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Captive
Insurance Company Benefits - A List of Captive Ownership Benefits,
Captive Insurance Benefits, Captive Benefits, Why Own a Captive?
Here is a list of the Benefits of
Owning and Operating a
Captive Insurance Company:
-
Captive Insurance Cost Savings.
By creating a Captive Insurance Company you will be able to
directly access wholesale reinsurance markets which will enable you to
reinsure risks at wholesale versus retail rates and receive lucrative
reinsurance commissions and profits. In addition, the insurance premiums
which your Captive charges your existing businesses will be calculated based
on their favorable claims histories instead of less favorable industry
loss cost estimates. A Captive Insurance Company will also allow you to
reduce costs by eliminating broker and agent commissions,
administrative charges, and insurer profits which account for
35% to 40% of the
premiums you are currently paying to a traditional insurance company. Insurance
industry experts estimate that a company with a favorable loss history can
save up to 50% on its cost of business insurance with a Captive Insurance
Company.
-
Captive
Insurance Coverage
Advantages.
Your Captive can custom tailor its coverages and policy language to meet
your unique risk management needs. Your Captive will also provide
better availability, stability and affordability on a wide range of
commercial coverages compared to traditional commercial insurers.
These important coverage differences will be especially pronounced
when particular covers are unavailable or unacceptably priced in the
commercial insurance market.
-
Captive
Insurance Claims Payments.
Captives tend to have a lot less red tape when it
comes to handling loss claims. Although the relationship between your
Captive and its insureds will be completely "arms length," it will be
less bureaucratic and adversarial than a traditional insurance
carrier. As a result, claims investigations, verifications, adjustments, and
payments will all be made more expeditiously.
-
Captive Insurance provides you with Complete
Control.
You will be in complete control of your Captive. You will own all the stock
of the Captive and will control all of its bank and investment accounts.
Owning a Captive will also improve your control over loss costs by providing
you with a vehicle and the resources to categorize, measure, and manage
these costs.
-
Cash Flow
Increases due to
Captive
Underwriting Profits and
Captive
Investment Income.
Premiums paid into the captive can be invested
to grow the financial strength of the company and increase surplus. If the
captive has good claims experience it stands to generate a tremendous amount
of underwriting profit for the captive owners.
-
Capacity.
Through the consistent application of conservative and prudent underwriting
techniques, and the judicious use of reinsurance markets, your Captive will
be able to generate long term capital surpluses. These surpluses will
increase your Captive's risk retention capacity.
-
Owning a
Captive Insurance Company Create a New
Profit Center.
Many Captives are initially started to reduce the cost of
insuring the commercial property and casualty risks of businesses which are
owned by the Captive's Parent Corporation, or its stockholders. However,
over time a number of Captives decide to substantially increased the amount
of unrelated risks they insure in an attempt to profit from a lucrative
array of unrelated risk underwriting opportunities. After
several years, related risks account for only a small percentage of the
total risks which the Captives profitably insure.
-
Owning a
Captive
Insurance
Company
will
Create New Risk Financing Options. By segregating specific
risks in a Captive, you will be able to take advantage of a wide range of
risk financing alternates including risk securitization programs. These
financing alternatives are not available without a Captive.
-
Owning a
Captive Insurance Company provides a
Competitive Advantage. A Captive can also be used as a vehicle
to improve your overall competitiveness. For example, some Captive owners
utilize their Captives to attract and retain key customers, vendors,
partners, franchisees, and joint venture partners by offering them insurance
coverage as part of their overall business relationship.
-
A Captive
Insurance Company can provide significant Tax Incentives and Benefits.
Captives which qualify for the Small Insurance Company
Tax Election under IRC section 831(b) are entitled to receive up to $1.2
million each year in premiums - Tax Free! Although potential tax savings are not a
valid reason for owning and operating a Captive Insurance Company, it is
none the less important to note
that a properly structured Captive Insurance program can provide you and
your business with significant tax benefits and savings. Please see
Captive Tax Benefits
and
Captive Taxation for more details.
A Comparison of Captive Insurance to Self Insurance and Traditional Insurance
|
Plan Comparison |
Retail Insurance |
Self Insurance |
Captive Insurance |
| Lower
Insurance Cost |
no |
yes |
yes |
| Provides
Protection from Risk |
yes |
no |
yes |
| Tax
Deductible Premiums |
yes |
no |
yes |
| Policy
Design Flexibility |
no |
yes |
yes |
| Control
Over Claims |
no |
no |
yes |
|
Underwriting and Investment Income |
no |
no |
yes |
|
Competitive Advantage |
no |
no |
yes |
|
Tax Planning Benefits |
no |
no |
yes |
|
Asset
Protection Benefits |
no |
no |
yes |
|
Estate Planning Benefits |
no |
no |
yes |
|
Retirement Benefits |
no |
no |
yes |
Captives are
the ultimate tool for superior risk management, asset protection, estate
planning, tax planning, retirement and other financial advantages.
To learn how a
Captive Insurance Company can benefit your business, call our office
(201)-995-9085.
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