‍The Silent Risk Executives Miss Until It Is Too Late

Transportation and logistics executives are conditioned to manage visible risk—accidents, claims, compliance issues, and market volatility. What increasingly threatens companies today is not what leadership sees, but what has quietly become normalized inside operations.

 Across trucking, warehousing, intermodal, and logistics businesses, companies are already functioning as insurance companies. They simply are not structured, rewarded, or protected as such. 

High deductibles, shrinking coverage, and fear of premium increases push losses directly onto operating cash. These losses rarely rise to board-level attention, yet over time they erode margins, weaken balance sheets, and create financial fragility that only becomes obvious during a crisis.

This article explains how captive insurance transforms unavoidable risk into a strategic financial asset—and why delay often proves far more expensive than action.

EXECUTIVE WARNING — WHAT BOARDS OF DIRECTORS OFTEN MISS

Boards routinely focus on insurance premiums while overlooking retained risk. In transportation and logistics, retained risk now frequently exceeds insured risk. When multiple unreported losses, a cyber-fraud event, or a catastrophic claim occur in close succession, liquidity—not insurance—becomes the constraint.

Captives address this blind spot by formalizing retained risk, imposing discipline, and creating surplus before stress arrives.

The Industry’s Escalating Insurance Environment

The transportation and logistics sector faces a sustained insurance crisis. Cargo theft alone has reached historic levels. The American Transportation Research Institute (ATRI) estimates annual U.S. cargo theft losses at approximately $6.6 billion, or nearly $18 million per day.

Source: https://www.ttnews.com/articles/atri-cargo-theft-2025

Industry experts believe true losses may be far higher—potentially exceeding $30 billion annually—due to underreporting, organized crime, and cyber-enabled fraud.

Source: https://tanktransport.com/2025/07/us-cargo-theft-crisis-2025

Underreporting is widespread. Many operators absorb losses internally to avoid premium increases or non-renewal.

Source: https://www.freightwaves.com/news/fear-of-high-premiums-keeps-cargo-theft-underreported

At the same time, insurance markets continue to harden. Premiums rise even for well-managed fleets. Deductibles increase. Coverage narrows precisely where losses occur most frequently.

Source: https://www.strategicrisks.com/wp-content/uploads/2025/04/SRS-2025-Transportation-Brochure.pdf

WHAT EXECUTIVES OFTEN MISS

• Deductibles are no longer “minor retention”—they are material risk layers 

• Premium increases lag losses, masking real cost 

• Cash-paid losses receive no tax benefit 

• No surplus is created for good performance 

The Hidden Reality: You Are Already Self-Insuring

Most transportation and logistics companies routinely self-fund:

• Cargo theft under deductibles 

• Warehouse and terminal losses 

• Refrigeration failures 

• Cyber fraud and double brokering 

• Environmental cleanup 

• Equipment damage 

• Auto liability retentions 

These losses are paid from operating cash with no tax efficiency, no reinsurance support, and no underwriting upside.

Why Paying Losses from Cash Quietly Destroys Value

 1. Losses Are After-Tax

Losses paid from cash reduce profit after tax. Premiums paid to a properly structured captive are generally deductible under IRC §162 and may qualify for favorable treatment under IRC §831(b).

Sources:

https://www.irs.gov/pub/irs-drop/rr-02-89.pdf

https://www.irs.gov/pub/irs-drop/rr-02-90.pdf

https://www.irs.gov/pub/irs-drop/rr-02-91.pdf

2. No Reinsurance Backstop

Self-paying losses means bearing 100% of risk. Captives access wholesale reinsurance markets.

Source:

https://www.pwc.com/us/en/industries/financial-services/insurance/captive-insurance-and-risk-management.html

3. Underwriting Profit Is Given Away

Traditional insurers retain underwriting profit. Captives retain it for the insured.

4. No Claims Discipline

 Captives enforce actuarial reserving, reporting discipline, and loss control.

Why Traditional Insurance Is Misaligned

Traditional insurance pools risk across industries. Pricing reflects averages—including poor performers. Coverage is standardized and slow to adapt.

High-performing logistics companies effectively subsidize weaker operators.

How Captive Insurance Realigns Risk and Reward

Captives allow:

• Premiums based on actual performance 

• Removal of retail insurer loadings 

• Direct reinsurance access 

• Retention of underwriting profit 

• Customized coverage 

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Lower losses directly improve financial results.

Common Captive Coverages:

• Cargo theft 

• Auto liability retentions 

• Warehouse legal liability 

• Cyber fraud 

• Environmental liability 

• Refrigeration & equipment breakdown 

• Workers’ compensation 

• Supply-chain interruption 

Source:

https://www.capstoneassociated.com/what-we-do/captive-insurance-for-businesses/trucking

BROKER & AGENT INSIGHT

 Captives do not replace brokers. They elevate them. Advisors who understand captives shift from price negotiators to strategic risk partners—deepening client relationships and stabilizing revenue.

Companies should evaluate:

 • Loss history and data quality 

• Capital readiness 

• Safety and security controls 

• Governance capability 

• Reinsurance strategy 

• Tax and regulatory compliance 

Captives are long-term infrastructure—not tactical insurance fixes.

 The Strategic Risk of Waiting

 The greatest risk is not acting too early—it is waiting until losses, insurer withdrawal, or a catastrophic event forces action under pressure.

Conclusion

Traditional insurance transfers risk and retains profit.

Captive insurance takes your retained risk—and converts it into strategic value.

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