Spring Consulting Group, LLC - Benefits of Captives

Alignment with corporate goals: Since the insurer is owned by the insured, corporations are able to design their insurance program(s) to specifically meet their own goals and objectives.

Tailored coverage: Captive insurance companies underwrite policies that are custom-made for its owner/program participants, allowing the insured to enjoy the benefit of purchasing specific coverages that they might not be able to purchase from a commercial insurer, or at all, and at competitive rates. One must bear in mind that the only insured has perfect information about its claims history; therefore it would design the optimal plan for itself.

Stability: As the insured designs its own program, it also avoids the impact of insurance industry coverage and pricing fluctuations. For example, in the 1980s, liabilities associated with medical malpractice claims increased the overall cost of insurance in the industry, which penalized unrelated parties.

Eliminate or reduce taxes: Depending on the tax treaty that the domicile offers to the program participant firm’s country, a captive insurance company can offer tax savings.

Greater control over claims: Captive insurance, essentially being self-insurance, provides incentives for owners to reduce or eliminate the potential for claims through proactive risk control and claims management techniques.

Direct access to reinsurance: Captive insurance allows owners/program participants direct access to the reinsurance market, thereby resulting in lower rates of without paying commissions to commercial insurers.

Captive Resources - What are the benefits of captive financing?

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