Captives
Advantages
Captive insurance companies provide a wide array of advantages that vary considerably depending on the risk structure and appetite of the captive owner. Our professionals at Concordis Group will be pleased to assist with the preparation of the feasibility study and business plan customized to your unique needs.
Captive vs. Insurance Market
- Captives are driven solely by the needs of their owner
- The insurance market is driven by profits
- Captives provide an alternative risk management strategy and defense against hard insurance markets
Financial Benefits
- Better risk management results in reduced losses
- Reduced Insurance costs
- Improved cash flow
- Possible tax advantages
- Potential profit center
- Ability to recapture investment income on your premium
- Retention of Underwriting profit
Insurance Benefits
- Reduced impact to cyclical and rapid rate increases
- Direct access to reinsurance marketplace
- Coverage possible for risk not normally insurable
- Formalized insurance program
- Greater control over claims
- Flexibility in designing your insurance program
- Increased availability and easier access to insurance coverage
Potential Tax Advantages
Qualified insurance companies receive special tax treatment; they can accrue tax-deductible reserves for unpaid claims, whether known or estimated. There are tax advantages to be gained by using captives, especially those with multiple owners or insureds and those where the insureds and the shareholders are not the same. Deductibility of premiums and deferred taxation of insurance income are the two principal advantages. Tax issues can be a major driver, but they should not be the only reason for forming a captive. If they are, the captive might not stand up under scrutiny of tax authorities and regulations. A company should seek the advice of qualified tax and legal counsel.