Reserves Nearing $1,000,000 is One of Several Benefits From Captive Participation
October 7, 2022
Geeding Construction, an oil and pipeline maintenance company, used their strong safety record to minimize overhead and join a captive.
Geeding Construction, an oil and pipeline maintenance company, used their strong safety record to minimize overhead and join a captive.
Geeding Construction, an oil and pipeline maintenance company located in the heartland, has a proud history of achievement. Founded in 1982, it has experienced steady growth with the help of highly trained and dedicated employees. Their guiding principle – we will not comprise on safety or quality – has served them well.
Founded by Jim Geeding, Jim’s two sons and grandchildren own and operate the business. Innovative business strategies, continuous technology adaptation and a commitment to the community continue to fuel their success.
The oil and gas industry is competitive. For Geeding, keeping a lid on expenses was critical. Looking for ways to minimize overhead without sacrificing quality or safety was necessary to attracting new business and retaining existing customers. Regular review of worker’s compensation and general liability expenses highlighted the need to find ways to contain these costs.
Another issue Geeding faced was the rising cost of insurance based on the historically poor safety performance of oil and gas industry. A hallmark of Geeding’s operations was focusing 200% on safety – 100% on personal safety; 100% on team safety. Why, they asked, should they be penalized for the poor performance of others?
The Miller Group proposed moving Geeding Construction from the traditional insurance market to a group captive. They were the perfect candidate: their safety record was well-above their industry peers; their committee to safety was deeply ingrained in their culture; they had a history of looking at non-traditional business strategies; their financial success was consistent; they were willing to take on calculated risks for the right to control their own destiny.
Two features of the captive were particularly interesting to Geeding. First, the proposed captive consisted entirely of other contractors, so they were joining forces with like-minded peers that were all best-in-class companies. The opportunity to share ideas and learn from others was appealing. Second, the return of unused premiums was financially attractive, as was the investment income gained from the equity fund established.
To help understand the financial advantages of captive participation, The Miller Group prepares a historical comparison based on past and projected loss runs. Not all companies make good captive participants. Due diligence on the part of both parties (the captive and the captive candidate) is necessary and can take months to complete
After almost three years of captive participation, Geedings estimates they have saved 25% of the cost of insurance compared to the traditional market. In addition, their equity fund and cash reserves is approaching $1,000,000.
Geeding leaders were very deliberate in their decision to become a captive member and now couldn’t be happier with their decision. While the learning is ongoing, the financial benefits continue to accrue. The Miller Group service team stays closely involved, with annual performance reviews, claims management, policies not included in the captive (i.e. property, equipment, executive protection), and insight about new solutions to help Geeding Construction remain competitive.