Self-Insurance and Large-Deductible Programs: When They Make Sense for Fleets

Trucking and logistics firms operating in the United States face rising commercial auto, liability and workers’ compensation costs. For many mid-sized and large fleets — particularly in high-frequency regional corridors such as Texas, California and the Southeast — traditional insurance markets can be expensive and volatile. Self-insurance, captives and large-deductible programs (LDPs) are alternative risk-financing tools that can improve economics, align incentives and stabilize cost — when structured properly.

This guide explains when self-insurance and large-deductible programs make sense for fleets, the financial mechanics, regulatory and collateral requirements in the U.S., practical implementation steps, and real-world considerations for carriers operating in states such as Texas, California and Florida.

Table of Contents

Executive summary: When to consider self-insurance or an LDP

Consider self-insurance or a large-deductible program when your fleet has:

Scale and stable loss experience — typically dozens to hundreds of power units and multi-year predictable loss trends.
Sufficient liquidity and claims management capability — to pay retained losses and manage claims administration internally or via a third-party administrator.
Desire for premium control — to capture underwriting profit and invest premium dollars.
Access to reinsurance/stop‑loss — to cap catastrophic losses above retention levels.

Typical business drivers:

Expected premium savings of 10–35% (varies by line, retention and market); savings accrue from transferring frequency/routine risk to the fleet while purchasing market coverage for catastrophes.
Improved cash flow (premiums retained and invested).
Better loss control alignment between operations and insurance.

Key program types — quick comparison

Program type	Typical deductible/retention	Best for	Pros	Cons
Traditional insurance	$0–$100k per claim	Small fleets or high volatility	Simplicity, admitted coverage, minimal collateral	Highest premium load, limited control
Large-deductible program (insurer-sponsored)	$25k–$500k+ per occurrence	Medium to large fleets	Premium reduction, insurer-administered, stop‑loss available	Collateral requirements, operational readiness
Self-insurance / SIR (self-insured retention)	$250k–$5M+ aggregate/occurrence	Large fleets / financially strong carriers	Maximum cost control, investment of retained funds	Regulatory filings, funding volatility, catastrophic exposure
Captive (single- or group)	Varies; often layered with large-deductible	Very large fleets or groups of fleets	Tax/underwriting advantages, governance control	Setup cost, regulatory complexity

How large-deductible programs work for trucking fleets

An LDP shifts initial loss payment responsibility from the insurer to the insured up to an agreed deductible per occurrence (or per claim). The insurer continues to provide defense, indemnity beyond the retention and often stop-loss reinsurance to protect against catastrophic aggregate losses.

Typical LDP components:

Per-occurrence deductible: commonly $25,000 to $500,000 depending on line and fleet.
Aggregate stop-loss: insurer or reinsurer may cap aggregate exposure for the program year.
Collateral: insurers often require collateral (letter of credit, trust account, cash) — frequently 100% of the deductible exposure, and possibly more for out-of-state exposures or admitted vs non-admitted placements.
Claims handling: can be insurer-handled with insured funding claims, or third-party administered with insurer oversight.
Loss fund mechanics: periodic contributions into a loss fund (monthly/quarterly) to pay retained claims.

Why fleets like LDPs:

Reduced fixed premium load and insurer expense charges.
Transparent claims cost visibility.
Stronger operational incentives for safety and repairs.

Financial thresholds and sample economics

Small fleets (<20 power units) generally lack scale to benefit meaningfully from self-insurance; LDPs with modest deductibles may be an option.
Mid-size fleets (20–100 power units) often find LDPs attractive — a $100k per-occurrence deductible can reduce premium cost substantially while keeping catastrophic exposure covered by the insurer and reinsurance.
Large fleets (>100 power units) may consider partial self-insurance, SIR or a captive for maximum control and tax/earnings benefits.

Illustrative (market-range) figures — use for budgeting, not quotes:

Typical LDP deductible bands: $25k, $50k, $100k, $250k, $500k.
Collateral: commonly 100% of deductible exposure for non-admitted placements; admitted insurers may require less but vary by state.
Expected premium reduction versus fully-insured: 10–35%, depending on deductible size and claims history.
Sources and program-specific pricing should be obtained from brokers or carriers for exact quotes.

Regulatory and state considerations (U.S.)

Interstate motor carriers must comply with federal FMCSA financial responsibility/insurance rules and state filing requirements: see FMCSA insurance regulations for minimum financial requirements and evidence-of-insurance rules. (FMCSA: https://www.fmcsa.dot.gov/regulations/insurance)
Workers’ compensation self-insurance and captives are regulated at the state level. States such as California, Texas and Florida have well‑established self-insurance regimes with distinctive collateral and reporting rules. Consult state DOI or bureau rules before implementation.
Captives are regulated and taxed; the IRS and state regulators scrutinize captive arrangements for bona fide risk distribution: see IRS guidance on captive insurance arrangements for federal tax considerations. (IRS: https://www.irs.gov/businesses/small-businesses-self-employed/captive-insurance)
Multi-state exposures increase complexity: collateral and admissibility rules vary, so many fleets keep LDP collateral conservative to satisfy multiple states’ requirements.

Operational readiness checklist

Before launching an LDP or self-insurance program, fleets should ensure:

Strong claims management capability or a qualified TPA.
Detailed loss-run and actuarial analysis (3–5 years minimum).
Budgeting for collateral and volatility (reserve funding).
Written governance, escalation and reporting protocols.
Reinsurance or stop-loss structures in place for catastrophe protection.
Legal and tax counsel engaged on captive or partial-self structures.

Who sells these programs — and how pricing looks in market

Major commercial insurance carriers and brokers working with transportation clients offer LDPs and self-insured solutions. Examples of participants in the trucking market:

Large insurers and programs: Travelers, Zurich, Progressive Commercial, Berkshire Hathaway/GEICO Commercial, and many admitted carriers provide large-deductible options or fleet programs.
National brokers and program administrators: Lockton, Gallagher, Aon, Marsh — they design LDPs, secure reinsurance and arrange collateral.
TPAs and claims administrators specializing in trucking exposures handle day‑to‑day claims.

Program pricing varies by:

Fleet size and operations (regional vs national, cargo type).
Loss history and safety program maturity.
Deductible level and collateral/security structure.
State regulation and admitted status.

For an accurate market quote, request a benchmark analysis from a transportation-specialist broker; they will model premium reduction vs retention cost using your exact loss runs.

Practical example (illustrative)

A 75-truck regional carrier in Texas with stable loss trends and good safety metrics considers a $100k per-occurrence LDP. Typical outcomes:

Insurer offers a 20% premium reduction vs fully insured.
Collateral requirement: letter of credit for a percentage of anticipated retention exposure.
Stop-loss layer purchased above $1M per occurrence.
Net result: improved cash flow and incentive-driven loss control, at the cost of increased balance-sheet volatility and claim admin commitments.

When NOT to choose self-insurance or an LDP

Small fleets with volatile losses or poor loss control.
Fleets lacking the capital to post collateral or absorb retained losses.
Operations with frequent catastrophic exposures (unless robust reinsurance is secured).
Fleets that prefer simplicity over savings — direct premium increases can be less administratively demanding.

Next steps and recommended team

To evaluate a program:

Assemble loss runs (5 years preferred), safety metrics and financials.
Engage a transportation-focused broker (Lockton, Gallagher, Aon/Marsh, etc.) experienced with trucking LDPs and captives.
Model scenarios (deductible bands, collateral, stop‑loss pricing).
Obtain legal, tax and actuarial advice before committing to captive or SIR structures.
Pilot with a retention level and reassess annually.