If risks exist and were left uncovered when a commercial insurance policy was implemented, a business may be eligible to form their own captive to insure risks, and consequently, take advantage of powerful ancillary financial benefits. The results of a feasibility study also determine premium levels the “insured” (typically, the business owner) will eventually pay to their captive.
Captives are bona fide insurance companies, and it’s mandatory for their affiliated business(s) to have insurable risks—ancillary financial benefits of captive planning should always come second to the businesses’ insurance needs.
In general, starting the planning off right, with a feasibility study will help business owners realize the full benefits of captive insurance as they move forward.
Why Does an On-Site Captive Feasibility Study Matter?
The consensus in the captive industry is that feasibility studies matter—they help hone in on risk exposures that are most commonly overlooked, and consequently, uninsured. But captive managers who are only in the business to make a quick buck often provide a watered-down version of a feasibility study. This typically involves a phone “survey” whereby a captive manager will ask a business owner general questions about their business.
With an on-site captive feasibility study, true risks can be better assessed when qualified professionals can see the operations of the business in-person. Walking the floor, examining equipment & processes, face-to-face discussions, and more provide clearer insight into a business’s risk exposures. This knowledge is difficult, if not impossible, to obtain over the phone.
Important questions can be fully answered after the on-site feasibility study, including:
• What coverages are needed?
• How will the policies be designed?
• How will the captive fit into the overall financial structure of the businesses?
• How will existing banking relationships be affected?
• Will captive planning be a long-term fit for the company?
An on-site feasibility study ultimately provides a true representation of a business’s uninsured risks, which informs premium levels. Identifying what true risks exist inside a business is integral to the determination of captive insurance coverages.
Capstone believes that forming a captive insurance company requires that risks be examined on the ground. Risk mitigation involves taking a first-hand look at risk exposures.
More About Capstone’s Approach to Feasibility Studies
Capstone leverages the expertise of qualified professionals to conduct feasibility studies, including several Associates in Risk Management, CPCUs, underwriters, and corporate & tax lawyers specializing in captive insurance. We also have a third-party actuary – independent of Capstone -- that joins in as the reviewer. We’ll work with your CPA and financial advisors as well, keeping them abreast of feasibility study results and next steps. Ultimately, our on-site captive feasibility study is one of the most important aspects of captive planning.
It also serves as a foundation for back up and support in the unlikely event of an IRS audit and can be used as part of a regulator’s examination. We encourage prospective captive insurers to consider Capstone, and its affiliated law firm, The Feldman Law Firm LLP to initiate their captive planning with this important business risk assessment.
Capstone’s Award-Winning Turnkey Captive Planning
Capstone Associated Services, Ltd. is one of the oldest and largest sponsors of mid-market-focused captive arrangements, which underwrite property & casualty annual premiums of less than CURRENT_PREMIUM_CAP million per year. Capstone has experience forming various types of captives, such as 831(b), 831(a), and 501(c)(15) captives.
In affiliation with the tax and corporate lawyers of The Feldman Law Firm LLP, Capstone provides the most comprehensive captive insurance planning available. Capstone's staff includes CPCUs (Chartered Property & Casualty Underwriters), ARMs (Associates in Risk Management), accountants and administrators.
Capstone is an attorney-led, captive insurance services provider, offering captive-related tax, legal, and insurance services, as well as captive asset management and accounting for one turnkey fee.
Having formed over CAPTIVE_FORMATIONS captives over the past CAP_YEARS_NUMBER years, we understand the importance of excellence in captive planning. Our staff is committed to doing the planning right, from the feasibility study to the ongoing administration.
Contact us to learn more about Capstone’s on-site captive feasibility study. Call WEB_TEL, or submit your information via the form. We’re looking forward to connecting with you.