A captive insurer is an insurance company, usually formed and licensed in one of several U.S. states that insure the risks of one or more affiliated business(es). A captive insurance company enables businesses to have tailored insurance coverages that fill gaps and holes in existing commercial insurance coverages. Property & casualty captives are a sophisticated tool that can be used to supplement or replace commercial policies or simply to cover retentions or gaps in those policies. Direct access to the reinsurance market can also be a significant advantage to forming a captive. The following are ways that self-insurers can use the advantages of captive insurance.
Self-insured employers can use captive insurance to provide medical stop-loss coverage to protect the plan from specific and/or aggregate stop-loss coverage. This can be on a stand-alone basis or as a layer of a larger reinsured stop-loss plan. If loss experience is good, the captive builds surplus. If losses exceed expected levels, the funds from the captive cover these losses, stabilize the years’ fiscal results, and ensure that budget goals are met.
A captive can be a great tool to combine with statutory workers’ compensation. The employer can combine a significant deductible with a deductible reimbursement policy underwritten by the captive. The deductible enables the program to remain in compliance with the various state workers’ compensation regulations while allowing the captive to participate in good loss experience and a limited amount of risk at an appropriate level.
A captive can also underwrite currently self-insured property and casualty risks and if needed, secure stop-loss protection directly from the reinsurance markets. This should provide lower costs and increased pricing stability over the long-term. Essentially, self-insurance is a good idea; captive insurance elevates it to a great idea.
Bottom Line:
A captive insurance company can mitigate potential risks and stabilize business outcomes. In addition to managing the stop-loss expense, the captive can provide coverage for a wide variety of other risks. Examples include broad-form cyber liability, employment practices liability & other workplace issues.
Contact Capstone Associated at 800-500-3190 for more information.
Turnkey Captive Insurance Planning
In affiliation with The Feldman Law Firm LLP, Capstone Associated Services, Ltd. assists in the formation and management of captive insurance companies for mid-market businesses. Coverages written through a captive fill gaps in insurance and provide significant financial benefits, such as secured loans, dividends, and tax advantages.
Capstone’s attorney-led team goes beyond risk management and serves as partners in finance, tax planning, captive formation, and management. Capstone is one of the most sophisticated and integrated outsourced providers of captive insurance services for the mid-market.
Turnkey services include:
- Feasibility study with independent professional sign off
- Tax – design, structuring and ongoing monitoring of the planning
- Accounting
- CPA independent audit
- Insurance
- Regulatory
- IRS tax controversy
- State tax issues
- Policy drafting
- Coverage pricing
- Ongoing management
- The Feldman Law Firm LLP takes on oversight for tax and legal
- And much more!
An Experienced Team
Since 1998, Capstone has led more than CAPTIVE_FORMATIONS successful captive formations; its affiliated law firm has successfully resolved without change more than TAX_CONTROVERSIES captive tax controversies, standing with clients throughout the audit and appeal process.
Capstone's team includes Chartered Property & Casualty Underwriters, Associates in Risk Management, and administrators, in addition to the affiliated law firm's tax, corporate, and federal tax lawyers. The team has had decades of experience forming captives under IRC 831(a), 831(b) and 501(c)(15).
