Strategic Cost-Saving Opportunities Digital 2014 - Captive Insurance Companies
Viable – and valuable – option
Mid-sized companies can benefit from captive insurance companies, too
The captive insurance landscape
additional risk that might happen
surance policies — such as cyber
used to be dominated by corpo-
to you in the future.”
risk, environmental and pollution
rate giants, as large corporations
Instead of paying into an
liability — are expensive or difficult
were the only ones with enough
insurance company’s profits,
to obtain. Others, such as medical
people and funding to finance a
your company keeps the profits,
benefits insurance, are suddenly
captive insurance company.
provided income outpaces claims.
more complicated and costly.
But as a result of changes in
That surplus can be used as a
“So if you can afford to fund
capitalization requirements, cap-
rainy-day fund to use as a buffer
your own risk, why not be in your
tive insurance companies are
against future risk factors.
own pool and not pay for some-
quickly becoming a viable option
“Insurance is based on pooling
body else’s problems? Rather
for mid-sized companies, as well.
risk,” says Bill Goddard, prin-
than exposing your business to
“A captive insurance company
cipal, Insurance and Captive
risks that could drain profits, you
is an insurance company that
Insurance Advisory Services
might want to consider starting a
companies — or, in some cases,
at Brown Smith Wallace. “When
captive insurance company, which
individuals — start themselves,”
you buy auto insurance, you buy
is essentially an insurance com-
says Alan Fine, member, In-
into a pool, where you’re assumed
pany owned and operated by your
surance Taxes and member
to be average within that pool
business,” says Goddard.
in charge, Captive Insurance
for the purposes of premiums.
While it may sound great in prin-
Advisory Services for Brown
If you never have an accident,
ciple, it’s important to do your due
Smith Wallace. “One of the big
you’re still going to be pooled with
diligence to determine whether a
advantages to captive insurance is
people who have had accidents,
captive insurance company is truly
that when you start an insurance
and you’ll pay for those accidents
the right route for you and your
company yourself, you can fund
through your premiums. Some in-
business to take.
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