What is Self-Insurance?

Self-Insurance is the decision to retain more risk in-house and on your balance sheet rather than simply purchasing it from a conventional commercial insurance company.

Whilst the main objective of self-insurance is to save premium and improve a company’s financial performance, self-insurance differs from standard insurance programs in that it requires a company to adopt many of the functions of a traditional insurance company.

Across the world today, thousands of companies are benefiting from an alternative way of buying insurance to protect their businesses and their employees. The process is known as self-insurance and if it is right for your business then the potential benefits can include lower insurance premiums, improved insurance coverage, more reliable insurance, a safer workplace and an improved bottom line.


There are various forms of self-insurance options that are available to businesses – throughout this article we provide a summary of the potential benefits to a company, should you embark on this type of specialist insurance.


We can provide a simple remote consultation to review if your business is suitable for self-insurance. We will provide information designed to enable you to discuss your requirements, and the considerations you need to review to ascertain if your business may benefit from increasing your self-retention.

What are the choices?

There are 4 main types of self-insurance:

Level 1 – Higher excess levels

Increasing the level of your present excess levels.

Level 2 – Aggregate excess

The next stage where a more substantial level of retention is taken in-house but a maximum cap is put in place.

Level 3 – Self-insurance or SIR/self -insurance retention

Taking more exposure on your balance sheet and using insurance after a certain claim level.

Level 4 – Captives

The establishment of your own insurance company using your capital, letters of credit and the reinsurance market.

Self-insurance can enable a company or group of companies to design their own insurance program. This means that they can often obtain broader or more appropriate insurance coverage than would otherwise be available commercially. Self-insurance also creates an incentive to improve claims management, risk management and the true cost of claims beyond the physical damage.

With self-insurance, a company or a group identifies its loss exposures and then makes the decision to assume the role of an insurance company by becoming responsible for settling all, or part, of any claims arising from those risks. By becoming its own insurer, a self-insured company or group can modify or design its insurance program, making insurance coverage more available than might otherwise be possible in the traditional commercial insurance market.

Self-insurance differs from standard insurance policies that have large deductibles, as it requires the self-insurer to adopt a formal system for paying its losses. This function is often outsourced to a claims manager, such as a third party administrator.

Our consultants can review with you the potential losses as well as savings that self-insurance could produce for you, including the cost to set up, how it would operate and the timeframe required to complete the project.

Self-insurance provides an incentive to reduce claims, save premiums and consequently increase profits or cash flow.

Any questions? Please don’t hesitate to contact one of our team.

Matthew.collins@ascendbroking.co.uk  |  Office: 01245 449 060