Captive insurance companies provide greater opportunity to diversify revenue streams for business owners.  Small and medium size companies can effectively manage risk and provide their own protection warranty plans and service contracts.  Not only does this create a new revenue line for the company, it also provides a new product or service to it’s customers.  This is another example of how owning a captive can turn a companies risk into profit.

As with any insurance company, captives tend to accumulate a considerable amount of assets in reserves.  These assets back the policies issued by the captive insurance company. However, a portion of the assets may be available to the business owner should the business need funds to overt a potential larger catastrophe.  Rather than paying premiums to a commercial carrier and increasing their reserves, you essentially are creating your own reserves for future needs.

Owning your own captive allows your business to access coverage specific to your business needs without additional inflated costs paid to a commercial carrier for high agent and executive compensations, marketing and advertising, and other unrelated overhead. Owning your own captive not only helps reduce insurance costs, it also makes your costs more predictable.

Captives can play a significant role in a company’s tax strategy.  Insurance premiums paid by a company to the captive are tax deductible.  Since insurance companies are subject to special tax rules, captives can take deductions for loss reserves. This results in differed taxation and even better, some captive programs qualify to exclude all insurance profits from taxable income.  Tax advantages were put into place by congress so that captives can accumulate assets and reserves quicker. As a result, the company is better prepared in case of a catastrophic event.

Reinsurance is referred to stop-loss insurance or insurers’ insurance.  Owning your own captive gives you access to the reinsurance markets that aren’t available to the general public. This access allows for direct access to the underwriter by removing the middle-man and give you wholesale level pricing with more flexibility of insurance coverage.

A company needs financial capital in order to operate and grow its business. The significant insurance costs and special tax savings generated from a captive formation directly results in additional profits.  These additional reserves allow for more accessible funds that can help your business leverage it’s capital.  Our staff not only manages our client’s insurance companies from issuance of premiums to monthly financial reporting, it also assures suitable tax and audit treatment.  Our experienced finance team is positioned to support all financial functions for maximizing tax savings, increased cash flow, and investment returns.