MB530: How to Use Captive Real Estate Insurance to Stop Losing Money on Premiums

Show Notes

Insurance premiums in real estate have risen steadily for years, and most operators renew each year, pay more, and write it off as a cost they can't influence. In this episode, I sit down with Nicolas Lares, founder and CEO of Insur3Tech, who built one of the largest captive insurance structures for Amazon's third-party delivery network and has since brought that same model to real estate investors at every scale.

We get into what's driving premiums up and then how captive insurance works as a direct alternative. Nicolas walks through why small investors with a single rental qualify, how profit distributions reduce the net annual cost by 30 to 45 percent, and how the captive model separates your insurance economics from the broader market's loss history.

If you own rentals in an LLC and you're watching insurance eat into your NOI each year, this episode walks through a specific model with real numbers attached.

Key Takeaways

Two forces are driving real estate insurance costs up

Inflation in building materials, labor, and replacement costs has pushed the direct cost of claims higher each year.
Public adjuster fraud — contractors and adjusters soliciting claims after storms — has cost carriers billions and driven up rates across all policyholders.
Carriers spread losses across the entire market, so clean operators pay for the fraud and negligence of others.
Premiums increase even for owners who have never filed a single claim.

Captive insurance makes property owners co-owners of the insurer

A group captive pools multiple property owners to form a shared insurance entity that they collectively own.
Each member holds a fractional ownership stake proportional to their premium contribution.
When the captive generates a profit at year-end, that profit is distributed back to members as a check.
Individual investors too small to self-insure alone can qualify by joining an existing group captive.
Captives are federally regulated and must price within the same rate bands as traditional carriers.

The net annual cost reduction runs 30 to 45 percent

Captives eliminate broker commission layers — typically 10 to 15 percent of premium — upfront.
Annual profit distributions return 20 to 30 percent of premiums paid back to members at year-end.
The effective cost combines both the reduced premium and the returned distribution.
Owners who avoid filing claims preserve a larger share of the year-end distribution pool.

The bar to qualify is low — one or two single-family rentals is enough

The two requirements to join are: the property must be held in an LLC, and a non-owner tenant must be in place.
A single-family rental in an LLC qualifies under the same structure as a portfolio of thousands of units.
Real estate collectively spends $150 to $200 billion per year on insurance — enough premium volume to support large group captives.
Institutional operators have used captives since the 1960s; group structures now make the model accessible to smaller investors.

Risk is filtered at the front door and monitored throughout the policy term

New members submit formal loss run statements before being accepted into a captive.
The captive retains inspection rights on properties after members join.
Members filing repeated preventable claims can be non-renewed at the next policy term.
The profit-share structure gives members a direct financial incentive to prevent claims rather than accumulate them.
Property management quality and operational track record factor into the underwriting evaluation.

Brokers have a structural reason to keep captives off the table

Traditional brokers earn commissions on carrier placements and earn nothing from captive arrangements.
Captives eliminate the broker from the transaction, so brokers rarely present them as a renewal option.
Captive awareness is growing as insurance costs have become severe enough to push owners to research alternatives independently.
Nicolas is active on LinkedIn engaging with pushback on the model and debunking common myths around captives.