Are Captive Insurance Companies Wise Risk Management Solutions?

The founding of captive insurance companies is a shrewd business decision, as it can protect assets and help to increase profits. Captive insurance companies constitute a wise choice as a risk management solution and risk financing alternative for numerous reasons.

This option lets you simultaneously minimize the cost of business insurance, improve your cash flow, control your risk, and accumulate wealth. It is a wise risk financing alternative because it helps you to stabilize pricing, purchase based only on need, enjoy tax benefits and flexibility in underwriting. It also introduces loss control incentives.

Why is a Captive Insurance Company a wise Risk Management Solution?

One of the primary benefits of utilizing captive insurance companies is that it can help reduce hidden risks.

There are intrinsic hidden risks in any business venture, though not all of them are covered by conventional insurance. Those that are, may only be covered by over-priced premiums.

Captive insurance companies are a more efficient risk financing alternative and risk management solutions to commercial insurance companies, while still allowing a separate entity to oversee the insurance.

Many insured individuals complain that there is a lack in the annual consistency of coverage with commercial insurance companies—a problem that cannot easily be remedied without resorting to alternative financing like captive insurance.

Virtually every industry would find captive insurance to be appropriate as a risk management solution and risk financing alternative, including: real estate, energy, manufacturing, development, restaurants, transportation, retail, healthcare, general contracting, finance, development, franchising, and nearly all others.

Added Benefits of Captive Insurance Companies

The way that captive insurance companies operate makes them an ideal financing alternative. One is the flexibility they present, particularly with respect to claims handling, the timing of premium payments, and policy design. A group or association captive allows you to provide insurance for risks that you can understand, while retaining investment income and underwriting profit.

Captive insurance is a good financing alternative also because it allows for underwriting profit participation. It provides reinsurance market access not usually accessible to entities in the non-insurance industry. Retention and management of risk are increased. Captive insurance companies are also one of the more superior risk management solutions and alternative financing options since insurance costs are stabilized.

A number of further benefits render captive insurance companies an excellent financing alternative. The ability to stabilize fluctuations in earnings that result from events that would otherwise be insurable is one of them. Another is the ability to ensure that coverage will be honored.