For years, “self-insurance” was almost a four-letter word in multifamily. The idea of creating an internal insurance company felt risky and complicated. Today, however, more executives understand how it works, and the captive model is gaining mainstream acceptance.
Captive insurance programs let owners cover tenant liability risk within their own portfolio, reducing risk and generating revenue.
Why Multifamily is Rethinking Risk
Traditional renters’ insurance policies typically combine liability coverage with optional contents protection. Many multifamily programs require residents to obtain these third-party policies yet still end up chasing lapses in coverage and fighting to obtain coverage when a loss occurs.
By contrast, a captive program focuses specifically on tenant liability, the portion that protects the property and the landlord. Coverage is built directly into the lease as an amenity. Every occupied unit is protected, leasing agents no longer must sell or police insurance, and property teams avoid the burden of having to track certificates and renewals. The claims process is streamlined and straightforward.
David Martin, CFO of Omninet Capital, says a captive allows you to control your own destiny. “When the insurance market hardens, the captive provides a source of capital that enables you to retain more risk and charge a more reasonable premium to your portfolio, insulating your portfolio from market volatility.”
Captives thrive where claims are predictable and capped — exactly the case with tenant liability. Annual claim costs average around 10 percent of premium, and most leases limit resident responsibility to around $100,000.
Tim Homrich, managing director at River Oak Risk, says a shift to captive is simple but powerful. “If you have 10,000 units and tenants pay monthly for tenant liability coverage through third parties, you’re generating over a million dollars in revenue for the outside insurance market. Given low claims, we encourage clients to create their own captive and let River Oak manage it so they can capture the revenue, and thus the profits."
David Martin also notes, “Reserve accumulation is another advantage to owning a captive. The capital can be strategically deployed to strengthen depository relationships that in turn, helps drive lending relationships, yielding more favorable loan terms.”
Wasatch Equity Partners’ Captive Journey
At Wasatch Equity Partners, which owns 17,000 multifamily units across the western U.S., two full-time staff were tied up just tracking insurance certificates, and gaps in coverage still slipped through, plus claims battles with outside insurers.
When Wasatch made the shift to a captive insurance program with River Oak Risk, with tenant liability coverage built into the lease, that administrative burden disappeared.
The fact that residents were not required to purchase a separate renters insurance policy became a competitive advantage. “If a prospective tenant is choosing between two properties and ours doesn’t require them to shop for insurance, that’s a plus,” says Scott Stettler, who is COO and managing partner at Wasatch.
Financially, the impact has been equally compelling. River Oak notes that most clients generate about $100 profit per unit per year once a captive is fully implemented. For Wasatch, revenue from its insurance program tripled compared with its prior arrangement.
Some owners choose to share a portion of the revenue with properties. Just a few dollars per unit can be a meaningful increase in property value once cap rates are applied.
Smoother Rollouts and Faster Claims Processing
Stettler describes the rollout as straightforward. It took four to six months to establish the program and start adjusting leases. Within six to nine months, as residents renewed or moved out and new leases were signed, the transition to captive was complete.
River Oak Risk provided lease addendum language, trained property managers, and worked with Wasatch’s attorneys on state-specific issues like affordable housing and Section 8 considerations.
Claims have been manageable, as well. At Wasatch, the in-house risk management department oversees claims, and River Oak provides support.
“For clients without that structure, some designate a single central contact who works with our claims liaison team. Others allow property managers to communicate directly with us about claims at their properties. We design the process to fit the organization,” says Homrich.
Because the captive is the owner’s own insurance company, checks can often be issued in one to four weeks, which allows for quick unit repairs and increased tenant satisfaction.
“Feedback from our team is that claims handling has been smooth, aligned with policy, and the adjusters have been good to work with,” says Stettler.
Options For Any Portfolio
Captives are not just for the largest players. River Oak offers group captive programs for owners with 1,500 to 5,000 units, where participants share risk across the pool but maintain their own accounting. For owners with more than 5,000 units, standalone captives provide economies of scale and more freedom to tailor policies and coverage.
There is a one-time capital contribution, typically $50,000 to $150,000 for group captives and about $250,000 for a standalone. That money is returned if the captive winds down, net of any claims.
How River Oak Makes Captives Work
River Oak Risk, based in Atlanta, has managed captive insurance for more than 13 years. The company launched its multifamily program eight years ago at the request of a 10,000-unit owner, and it’s grown steadily since.
The firm provides turnkey support, from training and claims to compliance and dedicated services. Fees cover audits, actuarial work, and tax preparation, ensuring programs are simple to run.
A Win For Owners and Residents
For owners, captives reduce administrative overhead, eliminate coverage gaps, and generate new revenue. Residents benefit from having built-in liability protection without additional paperwork. On average, tenant-procured liability insurance lapses for 20-30% of the lease term, exposing the asset owner to heightened risk.
“It’s a win for residents and a win for us,” says Stettler.
Martin agrees, saying it’s been a very impactful program for his firm. “I wish we had done it earlier.”
For multifamily leaders exploring the idea of adopting a captive strategy, River Oak Risk can answer questions and guide the process. To explore whether a captive strategy fits your portfolio, visit River Oak Risk's website or contact River Oak Risk for a feasibility review.
If you are interested in hearing Scott and Tim discuss captive programs, check out this webinar hosted on MFE.