The real value they can offer lies in helping clients navigate whether it’s the right time to look for alternatives to traditional insurance.

At its simplest, self-insurance means a company retains risk, rather than transferring it to a third-party insurer. This can be informal, for example, paying claims directly from the company’s profit and loss account.

In such cases, the business absorbs the full financial impact of any losses without using a formal insurance structure.

But for organisations looking for a more structured and sustainable approach, captives offer an alternative.

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