Forming Captives to Mitigate Manufacturing Risks
Manufacturing risks are nothing new to the industry. But commercial insurance policies can only do so much in addressing the inherent operational risks faced by midmarket business owners. Domestic/ foreign supplier concerns, Federal, state, and local regulatory changes, and fluctuations in commodity and raw material prices caused by national disasters and political unrest can all be heavy hitters—this is why leveraging an alternative solution to risk management is critical.
As part of an overarching alternative risk management plan, an owner of a closely-held business can form their own property & casualty insurance company (a captive) to fund risk coverages that may be too expensive or unavailable in the conventional markets.
Captive insurance benefits are twofold in that they provide for comprehensive insurance coverage and sound business planning.
Secured loans, dividends, and increased control over claims are just some of the advantages offered by captives, a vehicle that is being adopted more widely by manufacturing companies. As an added benefit, captive insurance may provide tax-efficient planning to the overall enterprise.
Another significant benefit of captive insurance is the opportunity to identify risks, and insure them before losses occur.
Hidden manufacturing risks often correlate to major financial losses. But risks identified during an on-site feasibility study for captive formation could avoid such costs—a feasibility study is the foundation of a well-executed captive arrangement. Vulnerabilities such as unrestricted access points, chemical hazards and cyber exposures are just some of
the risks that might be found during an in-depth risk assessment.
Overall, manufacturers should explore how captives can work for them in light of the many challenges faced by the industry. To learn more about captive insurance coverages, please contact Capstone at WEB_TEL.
Exclusions Could Lead to Lawsuits
December 28, 2015 (Houston, TX) – Industry publication Risk & Insurance reported that limitations or exclusions in commercial insurance policies could lead to costly lawsuits. Get the highlights.
States Leading in Employment Litigation Lawsuits
As suggested by the Internal Revenue Code, middle market businesses that insure risks through a captive insurance company are currently at a planning advantage. Here, you can read the details of IRC Section 831(b) and other Sections of the Code.
Tax Issues: U.S. Sides with Tax-Avoiding Companies
December 24, 2015 (Houston, TX) - Small and midsized businesses are experiencing a spike in employment practice lawsuits. The question becomes, why aren’t more businesses opting for insurance coverage? Inside, you’ll get quick info on the true cost of being underinsured.
More Large U.S. Companies Move Abroad to Cut Taxes
August 26, 2015 (Houston, TX) – More midmarket companies are moving their headquarters and/or operations abroad in order to reduce their tax obligations. Read about how the current U.S. tax code is driving corporate ‘inversion’ structures.
Sources for 2016 Industrial Manufacturing Trends Infographic, Manufacturing Risks
Strategy&, “2016 Industrial Manufacturing Trends”
Augmented Reality for Enterprise Alliance, “Meeting and Managing Enterprise Augmented Reality Risks”
Risk & Insurance, “Helping Hands”