Captive Insurance for Manufacturing Businesses

Manufacturing businesses are a key component of the U.S. economy, accounting for 12% of annual GDP. In fact, manufacturers contribute approximately $2.18 trillion according to recent estimates. This figure has risen since the second quarter of 2009, when manufacturers contributed about $1.70 trillion.

The reason for this growth can be attributed in part, to the industry’s rapid adoption of state-of-the-art tech within their operations. Many businesses are integrating the Internet with machinery, a concept known as The Internet of Things, which is simultaneously making businesses more efficient and creating new risks. In addition to traditional risk exposures such as equipment breakdown and regulatory changes, cyber risk is fast-becoming a major concern in manufacturing as the Internet of Things continues to gain popularity. Any one of these risk exposures can lead to high out-of-pocket costs if they’re not properly insured in the event of a loss.

Forming a captive insurance company can help mitigate risks and thwart financial losses in the event of a cyber hack, or other peril. Essentially, comprehensive captive coverages can help business owners fill gaps in insurance that commercial policies may leave behind. Other ancillary financial benefits may also be available.

The video below explains.

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Have questions? Call Capstone at WEB_TEL, or submit your information via the form. One of our experts will be in touch. We’ll discuss how we can help you or your client form a captive insurance company to insure the risks of your manufacturing business.

Managing Growing Pains with Comprehensive Coverage

According to data obtained by The Bureau of Labor Statistics, manufacturing businesses employed 12.3 million people, in March 2017. And according to the National Association of Manufacturers (NAM), The United States is seen increasingly as a viable location for global manufacturers, with foreign direct investment in the sector exceeding $1.2 trillion in 2015, an all-time high. It’s clear that the manufacturing industry’s future is bright, but mid-market businesses must remain vigilant in their risk management as they embrace more progressive technology and continue to face more traditional risks.

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.

Forming a captive may be the right strategy for businesses that want to strengthen a their ability to recover from potential losses. Under a captive insurance arrangement, manufacturing companies pay premiums to the captive insurance company, just as they would to a commercial insurance company. Funds accumulate inside the captive and can fund losses in the case of a loss event. IRC 831(b) captives offer a 0% Federal income tax paid on the captive’s underwriting profits.

Moreover, if there is undistributed earned surplus, as in the case where there are no claims made in a given year, the funds can be distributed as a dividend or as a secured loan back to the operating company. Premium costs are lower, because in the commercial markets, “special” coverages tend to be more expensive. In fact, these coverages may not be available at all commercially. Business owners have better control over their risk management efforts, more comprehensive coverages, and a more advantageous planning solution.

Captive insurance for manufacturing companies is a powerful supplement to commercial insurance. Smart business owners who form their own captive insurance company can count on a new level of loss protection as they continue to combat risk.

Examples of captive coverages include:

  • Cyber Risk
  • Regulatory Changes
  • Equipment Breakdown
  • General Liability
  • Products Liability
  • Loss of a Key Business Relationship
  • Loss of a Key Customer
  • Supply Chain Breakdown
  • Employment Practices Liability
  • And Many More

Attorney-led Captive Planning for Manufacturing Businesses

The benefits of forming a captive insurance company can be fully realized when business owners partner with an expert captive management team, like Capstone Associated Services. Capstone Associated Services, Ltd. is the most integrated and largest outsourced provider of captive insurance services for the U.S. middle market. In association with The Feldman Law Firm LLP, Capstone offers platinum level attorney-led captive planning and administers property & casualty captive insurance companies that provide alternative risk financing services throughout the U.S. Now in its 19th year, Capstone provides turnkey services usually under a joint engagement with The Feldman Law Firm LLP, to businesses in the manufacturing industry, and many others.

Unlike most other captive management companies, Capstone’s turnkey service providers do not disclaim tax and legal support. The company has an award-winning track record for standing with clients in the design, implementation, ongoing management, and defense of their property & casualty captive insurance programs. Capstone has successfully administered and successfully managed over CAPTIVE_FORMATIONS captives since 1998. The Feldman Law Firm LLP has experience in more than TAX_CONTROVERSIES tax controversies, all to successful conclusions.

Capstone's staff of insurance professionals includes Chartered Property & Casualty Underwriters, Associates in Risk Management, accountants and administrators, in addition to the affiliated The Feldman Law Firm LLP's tax, corporate, financing and regulatory lawyers, and outside CPAs, risk managers, property & casualty professionals, and actuaries.

Together, this team offers middle market companies the most comprehensive risk planning solution available.

Learn More About Captive Insurance