Membership clubs are one of the hottest real estate concepts today, with trendy clubs like San Vicente Bungalows, Moss, and Stonethrow offering high-end experiences to a select crowd. A new generation of companies is looking to take that selectivity and apply it to one of real estate's hairiest problems: insurance.
While property insurance rates have cooled slightly of late after years of double-digit growth, they remain high, and liability insurance premiums continue to climb. In an environment of weak rents and rising costs, operators are looking to an old model to save money: insurance captives.
Captives have been around for decades, but they're getting fresh attention among real estate owners. While they have traditionally been seen as the domain of large operators with the scale to self-insure, in recent years a growing number of "pooled captives" have brought smaller operators together. It's a bit like rebuilding insurance from first principles, and it brings some real advantages.
Pooling insurance risk works best when there's selectivity about who gets in, and some captives are starting to operate like private membership clubs. Think the Yellowstone Club, but for insurance.
Today we'll explore the rise of pooled captives through a deep dive into one company doing exactly that:Real Property Captive (RPC), which plans to launch in January 2027 and has signed up $6 billion in assets and 14 members through a selective approach to captive insurance. The company aims to grow to hundreds of billions in assets. creating further economies of scale.
Let's dig in.
The Captive Model
A captive is an insurance company owned by the business it insures. While that circularity may seem odd, captives have been a popular concept among large US corporations since the 1950s. In the captive model, the owner pays premiums to its own insurer instead of a commercial carrier, so any premium not spent on claims stays in-house rather than going to someone else's underwriting profit.
Real estate came to captives relatively late. The first adopters were large REITs and institutional owners, who used captives to fund big deductibles and, after 9/11, to access federal terrorism reinsurance at a time when the commercial market had mostly stopped writing that coverage.
Real estate owners with less than about $3 billion under management can't justify a captive of their own. Instead, they pool with peers in a group captive or rent a segregated "cell" inside a captive someone else already runs. Since 2022, rising property premiums in Florida, Texas, and other catastrophe-exposed markets have pushed midsize owners into group and cell captives. But in many cases, these programs serve owners who struggle to get coverage elsewhere, rather than working as a pure cost-saving play.
Angad Guglani, RPC's founder, has been buying small properties in southern and central New Jersey since 2016, scaling to 200 properties (a mix of scattered-site residential, multifamily, and small-bay industrial assets) and $70 million in AUM. And while building his portfolio, he experienced rising rates and the challenges of the conventional insurance market firsthand.
"I actually got dropped by my carrier because my portfolio was growing too fast," Guglani says.
His broker placed him in an insurance program for landlords, one of only two or three such programs in the market at the time, and Guglani referred many of his local landlord friends to it. When he later learned that the program was run by three people on MS-DOS software and wrote just $15 million in premium a year, he offered to buy it. The owners said no, and Guglani started researching how to build something better himself, which led him to captives.
"So I put out an email in the Wharton alumni group saying, 'Is anyone interested in forming a group captive?'" he says. "Our first three members, about $1.5 billion of property, came in from that email."
(As regular Thesis Driven readers know, we have a soft spot for real estate operators who decide to build technology and services to solve their own problems, such as DealNav's Pat Carino.)
Guglani decided to take a "membership club" approach to make the model work in real estate. Rather than pushing for scale early, RPC screens members on historical loss ratios (members need to be under 20%) along with tenant delinquencies, work order response time, capex reserves, and building system maintenance.
Guglani focuses on the middle market: firms too small to fully self-insure but large enough to benefit from the captive model. And aggregating the middle market offers efficiencies over targeting the largest owners and assets; a wider mix of asset classes, geographies, and individual properties reduces risk compared with concentration.
RPC's structure isolates what Guglani calls the "working layer risk": claims an operator could have foreseeably controlled or minimized themselves, such as small property damage and liability claims influenced by preventive maintenance and high-quality tenants.
"With auto insurance, you get lower premiums for taking defensive driving lessons. In real estate, that doesn't exist today," says Guglani. "We're figuring out how prudent the owner is, not just the risk of the building, which is how the market sees it right now."
Guglani says that RPC is built to avoid the kind of catastrophic risk that comes with fires and floods. The captive retains only a $10 million deductible, of which no more than $250,000 can be drawn per loss. Above that, reinsurers step in to cover catastrophic losses.
"If there's a hurricane ripping down the Eastern Seaboard, our clients in Montana aren't going to be subsidizing clients in New York or in Florida," Guglani adds.
Guglani stresses that, for all its structural differences on the back end, a captive program is the same Travelers-bound policy owners would receive otherwise; the differences come in the captive's own risk exposure and reinsurance, not its treatment of the property owner. The fronting carrier issues the policy and remains the issuer of record, but the captive cell holds the first layer of risk, with reinsurers above it.
The barrier to entry for a captive like RPC is notably higher than for traditional insurance: operators must front a full year's premium as collateral, which is often done through a letter of credit. The offset is that the premium itself should be substantially lower, and RPC expects the collateral requirement to fall as the captive builds up its own reserves.
As in traditional captives, owners can benefit if they individually, and the members in the aggregate, underspend the premium and collateral. At the end of each year, the captive will pay a dividend to members based on its total losses and each member's remaining premium and collateral. But Guglani says he is primarily focused on lowering premiums rather than optimizing for dividends. (Premium savings flow into an asset's NOI, which is considered in financings and acquisitions, whereas one-time dividends are not.) Because captives are member-owned, any profits are returned to members on a pro rata basis.
Despite the selectivity and membership-club framing, Guglani is not billing RPC as a luxury or high-touch product. "We're not going to take any clients to fancy lunches or sports games," he says. "We're modeling ourselves after Costco. A membership model, but no frills."
Guglani's point that traditional insurance suffers from frills is fair. Between retail brokers, wholesale brokers, and managing general agents, it's common for 35% to 45% of a premium to go to intermediaries rather than compensating risk capital directly. RPC, on the other hand, charges a 6.5% sponsor fee on premiums, all-in, with no separate brokerage commission.
The company also bundles renters insurance with the captive policy, allowing owners to underwrite and sell their own renters insurance at a profit. "Renters insurance historically has run at an 80% net margin," Guglani says. "If you're a multifamily owner, why not use it to subsidize your liability and property policies?"
Guglani estimates captive participants will pay 30% to 40% less for insurance than they would with traditional providers. "We want our members to be paying a lower rate than a Blackstone, and we think it's possible," he says.
On Walled Gardens
As readers can probably tell, I like the captive model, which makes sense for owners. But I don't love the environment that produces it: the rise of private, gated services is an inevitable outcome of bad actors run amok. We've written before about this in terms ofdeclining social trust and tenant "whitelists," and captive insurance is yet another example.
Just as the rise of membership clubs is a downstream symptom of public disorder and degraded public spaces, selective insurance captives grow out of runaway tort litigation, deferred maintenance, and development in flood- and fire-prone areas.
Part of the problem, as Guglani tells it, is that carriers have little reason to fight claims. When a carrier settles a $100,000 trip-and-fall claim, the settlement lands on the owner's loss run and justifies a steep premium increase at renewal, while the cost of defending that same claim in court falls on the carrier and never touches the owner's record. Even a claim the carrier could win is often cheaper to settle, and since carriers earn their margin on a premium base that grows with every claim paid, the cycle doesn't cost them much. "Why do these [personal injury] attorneys exist? They exist because insurance companies just settle with them," Guglani says. Add the personal injury bar's ever-growing ad budgets, and it's clear why general liability premiums keep climbing even as property rates soften.
Like private clubs, selective captives can be a welcome respite for their owners. And while they don't entirely solve insurance cost inflation — litigation can still hit anyone — they go a long way toward lowering costs today by eliminating intermediaries and problem cases.
The growing popularity of captives risks making the insurance situation worse for everyone else. There's a reason, after all, that the ACA ("Obamacare") included an individual mandate requiring most Americans to carry health insurance. Without one, low-risk participants defect, leaving the system with a shrinking pool of high-risk participants. Costs then rise, pushing more marginally lower-risk participants out and putting the entire system in a death spiral.
Unlike health insurance, commercial real estate insurance does not benefit from public subsidy. If well-run owners with strong maintenance and compliance programs defect, the quality of the pool of remaining owners will degrade quickly.
"We believe there are 16,000 owners in the middle market that own between $100 million and $3 billion," Guglani says. "We want to take the best 4,000 of them into our captive."
Whether or not 4,000 middle-market owners make it into one mega-captive, the model clearly appeals to owners tired of rising costs and intermediaries. As these models gain popularity, owners may soon see joining a captive not as a cost-saving experiment but as a necessity. Once the best firms leave the conventional market, the ones left behind will face rising premiums and a shrinking pool.
To each individual real estate owner, the overall health of the insurance market is of little concern: if they can make their way to greener pastures, they'll do so, and few owners will miss the old way of doing insurance. Operators should start mapping their exit strategy sooner rather than later.
Brad is the founder and editor of Thesis Driven (www.thesisdriven.com), a publication covering innovation in the built world. Over the past decade he has co-founded General Assembly and Common which generated a combined $500M+ in enterprise value.
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