Top 5 Benefits of Forming a Captive Insurance Company

There are over 7000 captive insurance companies operating globally in 2020. Many of these companies are sponsored by organizations from within the United States.

A captive insurance company may be right for your business, but what is a captive insurance company, and what are the benefits of forming one?

What Is Captive Insurance?

A captive insurance company is an insurance company formed and owned by a singular entity, or group of entities, to insure the risks of its owner(s). They are a form of self-assurance where the insurer is a subsidiary company of the insured.

Why Use a Captive Insurance Company?

The benefits of using a captive insurance company are numerous if your business meets the proper criteria. A captive insurance company may be right for your business if it:

  • Is seeking adjustable annual tax deductions
  • Contains multiple entities and is capable of creating subsidiary companies
  • Has profits of half a million dollars or more annually
  • Is underinsured or uninsurable by conventional means
  • Is looking to protect its assets

If your business meets these criteria, you should think about captive insurance. Creating a captive insurance company affords your business the following five benefits:

  1. Captive Insurance Programs Provide Stable Premiums

The owner of a captive insurance company is also the owner of the company being insured. Thus, it can set independent premium rates that accurately reflect potential losses.

A captive insurance company’s premiums will be more immune to market fluctuations. They will also be more custom-tailored to your company’s individual needs.

  1. They Save Your Company Money

By forming a captive insurance program, you are successfully excluding the middle man of outside insurance. This means that your company will not pay the inflated premiums insurance companies design to increase their own profit margins.

  1. Captive Insurance Offers Superior Services

The flexibility that a captive insurance program offers to your business is unparalleled in the insurance marketplace. Part of this is due to the unbundled nature of its services.

A captive insurance company ensures customization. It uses the right combination of reinsurance potential, settlement claims, and the issuing of policies

  1. Captives Are Less Regulated

The insurance industry is an extremely regulated sector of the economy. A captive insurance program is less regulated. This affords you the fluidity and flexibility to meet your company’s growing needs.

  1. You Can Reinsure With Ease

Unlike conventional insurance, a captive insurance program allows owners premier access to the reinsurance marketplace. This allows your business flexibility when it comes to reinsurance, even when conventional insurance is expensive or impossible.

Insurance Independence

A captive insurance company ensures that your company assets will be protected in the most economical and efficient way possible. It frees you from the middle man of conventional insurance companies, keeping your company profitable and independent.

For more information about captive insurance, or other topics in the business, financial, or investment world, be sure to check out the rest of our blog!

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