FCCS News & Insights

The Safety Net of Insurance

We’d all like to take risks without thinking of insurance as a burden, and instead have confidence that the insurance we purchase will protect us. There is no better way to ensure that than through a captive insurance company, which, like a cooperative, is focused more on member care and service than its own bottom-line returns. The result is a safety net that can enable the captive’s members to innovate more freely.

The concept of a self-insurance company for agriculture institutions emerged during the agricultural insurance instability in the 1980s, leading to the creation of The Farm Credit Captive Insurance Company. For more than 30 years, FCCS has managed The Farm Credit Captive Insurance Company (the Captive), delivering financial and operational advantages to the Farm Credit System. The Captive provides insurance for all Farm Credit institutions, even at times when the commercial markets wouldn’t. Farm Credit’s captive insurance program has delivered substantial premium savings for members, amounting to nearly 50% or approximately $50,000,000 in premium savings annually, a notable success. The Captive plans to mitigate overall risk through its 15-year strategy of transitioning more insurance segments from the commercial market to self-insurance.

Captive insurance, by design, creates an innovative framework for organizations to manage their risks in a way that is more flexible, efficient and cost-effective compared to traditional insurance methods. They’re also safe: A.M. Best’s Market Segment Report: Growing US Captive Insurance Market Highlights Risk Management Expertise revealed that captives are a safer way to provide insurance. One of the most striking findings is the $6.3 billion in insurance cost savings captives have experienced from avoiding the commercial markets from 2019-2023.

Farm Credit’s Captive is focused on its members’ success, which in turn enhances the Captive’s own. Beyond processing claims efficiently – paying out quickly to members who are also owners – the Captive’s risk management and insurance experts offer education, consulting and other resources to help Farm Credit organizations understand and mitigate against their risks beyond the insurance coverage the Captive provides. The shared success and shared goal of risk mitigation are also why the Captive strives for transparency with its members.

Thanks to this strong foundation, the Captive has effectively met Farm Credit’s insurance needs for decades, offering financial savings and access to experts, which can lead to peace of mind. The continued strategy to shift to a fully self-insured model is ongoing, offering even more savings and other benefits to System members.